5 Technical Indicators Every Forex Trading Hopeful Must Know

by Anthony     Feb 18, 2019

Unless this is your first day venturing into the world of Forex trading, you probably already know that the most successful trading strategies use a combination of both fundamental and technical indicators to decide when is the right time to buy and sell currencies of interest. However, you might not be familiar with just how many technical indicators there are on the market that investors use when calculating their buying and selling points. While there are a number of strategies that will work when Forex trading and you won't need dozens of indicators to make a tidy profit when trading, you should be familiar with the many indicators that traders use. Read on to learn about five of the most commonly used technical indicators when Forex trading, and consider whether or not incorporating them into your strategy will result in higher earnings.

Average Directional Index - ADX. The ADX is commonly known as a trend strength indicator; it is a directional indicator that uses data points to give a value on a scale of 0 to 100 to quantify the strength of a trend. A higher ADX means that the trend is strong, and will likely continue on in the current direction. A low ADX means that there is a very weak trend, and that is should not be relief on when forming upcoming money movements.

Exponential Moving Average - EMA. The EMA is a type of moving average that indicates the average value of a stock or Forex trading currency. It is different from other types of moving average because it gives more weight to the most recent data points, meaning that it can be immediately more useful than an overall average.

Moving Average Convergence Divergence - MACD. The MACD is used to estimate when a trend or general direction of a stock or currency's value will change direction. It can be useful in Forex trading when combined with the ADX, and can help you to decide if a currency will soon reach it's resistance or support points.

Relative Strength Index - RSI. The RSI is a momentum oscillator that gives a value to the speed and movement of price changes. It is useful in stock trading or Forex trading because it allows investors to estimate when a property has been ether overbought or oversold, and will thus increase or decrease in value in the coming days, weeks, or months.

Fibonacci Indicators. Fibonacci was an Italian mathematician famous for the development of the Fibonacci sequence, a repeating pattern of numbers that is often times found in nature. There are a number of technical indicators currently being used on the Forex trading arena based off of the research of Fibonacci, including Fibonacci Lines, Fibonacci Retracements, and Fibonacci Channels, all of which use the standard Fibonacci sequence as the basis for their movement predictions.

While you will likely not need to incorporate every one of these technical indicators into your trading strategy, it is useful for Forex trading hopefuls to understand the many types of different indicators that investors use on the market. Consider adding one or more of these indicators to your trading strategy!

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