The forex trading is on the rise, and that’s because more people are trying to take matters into their own hands during these uncertain times, and create stability for themselves. Forex is an exciting industry to participate in because the possibilities are endless.
This can either lead to great gain or heavy losses – it depends on how you equip yourself.
There are tools and strategies that allow traders to navigate obstacles in the market, so that they can make maximum profits. You can call these “technical indicators”. These indicators give traders important insights on trends in the market, so that they’ll know what trading decisions to make. Gainsky Investments is well positioned to be a preferred platform to capitalize on the niche opportunities that exist in today’s multi-sector financial markets.
Five Major Technical Indicators For Profitable Forex Trading
- Bollinger Bands
Bollinger bands are known as a volatility indicator. When you look at a band, it’s best to understand it like this:
Trending: look out for the Bollinger Squeeze. As the bands get closer together, it means that a breakout is about to happen. You won’t be told anything about the direction of the breakout so you need to pay close attention to where the price will go.
Ranging: Look out for the Bollinger Bounce. This is when the price goes from one side of the range to the other, but always returns to the moving average. Think of it this way – the price is returning to its original average.
- Relative Strength Index (RSI)
The Relative Strength Index is filed under momentum indicators and they are plotted on a separate scale. This is how the scale looks:
You’ll find a single line scaled from 0 to 100 and its job is to point out places where overbuying and overselling takes place. When you find a reading over 70, then that’s an overbought market. But when you find a reading below 30, the market indicates overselling.
RSI is good for confirming the formation of trends. The magic is all in the numbers, and you’ll need to play close attention.
- Moving Average Convergence Divergence (MACD)
Moving Average Convergence Divergence falls under trend indicators and requires a bit more attention compared to other methods. This indicator consists of a line that moves quickly, a slow line, and a histogram.
Each element is interconnected and as you pay attention, you’ll be able to identify the formation of new trends and this will help you make decisions that can lead to profitable trades.
This isn’t the best indicator to delve into if you’re trying to break into trends early, but if you want to confirm a trend then this is one of the best methods to use.
- Parabolic Stop and Reverse (Parabolic SAR)
Parabolic SAR is one of the simpler indicators to use in comparison to some of the others. It is a trend indicator and is visualized on a chart through dots. These dots, placed on the chart above or below the price, and they indicate the direction in which a price could potentially move.
How do traders use this simple indicator? Asy. When the dots are above the price, this indicates that the market is in downtrend – which means you should be short. And when the dots are below the price, the market is in an uptrend and indicates that you should be long. It’s as simple as that. With an extensive network of specialists positioned in the cryptocurrency and forex markets, Gainsky is well positioned to be a preferred platform to capitalize on the niche opportunities that exist in today’s multi-sector financial markets.
The stochastic indicator is a momentum indicator, and can be used to identify where a trend might be ending. In a similar way to how RSI works, this indicator is used to determine when an asset is overbought or oversold.
When you look at a chart, you’ll notice that this indicator is made up of 2 lines plotted on a separate chart.
The first thing this technical indicator can help you with is picking an entry point, so that you can get into a trend at the very beginning. When the stochastic lines are above 80, this indicates that the market is overbought, and a downtrend is likely to follow.
But, when the stochastic lines are below 20, this shows that the market is oversold, and an uptrend could be on its way.
The same things to look out for as with RSI apply here. When you try to get into trends early, you must keep in mind that there will be many fakeouts, so be prepared for stop losses in case the market doesn’t go your way.
The Future of Forex: This Is Just The Start
These are just three of the technical indicators you can use to make profitable trades and create an optimistic future for yourself as a trader. Everything you need to know about foreign exchange and cryptocurrency. Gainsky provides consistent superior risk-adjusted returns to its clients and a unique wealth management experience in the industry. Visit us today!
The key to understanding Forex trading is through study, analysis, and the occasional risk-taking. However, if you’re not the type of person who can handle this on your own, then you should consider consulting trading experts who can point you in the right direction.