Monday, 30 November 2009

Forex Trading Indicators

There are 100's of forex trading indicators that can be used to trade profitably with. You may be asking yourself which is the best and which are the worst.

In my experience the use of MACD, RSI, Bollinger Bands or Stochastic are the most popular lagging indicators used by forex traders. These indicators confirm the direction that price is now heading and can be used to qualify a trading decision.

The problem for most traders is that they will start out with one indicator on their charts and for a while they will be happy with the results that they get from reading the indicator. Then they have a few losing trades so they then move on to another indicator in the belief that this will be more successful and not generate any losing trades.

Of course the next indicator has some losing trades so you then move onto the next and the cycle continues. You start moving from one indicator to the next searching for the holy grail. So make the decision to stop and your trading will start to improve.

The three main indicators you need to understand that form the basis of all the lagging indicators mentioned above are price action, support and resistance. The most important is understanding how support and resistance works and how the major institutional players of the market use these levels as their reference points to buy and sell at.

Most traders understand support and resistance but they dismiss this as a trading indicator because it seems too simple. But in my experience the most successful forex traders buy at support and sell at resistance. Old lows form support and old highs form resistance.

Leading indicators that can form possible support and resistance levels are Pivot Points, and Fibonacci retracement and extension levels. These are widely used by the major institutional players and therefore should be considered by you when selecting your trading indicators.


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