A Guide to the Most Important Forex Indicators You Should Know

When seeking forex day trading indicators, every trader will have his or her own preferred tool for watching prices and trends.

While approaches will vary, each of the forex indicators that you’ll find that deal with forex trading, they all follow a fundamental principle of predicting action. Knowing what to do and when to do it makes all the difference when you’re building wealth with currency trading.

Here are 4 of the essential forex indicators to know.

1. Use Moving Averages

If you want a solid forex indicator to inform any strategy you’re looking to employ, stick with moving averages. A moving average is meant to make it easier for you to find trading op[ortunities that are in the direction of trends. If a market is starting to trend upward, moving averages can help you find the pattern and let you know when it’s time to buy or to sell.

Moving averages are in a line that will measure the average price of currencies over time. By looking at the rates of two currencies over the last year, you can see the general price direction.

You can buy or sell off your investment as a trend loses or gains momentum.2. Try RSI

A relative strength index is a system that shows you when a currency is overbought or oversold, signaling a reversal will be around the corner. If you like to buy a currency when it’s low and sell when its high, RSI is the indicator you’re looking for.

RSI can help to find the best entry and exit prices in a trending market. When they’re trending, tie’s more obvious where the market is headed, but it’s hard to know when to enter, as you want to keep an eye on the extremes.

Learn about how this oscillating scale works, and you might find that it’s your new favorite tool when it comes to trading.

3. Stochastics

Slow stochastics are similar to RSI in that they are an oscillator for locating overbought or oversold environments that will see a price reversal soon. If you use the stochastics method, there are defined regions for calculating entry.

Because the standards are laid out for you, it’s slightly more dependable and lucrative of a system than RSI

4. Moving Average Convergence & Divergence

Probably the most sophisticated of all the oscillators in forex trading, this indicator can be used in trending or ranging markets. You’ll end up with a visual display of changes in the momentum.

After you’ve figured out which way the market is headed, you can derive different signals from this indicator. You can watch the lines for an upward or downward bias for the currency pair. Then you can find a signal line to tell you whether to buy or sell.

If you pair it with a range-bound market, you can’t lose.

Finding Forex Indicators That Work for You is Hard

When you’re on the hunt for forex indicators that suit your style of trading, it’s important you don’t overburden yourself with work. You want your trading to fun and engaging as much as you want to make money.

If you want to pair your indicators with forex signals, check out our guide for what works.

This article was written by our in-house forex traders with a combined 20+ years of experience in trading the financial markets.