Best Forex Trading Indicators - For Bigger Long Term Profits With Less Risk

Here we will look at some best Forex trading indicators and how you can use them to make bigger Forex profits...

Here are some of well known indicators which every trader should make part of their Forex education. We will give you a quick overview of them and some tips, on how to use these indicators for bigger Forex profits.

Bollinger Bands

Gives you a view of the volatility of a currency and standard deviation of price. If you want to trade Forex successfully, you must understand the impact of volatility and standard deviation of price. Bollinger Bands help you see volatility at a glance and while we don't have time to cover all the advantages of Bollinger bands in this article, below you will find a trading tip which is extremely useful for entering a trend in motion.

Trading Tip

In strong trends, buying back to the mid Band (the center moving average) offers a great low risk, high reward entry point.

Moving Averages

Short term price spikes never last long and are normally driven by emotion and prices then fall back to an average which is in line with a longer term moving average. There are several moving averages which are great for spotting areas of value when trend following and here are two of the best.

Trading Tip

Notice in a strong trend, how important the 18 day MA is and how short term spikes away from the average and then returns to it. Take a look at the 40 day moving average as well, as it makes a great stop level in a strong trend.

Simple moving averages are a very effective tool and all traders should study and use them.

Average Directional Movement

Want to know if a market is trending and the strength of a trend?

The ADX line is a great indicator to help you do this.

Trading Tip

Want to know when to bank some profits and get advance warning when a trend might end? Watch for the following:

Watch for a move above 40 and a turn down, as a great profit taking warning. This set up often warns of the end of a strong trend and allows you to tighten stops or take some profit.

Relative Strength Index

The RSI measures the strength of the trend. Trading divergences of the RSI from the price trend can be a great way to warn of a trend change and get out of existing positions or get in to contrary trades.

Trading Tip

Look for changes in the RSI from chart extremes above 80 below 20, to warn of important trend changes and contrary trading opportunities.

The Stochastic

The stochastic is based on a simple concept:

If a trend is strong, the price will close, closer to the high in a bull market and vice versa in a bear market. Trading crosses on the stochastic, with bullish or bearish divergence from overbought or oversold levels, is a great way to time trading signals with greater accuracy.

Trading Tip

Watch for extreme readings in the RSI and a divergence away from the trend then, use a stochastic crossover (also from extremes) to confirm the move and execute your trading signal.

Learn how to use these best Forex trading indicators and combine them correctly and you can enjoy bigger Forex profits.