FOREX Trading Tip - Use Leading indicators For Greater Profits Here's How

Many traders like to buy dips to support or sell into resistance but this simply ensures they lose.

This FOREX trading tips is all about using leading indicators to confirm a move, rather than simply assuming support and resistance will hold.

Let's look at it in more detail.

Buying Into Support and Sell Into Resistance.

You hear this tip all the time, but it doesn't make money.

It is based on the old saying "buy low sell high" which is another phrase that won't make you money.

If you buy into support or sell into resistance then the logic is that you will have low risk and high reward if the levels hold.

The important word here is "if"

If you trade FOREX then you don't want to rely on "if" and hope - you want indicators that will increase the odds of these levels holding and your chances of making a profit.

If a price is speeding toward support or resistance then it will break as often as it holds, you therefore need to watch for changes in price momentum and that's where leading indicators can help.

Getting the odds in your favor

If you want to buy support and sell resistance and get the odds in your favor do use the following FOREX tip.

You can use lagging indicators as well as trend lines in FX trading to denote areas of support and resistance and the ones we like are:

Bollinger bands and moving averages.

These indicaotrs like trend lines should NOT be used to enter trades.

When buying dips to support or into selling resistance, you want confirmation that the levels are going to hold - before prices reach these levels you want confirmation of the turn in advance.

When price momentum turns above support or below resistance you can enter with increased odds of success.

The best timing indicator by far is the stochastic.

Look it up and learn all about it as it's a great under used tool.

Another great indicator is the Relative strength Index RSI.

Combine the two and watch for confirmation on both and you have a powerful combination you can use to increase your odds of success.

They will give advance warning of a change in price momentum at support and resistance and when they turn in your favor you can enter the trade.

You don't predict with the above.

You act on confirmation and this will increase the odds dramatically in your favor and increase your overall profitability.

This FOREX tip is obvious, but it's surprising how many traders simply hope a level holds rather than looking for confirmation

Don't make the same mistake always act on confirmation when trading FOREX.

Read more...

How to Use Leading and Lagging Indicators in Currency Trading?

Technical analysis uses charts and indicators to predict the future direction of the market. As a trader, you must master both how to read the different charts as well as how to use the different technical indicators. Technical indicators are basically of two types: 1) Leading and 2) Lagging. Understading how to use both the leading and lagging indicators can give you the edge as a trader. Some of the these indicators are highly useful and considered to be an important weapon in the hands of a skilled and savvy trader.

What are leading indicators? As the name suggests, a leading indicator leads the price action in the market and gives buy or sell signals ahead of the reversal in the trend or ahead of the start of a new trend in the market. Leading indicators are considered to be very important as they give you the trading signal ahead of time. One of the most popular leading indicator is the pivot points. There is a whole method of trading called pivot point trading that has been developed over time. Pivot points combined with fibonacci retracement can be highly effective. Pivot points can be calculated for any market. The other popular leading indicators are the oscillators like the Relative Strength Index (RSI) and the Stochastics. However, the problem with most of these leading indicators is that they often give false buy or sell signals. They need confirmation from other indicators.

On the other hand, as the name suggests lagging indicators are lagging behind the price action. Lagging indicators are often later. Sometime too late in giving the buy or sell signals. Since these indicators are lagging, they tell you about the reversal in the trend or the start of a new trend afterwards that might be late for you. Most popular lagging indicators are the Moving Averages. Moving averages are of three types; 1) Simple, 2) Exponential and 3)Weighted. Another very important lagging indicator is the MACD ( Moving Average Convergence Divergence). Moving averages and MACD are widley used by stock traders, forex traders, futures traders and options traders!

Stochastics is one of the popular leading indicators that is used in different markets like stocks, forex, futures, commodities, options almost all the markets. Stochastics is based on a complex statistical formula that you need not go into. You just need to know this that it gives an overbought or oversold conditions in the market. It is scaled from 0 to 100. When it touches 80, the market is considered to be overbough and when it touches 20 level at the bottom, the market is thought to be oversold.

On the other had the MACD ( pronounced Mac Dee) is a lagging indicator that uses three exponential moving averages 12,26 and 9. 12 represent the faster exponential moving average that uses the prices in the last 12 time periods. 26 represents the slower exponential moving average. 9 represent the difference between the two.

So what indicators to use? Professional traders combine the leading indicator with the lagging indicator to make the buy or sell decision. The best combination is combining Stochastics with MACD on 1 Hourly charts to identify the trend of the day. You must master these leading and lagging indicators if you want to make a successful trader.

Read more...

How to Use Leading and Lagging Indicators in Currency Trading?

Technical analysis uses charts and indicators to predict the future direction of the market. As a trader, you must master both how to read the different charts as well as how to use the different technical indicators. Technical indicators are basically of two types: 1) Leading and 2) Lagging. Understading how to use both the leading and lagging indicators can give you the edge as a trader. Some of the these indicators are highly useful and considered to be an important weapon in the hands of a skilled and savvy trader.

What are leading indicators? As the name suggests, a leading indicator leads the price action in the market and gives buy or sell signals ahead of the reversal in the trend or ahead of the start of a new trend in the market. Leading indicators are considered to be very important as they give you the trading signal ahead of time. One of the most popular leading indicator is the pivot points. There is a whole method of trading called pivot point trading that has been developed over time. Pivot points combined with fibonacci retracement can be highly effective. Pivot points can be calculated for any market. The other popular leading indicators are the oscillators like the Relative Strength Index (RSI) and the Stochastics. However, the problem with most of these leading indicators is that they often give false buy or sell signals. They need confirmation from other indicators.

On the other hand, as the name suggests lagging indicators are lagging behind the price action. Lagging indicators are often later. Sometime too late in giving the buy or sell signals. Since these indicators are lagging, they tell you about the reversal in the trend or the start of a new trend afterwards that might be late for you. Most popular lagging indicators are the Moving Averages. Moving averages are of three types; 1) Simple, 2) Exponential and 3)Weighted. Another very important lagging indicator is the MACD ( Moving Average Convergence Divergence). Moving averages and MACD are widley used by stock traders, forex traders, futures traders and options traders!

Stochastics is one of the popular leading indicators that is used in different markets like stocks, forex, futures, commodities, options almost all the markets. Stochastics is based on a complex statistical formula that you need not go into. You just need to know this that it gives an overbought or oversold conditions in the market. It is scaled from 0 to 100. When it touches 80, the market is considered to be overbough and when it touches 20 level at the bottom, the market is thought to be oversold.

On the other had the MACD ( pronounced Mac Dee) is a lagging indicator that uses three exponential moving averages 12,26 and 9. 12 represent the faster exponential moving average that uses the prices in the last 12 time periods. 26 represents the slower exponential moving average. 9 represent the difference between the two.

So what indicators to use? Professional traders combine the leading indicator with the lagging indicator to make the buy or sell decision. The best combination is combining Stochastics with MACD on 1 Hourly charts to identify the trend of the day. You must master these leading and lagging indicators if you want to make a successful trader.

Read more...