On the stock exchange it is no secret that the most successful traders do not rely on their simple intuition but on the contrary work on a fine and precise technical analysis. For this, they choose the best technical indicators. To become a successful trader too, here are the 6 most effective indicators.
The best Forex trading indicator
When we start on Forex, we often start looking for the best trading indicator, the one that will make us money fast.
Unfortunately, such a universal technical indicator does not exist. Or rather, there is no single best indicator for trading on all markets, all trading styles and according to any strategy.
No, but there are indicators that are better than others in certain markets, for certain trading styles or for certain strategies.
It is therefore up to each trader to find the best trading indicator for him, adapted to his investor profile. To help you, here is our ranking:
1. Simple Moving Average (MMS) trading indicator.
The Simple Moving Average (MMS) indicator, or SMA in English (for Simple Moving Average), is a trend indicator. It may not be the best indicator in Forex trading, but it is one of the simplest.
The MMS trading indicator draws a curve on the graph that follows the evolution of the price over a certain period. A short period will be more sensitive to changes in direction than a longer period.
A trend overlap on these two time frames indicates a buy or sell opportunity depending on whether the trend is bullish or bearish.
2. Exponential Moving Average (EMA) trading indicator.
Another trend indicator from the same family is the exponential moving average (EMA) indicator. It is considered to be one of the best indicators, if not the best indicator for trading.
The MME indicator (or EMA, for Exponential Moving Average) draws a smooth curve (a method of smoothing values that removes transient fluctuations) and is therefore easier to read on a chart.
3. MACD trading indicator
A third essential trading technical indicator is the very popular MACD (Moving Average Convergence Divergence).
The MACD trading indicator calculates the difference between two exponential moving averages and represents the positive and negative values on your chart.
Thanks to the MACD Trading Indicator, you can predict the intensity with which prices are likely to rise or fall.
4. The Fibonacci retracement
In Forex, a trading indicator that has few skeptics is based on the Fibonacci retracement. It is one of the most trusted tools for Forex traders.
Fibonacci retracements and extensions can predict market support and resistance lines. They are represented on a Japanese candlestick chart.
The main retracement values to be aware of are 38.2%, 50% and 61.8%. These are the most anticipated retracements in trading, especially in a trending market.
The main extension values to be known are 127.2% and 161.8%. These are the two extensions most used by Fibonacci traders.
Another popular Forex trading indicator, fractals help traders identify underlying fluctuations in price waves.
Graphically, fractals consist of five consecutive bars on a histogram.
We look for a break in the fractals, which leads to the crossing of a pivot point (support or resistance) and allows us to take a position.
6. Bollinger bands
The latest stock indicator among the best, the Bollinger Bands, named after its creator John Bollinger, allow you to spot the first trend signals.
These Bollinger Bands are three in number:
- The highest end,
- The mid-range,
- The lower band.
The distance between the upper and lower bands indicates volatility. Thanks to an upper limit and a lower limit, this indicator offers a good reading of the market. It is a true indicator of a professional trader.
Best Forex Trading Indicator – Conclusion
At the end of this article, if you are still wondering which online trading indicator to choose, it is best to test the six tools presented here on a demo account. Such an account will allow you to familiarize yourself with each of them and to safely determine the best trading indicator for you.