Every new trader thinks indicators are the best tools to secure the best possible trades in the Forex market. They become biased with the readings of the indicators. Unlike them, the professional traders never rely on the readings of the indicators to find the potential trading zone. Rather they consider it as a filter tool which allows them to assess the quality of the trade setups. Though there are hundreds of indicators in Forex market, we will highlight the top four indicators used by the professional traders.
Simple Moving Average
Simple Moving Average is a very popular indicator in the Forex market. Many pro-Aussie traders often use the simple moving average to find the critical support and resistance level in the currency pairs. But do you the perfect period to use in the simple moving average? The obvious answer is NO. To find the best possible trading zone, you need to use the 100 and 200 periods in the SMA. Though the indicators offer high-quality trading signals to the retail trader’s many professional traders often use price action signals to trade the dynamic levels.
RSI indicator
RSI stands for Relative Strength Index and it allows the retail traders to find the overbought and oversold condition of a certain asset. You might be new to the trading profession but this doesn’t mean you can’t execute quality trades. Find the key support and resistance level in your trading platform and assess the quality of the trade setup. If you look at the reading of the RSI indicator, you can easily spot the two specific level market with the number 80 and 20. If the RSI curve touches the 20 levels, you should look for the bullish trade setup. Similarly, if the RSI curve touches the 80 levels, look for selling opportunity. Though the use of RSI indicator is extremely efficient, still learn its use by using the demo account offered by Saxo.
Bollinger band indicator
Bollinger band indicator offers classic trade setups to the retail traders. You can easily execute short and long trade by using the upper and lower band of the indicator. The lower band of the indicator act as critical support level and the upper band act as a critical resistance level. If the price of a certain asset hits the lower band, you can expect a bullish rally. Similarly, if the price of a certain asset hits the upper band, you make a profit by executing long orders. But there is a small twist to the use of this indicator. To get the best possible trade setup use other essential tools like Fibonacci retracement level, trend line, etc. to find the best possible signals. And always make sure you are not executing high-risk trade with this indicator.
Harmonic pattern indicator
This indicator is mostly used by the advanced trader. Some of you might not understand the details of harmonic pattern trading strategy but if you dig deep it won’t take much time to develop your skills. The harmonic pattern is mostly used to trade the major reversal. However, you can also use the indicator to trade along with the major trend. Unless you have extensive experience with position trading strategy, you should never use the harmonic pattern trading strategy. Some of you might think by buying the most expensive harmonic pattern indicator in the Forex market, you can make big profits from this market. But this is not all true. There is no assurance a certain indicator will work in real life. You need to backtest the indicators in the demo trading account. If you feel comfortable with your demo trading performance, switch to the real trading account and execute the trade.
We have already discussed the top four indicators used by the pro traders. Try to learn its use by using the demo account. Take advantage of these tools and become a successful trader.