The MACD (moving average convergence / divergence) indicator is very, very popular. It can be used to confirm trend direction or tell you when the trend has changed. It is one of the most heavily used forex trading indicators, and I want to show you how to use it to find and confirm winning trades.
I like to use the MACD as confirmation, not as the only indicator to trade with. When I am looking to enter a trade, I like to start with the daily charts and see which currencies are trending the most. By doing this, I have a higher probability of trading with the trend, and therefore, making more money.
Once I have identified the currency pair I want to trade and the direction I want to trade in, I use the MACD to help me verify the trade and find the best entry point.
So what should you be looking for in the MACD? Here are a few things:
1. You want to see the MACD line and the signal line below the zero line. That might sound confusing, but if you have used this indicator at all (or even if you bring it up on your trading charts now), you will easily see what I am talking about.
2. Secondly, you want to see the histogram bars in the indicator sloping in the direction you want to trade.
If you see that both aspects of the MACD match the daily trend, there is a real good chance you will make money on your trade.
You may have to be patient though. Don’t jump in just because you want to trade! Make sure you have studied the market and have a plan for when to get in and get out.
Posts Tagged ‘Forex Trading’
I use the stochastic all the time and think there is no better indicator for timing your trading signals – its simply the ultimate momentum indicator and every forex trader should use it – lets look at this fantastic indicator in greater depth….
The stochastic indicator is:
A momentum indicator which warns of strength or weakness in advance, making it leading indicator to confirm trading signals in conjunction with support and resistance.
The Technical Bit
The stochastic is plotted as two lines %K and %D.
The %K line is the more sensitive line
The %D line is a moving average of %K.
The plotting of the stochastic is a bit similar to a moving average. Substitute the %K for the fast moving average and %D for the slower average.
The lines are plotted 1 – 100.
Here are 3 ways you can use the stochastic indicator to great affect, with crossovers from over bought – oversold being my personal favorite.
1. As a Overbought / Oversold Indicator
A common use of the stochastic is to use it as an overbought / oversold indicator. When stochastic moves below the 20% and above 80% trigger lines are crossed the Buy when the stochastic goes below 20% and then rises above that level and sell when the stochastic rises above 80% and then goes below.
2. Trading Crossovers
the crossover is my favorite way of using the stochastic from over bought above 80% or oversold below 20% Many traders simply buy when the %K line rises above the %D line and then sell when the %K line falls below the %D line.
This can work but you tend to get a lot of whips in price. I personally prefer to do crossovers from very overbought and oversold levels. In currencies you often get above 90 and below 10 and a recent currency signal I had was from 96!
When these levels are reached and you have cross the upside from oversold or down turn from overbought are great signals.
I know traders who simply use support and resistance and crossovers from extremes and make a lot of money with the stochastic and support and resistance lines.
Sure it’s simple but it’s very effective now the final use.
3. Trading Stochastic Divergences
Divergences between the stochastic and price can be used as a leading indicator for executing trading signals.
For example, if prices are making new lows and the stochastic moves higher or crosses to the upside you have a warning that prices may re bound as price move up. The opposite is of course true in a bear market.
Of course no indicator works all the time by itself – but in terms of a momentum and timing indicator for your trades, it’s a fantastic indicator if used correctly.
As stated my preference is not just to use crossovers but crossovers from price chart extremes and this with trend lines and a little practice works.
I also like to use filters in line with the stochastic and use the Relative Strength Index (RSI) and Average Directional Movement (ADX). There great as momentum indicators and work well with the stochastic. Get the book they come from – New Concepts in Technical Trading – By Wells Wilder it’s a great book and outlines them in more detail.
I have used the stochastic for 25 years and use it for swing trading and trend following and never execute a trade without checking it.
It’s a very visual indicator and you can learn to use it in 30 minutes. If you don’t know or use the stochastic, its time to make it part of your essential forex education.
When individuals hear the term Best Forex Indicator, it means a lot of different things to people who get involved with Forex trading, or have just heard about it. You will find many Forex indicators that claim to be the best Indicator and get what it takes to identify profitable trades. However, they have only helped in multiplying the number of discouraged Forex traders. If you’re one of those in search of the the most efficient Indicator that helps users come on the profit zone, Sniper Forex may simply be what you want.
It’s unfortunate the way individuals paint the Forex trading world black. After a trial period or two they back out with damaging reviews. Some individuals, who are hyped by people who parade themselves as having the magic wand that guarantees all-year-round effective trading, are really counting their losses. It’s for vary people and many first time traders that the Sniper Forex indicator is perfect for, this system’s accuracy contains granted traders a reason to dub Sniper Forex as the most reliable indicating system.
Unlike other software or indicators Forex traders get to start using, Sniper indicator is a manual Forex indicator that utilizes a powerful and precise set of rules to offer exit and entry points while you trade. Therefore it’s recognized to become the Best Forex Indicator that has been noticed by traders who wish to work as they trade.
There are many indicators online today. Some are sold at a high price, while some are virtually given for free. One thing you need to understand that the internet is filled with a lot of programs and software’s that is never created to succeed. And when it comes to Forex trading you do not have the luxury of trying out indicators that claim to become the best as that quickly results in an empty wallet. The Sniper Forex indicator provides you with the very coveted and efficient entry and exit timing that is the philosophers ‘ stone of Forex trading.
The reason for it being termed to become the Best Forex Indicator is the fact that after a day’s trade, you will absolutely count your blessings. You’re sure to profit from the use of Sniper Forex than you are going to with any other indicator on the marketplace, the purpose of saying this bold statement is really simple, Sniper Indicator is used by many traders today and the overall review of it is highly positive. In fact it has been found that individuals that have bad reviews of it were really having some issues either with their internet connection, or some other personal challenges. Since it’s meant to offer entry and exit points, your duty is set the info into action as fast as the indicator shows it off. Slow networks can hinder your success in Forex trading.
Forex trading is worthwhile for those who have the appropriate kind of tools it has. It is the quickest means of making more money than needing to promote products online with a sea of competition to struggle with. Sniper Forex indicator is you’re guaranteed Forex trading partner. As the name implies, it isn’t designed to misfire any trade it opens up for you.
Technical analysis depends on the use of technical indicators. There are many indicators in the market now. In fact, the old indicators soon lose their efficacy and new indicators are developed to replace them. Markets keep on evolving!
What worked in the markets a few years back may not work anymore. The right choice of forex indicators in your forex trading is of utmost importance. Trading with the wrong forex indicators will only make you end up frustrated. Now, to tell you the inconvenient truth, free indicators like the stochastics, moving averages, MACD, bollinger bands, RSIs and others simply don’t work anymore.
Why? When everyone starts using the same indicators, they lose their efficacy in predicting the markets. You see technical analysis is just the study of the short term price action in the market. Now, this short term price action is determined by the buyers and sellers in the market. Markets are just buyers and sellers trying to buy or sell. Their emotions rule the markets. When these buyers and sellers all start behaving in the same manner, you can well imagine market can become highly predictable. When things become predictable, they lose their value. This is the exact reason why when majority of the traders use the same indicators they become useless. Now, these two powerful forex indicators can catapult your forex trading to the highest possible level.
1. Slingshot Indicator;
You must have heard this oft repeated saying that trend is your friend. Indeed the trend is your friend and fortunes are always made if you can ride the trend correctly. There are many way to trade the trend. Some use simple technical indicators like the ADX, moving averages and others combined with candlestick patterns. Slingshot indicator is meant to make your trend trading highly accurate and efficient. What this indicator does is to setup the SLINGSHOT of a trend reversal that can be highly profitable.
2. US Dollar Index Indicator;
US Dollar Index is a basket of currencies that is used to judge the performance or what you call the market sentiment of USD. The basket of currencies in the US Dollar index comprises EUR, JPY, CHF, CAD, GBP and SEK. Knowing the performance of the USD against the major currencies can be really helpful in forming your bias or what you call the market sentiment.
These two powerful indicators are in fact the latest additions to the Forex Mastery 2.0 System and the M3 Forex Navigator Software!
What are the best forex trading indicators and how do you use them to make your forex trading strategy succeed? Here we will look at how to do just that.
Firstly, there is no such thing as a best forex trading indicator on its own, as no indicator works all of the time however if you combine the right Forex trading indicators you can build a robust forex trading strategy and seek currency trading success.
Here we are going to give you a subjective view, of the best forex indicators and how to combine them for success.
When trading forex markets, we always like to use simple bar charts and see support and resistance as the initial paint on the canvas. We can see support and resistance and the direction of the market clearly and then decide with our indicators areas of value to buy and sell.
Here are some indicators we have been applying for 25 years and have made money with and the some advantages we think they give to any trader.
Simple Moving Averages
We all know prices come back to an average and we find the most useful the 40 day MA, for defining the biog long term trends and in strong trending markets, we like to buy or sell back to the 20 day MA, to enter fresh positions in the direction of the trend.
Bollinger Bands
Gives you the volatility of the market and they are a great help in determining the standard deviation of the market from the norm. This of course gives you clues to overbought and oversold scenarios, entry points and targets.
Anyone who trades forex, needs to be aware of volatility and standard deviation, so make it part of your essential forex education and use Bollinger Bands.
While you can see trends support and resistance and volatility, this is just setting up areas to trade now you need to do market timing. You should never predict a move, you should always confirm it with momentum indicators to get better market timing.
Here are two great forex trading indicators to do this.
Relative Strength Index
A great indicator you can use it to time entries if the RSI is in your favour and strong, in existing trends – or when it diverges from trends ( particularly when its over bought or over sold) to enter contrary trades.
Stochastic
We love the RSI – But our ultimate indicator to trigger trades is the stochastic; it’s simple and very effective. We always use crossovers to confirm any move we are looking at. In contrary trades we love stochastic crosses with bullish or bearish divergence ( from over bought or oversold areas) against the prevailing trend.
A Great Toolbox Of Indicators for Any Forex Trader
So there you have our best forex trading indicators and they can be used for trend followers, contrary trading or swing trading. We can’t give you every advantage of them here but look them all up and study them and you can blend them, into a powerful forex trading strategy for profit.