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The 4 Best Technical Indicators Forex Traders

What tools should you be using on your favourite trading platform?

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If you are a forex trader who prefers technical analysis over fundamental analysis, then you may be wondering what the best indicators are to build your strategy around. This article will discuss the most popular indicators and how you can begin to implement them.

Platforms to Install Indicators

MT4 and MT5 can be downloaded from HFM broker who specialise in Forex Trading SA. These platforms contain a huge range of pre-installed technical indicators that you can begin using immediately. You can also use other charting software such as Trading View or Sierra Chart.

MACD

MACD stands for Moving Average Convergence Divergence. It is a momentum indicator that uses calculations based on moving averages to help you to establish when a bearish or bullish move is nearing completion.

It, like many other indicators, is a lagging indicator, meaning it is not predicting what is going to happen, but rather working on what has already happened on the charts. This doesn’t mean, however, that it isn’t useful when it comes to trading.

Many traders trade the crossover of the MACD and signal lines for entry confirmations. However, the histogram is also extremely useful for finding true peaks and falls within the market and helping to determine trends.

For example, if you mark all of the peaks of the MACD on the price chart and they are forming lower highs, then you know that the time frame is currently in a downtrend.

RSI

RSI (relative strength index) is another technical momentum indicator that is lagging as it follows what is happening on the charts. It is generally used to identify reversals by using divergence alongside the overbought and oversold zones (usually set to 20 and 80). It is a very popular indicator to have in your toolbox.

PSAR

The PSAR (Parabolic Stop and Reverse) appears on your price chart as a series of dots that follow the price as it moves in one direction. When price retraces and crosses one of the dots, the PSAR flips to the opposite side of price and begins to follow the price in the new direction.

The idea behind the PSAR is that when it flips, the trend has changed direction for the time being. You need to add extra analysis to determine whether the change is a long-term true reversal or a short-term pull back.

Bollinger Bands

Bollinger bands are essentially ribbons on the chart which flow with price. They have a median line (which is a moving average) and a higher/upper line. The idea behind Bollinger bands is that when price reaches the upper band, it could be ready to drop, and if it reaches the lower band, it could be ready to rise. In addition to this, some traders like to trade bounces from the median to the upper/lower lines.

There are hundreds of technical analysis tools and indicators to choose from, and you should test out many of them alongside your strategy and journal to find out which gives you the most improved results. These are some of the most popular ones you can begin testing.

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