5 Forex technical indicators that are a must for beginners
Are you new to forex trading and you are looking for the best technical indicators to use? You are in the right place.
Choosing an indicator for doing technical analysis can be quite hard especially when you have little market understanding. Nevertheless, below are some tips for choosing a technical indicator as a forex beginner:
The indicator should be easy to use. You should not struggle loading the indicator, setting the parameters and even interpreting its signals.
Complexity does not always translate to profitability. What matters with technical indicators is whether you are able to use whichever indicator that you choose to use effectively.
Also remember that what is simple for other traders may not necessarily be simple for you. You should choose the indicator according to how well it suits you; not because your friend uses it.
- Straightforward signals
The main reason behind using technical indicators is to analyze the forex markets so that you could get good entry and exit points for your orders. Therefore, it is important that you understand how the technical indicator works and also be able to interpret the trading signals that the indicator gives without much of a struggle.
Remember you are supposed to interpret the signal very fast and place the right kind of trade before it is too late to place your order. If you delay in placing your order or closing your order, you will end up making losses.
- Reputable indicator
You should look for an indicator that is commonly used by other traders. This way you will be able to get reviews from other traders who have used a similar indicator and get to know whether it is a profitable indicator or not.
Tips on how to successfully trade using technical indictors
After choosing the technical indicators, the next step is using them in the best way possible so that they help in increasing your profit margin.
Below are tips on how to successfully trading with technical indicators:
- Practice on the demo account
Always test technical indicators on your demo account before using them on your real trading account. This way, you will be able to learn how the indicator works without put your hard earned saving at risk.
In the demo account, you will have the liberty to test any parameters on the indicator since the funds in the demo account are virtual. After changing the parameters of the indicator, you can test whether the signals provided are worth trading by placing orders and waiting to see whether they will turn out to be profitable or not.
- Do not depend on one indicator
You should have another indicator to help confirm whether the signal being given by the first indicator are correct. At times an indicator may give ‘premature’ signals and if used, they would results to losses.
Using a second indicator would be helpful since you will only trade when both indicators give similar signals. For example, both indicators can indicate that the trend is bullish and this would be perfect time to place a buy order. But if one says the trend is bearish and the other says the trend is bullish, then you should not place any order until the two indicators agree on the trend.
- Avoid using too many indicators at the same time
To avoid making the trading chart look overcrowded, you should use at least three indicators if you are not comfortable with using two. However, you should ensure that the indicators you choose to use do not display too much information to obscure the chart.
There are some indicators which would be better off when used individually due to the much information they display on the chart. An example is the Ichimoku indicator.
5 best technical indicators for beginners
Considering all the factors given in the above sections, below are five best Forex trading technical indicators for beginners:
Moving Average (MA)
This is a trend indicator which helps trader identify bullish and bearish trends in the market. It is usually very easy to use and actually forms the basis of most technical indicators.
There are very many types of moving average indicators. They include: Exponential Moving Average (EMA), Smoothened Moving Average (SMA), Triple exponential Moving Average (TEMA), and Adaptive moving average (AMA).
This is normally classified as a momentum indicator. It assists traders determine the strength of the prevailing market trend. It normally tells whether a trend is strong or week.
Moving Average Convergence Divergence (MACD)
This indicator helps traders determine the prevailing market trend and the strength of the trend (usually referred to as the momentum).
It is best used with trending markets.
Pivot points indicator
This help traders identify level at which the market trend is most likely to change. This levels are determined using previous market movements and are referred to as support and resistance levels.
Ichimoku cloud indicator
This is one of the most comprehensive yet easy to use indicators there is. It helps trader identify the trend, its strength and also precisely identify entry points.