5 trading indicators to use in 2021 – ForexLive
A look at five trading indicators to enhance your trading this year
Everyone can trade forex, but not
everyone can trade forex well. In this day and age, making profitable returns
can be achieved by using trading indicators.
The forex market does not operate at
random. On the contrary, many economic theories suggest that there are patterns
that can be identified through various mathematical equations. If you’re not
great with numbers, trading indicators can soon become your best friend.
What is a Forex trading indicator?
Trading indicators are tools used
for technical analysis when trading forex or CFDs on stocks, indices,
commodities and more. Essentially, indicators are complex mathematical
calculations that are presented in the form of lines and graphs on a market
The purpose of implementing these
indicators is to help traders understand what’s happening on the price charts
and identify trends to make better decisions when opening a position.
Indicators come in many forms and, if you’re using MetaTrader 4, many will
already be included on the trading platform.
Who are Forex trading indicators
Forex trading indicators form part
of any technical trader’s strategy, as they provide insight into price trends
over time. Following a year of much volatility in 2020, adding indicators to
your trading strategy in the year ahead can help you understand the markets to
earn higher profits.
When it comes to choosing which
Forex trading indicator to use, you will need to consider your own personal
trading style, experience and skill. If you want to take your trading strategy
to the next level by trying out different indicators, you can practice on a
free demo account.
In this article, we’ll go through
five popular trading indicators that you can use to enhance your strategy. Keep
in mind that each indicator is best suited for a specific trading style and may
also vary on your own trading psychology.
Simple Moving Average Indicator (SMA)
The Moving Average Indicator, or simple
moving average, is used to indicate the direction in which a price is moving
along a trend, excluding shorter-term price movements. The SMA identifies
significant price points for an asset in a chosen time frame, dividing the
totals by the number of data points to present a single trend line. Traders can
choose the time period that they want to focus on, to view and analyse
historical price action and determine future price patterns!
Exponential Moving Average (EMA)
Another type of moving average indicator is
the Exponential Moving Average. The EMA places greater emphasis on more recent
data points, which may have a more significant impact on future price trends.
This indicator can be used alone or in combination with other indicators to
judge the legitimacy of trends spotted by other indicators based on newer data.
Much like the SMA, this indicator can be applied to both long-term and
short-term timeframes with averages ranging from 12 to 200 days.
Moving Average Convergence Divergence Indicator (MACD)
The Moving Average
Convergence Divergence Indicator, or MACD, is another useful tool in a trader’s
toolbox. This indicator is particularly suited for identifying differences in
momentum between two moving averages. If two moving averages are moving closer
together -ie. ‘converging’ -momentum is decreasing, whereas if they are moving
away from each other -ie. ‘diverging’ -momentum is decreasing. As a result,
traders who use this tool are in a better position to analyse price action
around the support and resistance levels of an asset, helping them know when
it’s a good time to buy or sell.
There’s a reason why Bollinger bands have become so popular,
and that’s because they’re a useful indicator for when markets become more
rebellious than usual. Bollinger bands provide an established price range
within which an asset is normally confined, widening or tightening based on
recent volatility levels. This indicator, therefore, can be used to forecast
long-term price movements to understand when an asset may be overbought or
If you’re looking for an indicator that shows both momentum and
strength of a trend, the Stochastic Oscillator is the solution. By comparing
specific closing prices of a particular asset, to its price ranges over a
period of time on a scale of 0-100, this indicator helps traders identify when
a market is oversold or overbought. Forex trading indicators have stood the
test of time, providing a reliable means of analysing markets based on
If you’re looking to expand your
trading horizons, try implementing a few trading indicators into your strategy
and make the most of market movements.
With CedarFX, you can get access to
a 0% Commission Account with up to 1:500 leverage and all the indicators you
need to trade smarter. Create a free account at www.Cedarfx.com.
This article was submitted by CedarFX.
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