There are a lot of technical indicators, and this article will explore the best forex technical indicators of the forex indicators that are considered the best indicators available in forex, including trend determining indicators such as the ADX indicator, the Aroon indicator, the MACD, and momentum indicators such as the indicator. Relative Strength (RSI), Stochastic, and many more.
When you start to trade Forex, it is important to remember that searching for the best indicator of the direction in Forex is pointless – because there is no “holy cup” in Forex. To be successful in Forex, you must follow the same path that every other trader follows, and know-how to trade. You will need to know the logic behind the most popular Forex indicators, know their strengths and weaknesses, and most importantly, know how technical indicators can organically correspond to each other and help you in your trading journey.
What are The Best Forex Technical Indicators
Technical Forex indicators are mathematical tools that analyze one of the following five numbers: the opening price, the highest price, the lowest price, the closing price, and the trading volume. As a result of the calculation process, technical indicators are graphed as patterns on the chart to determine entry and exit points for trades. Sometimes it is attached to the price chart, and sometimes it is plotted in a separate window. There are literally thousands of indicators, and anyone with coding skills can write their own indicators, but keep in mind that there is only so much information that will actually be of use to you.
Another thing to keep in mind is that most of the stock market technical indicators and daily charts were developed, because on the day of their initial creation, it was in about 24 hours that the trading charts are updated. This was 30 years before the Internet.
Best Forex Technical Indicators
Let’s take a look at the most important forex indicators that help determine the general trend (trend) on our trading charts:
ADX Average Directional Movement Indicator
The ADX indicator is a forex indicator for technical analysis of trend strength, and it is based on the EMAs (exponential moving averages) of the other two indicators: + DI and -DI’s. DI (Trend Movements) is an account of how the current day’s highs, lows and closes are related to the previous day’s highs, lows and closes. The sum of these numbers is then divided by the Average True Range (ATR).
In essence, the + DI tells us how strong the bullish trend (bull) is today compared to yesterday, while the -DI indicator informs us how strong the downtrend (bear) is today, compared to yesterday. The ADX takes the values of + DI and -DI, and tells us who is stronger today, compared to yesterday – the bull or the bear.
Graphically, the ADX with + DI and -DI are like three lines intertwined with each other, moving on a scale from 0 to 100. If the ADX value is less than 20, then the trend (either bullish or bearish) is weak. A threshold of 40 indicates trend strength, and everything above 50 is a strong trend. If + DI is above -DI, then the trend of the bull is dominant with the bear. The curvature of the lines also has a value, which indicates how fast the rate of change can be. ADX is a forex indicator that assesses trend strength.
The Aroon is a technical indicator for forex trading that measures if there is a trend, how it is developing, and how strong it is. Aroon indicators play the notion that the trend can be measured by assessing how close to previous highs (highs) and previous lows (lows). The freshness of previous highs is reflected in the ascending line of the Aroon Index, while the freshness of the lower low is reflected in the descending line of the Aroon.
Lines are then oscillated from 0 to 100. For example, when the rising line is pressed to the highest scale around the mark of 100, the descending line is barely above the low at 0, and the highest peaks are often over the lower lows which are considered few – This indicates that we have a strong bullish trend. Crosses indicate a change of direction. The Aroon is also a lagging indicator, and is often used to confirm whether the trend has stayed the same.
The MACD indicator aims to detect changes in strength, trend, momentum, and trend duration. It’s based on moving averages from 12 and 26 periods, but with some interesting tweaks. There are two things you can glean from this alone. Using moving averages is similar to using a lagging indicator; The 12th and the 26th look a lot like the Trading Weekly and the Trading Month. Hence, this indicator is supposed to be used on daily charts.
Aside from adjustments, the indicator consists of the MACD line – the difference between the 12 EMA and the 26 EMA, the signal line – and the same MACD line that has been leveled by the SMA for nine periods. And the histogram, which is the difference between the MACD and the signal. Columns along the 0 axis – histogram – are often used to define the differences. A divergence occurs when the price forms a new high or a new low that the chart does not support. Which also results in a higher rise or a greater drop, accordingly. Divergence refers to the change in price direction.
Technically, there are three ways in which the MACD indicator can be interpreted:
Crossover: When the MACD indicator falls below the signal line, it represents a bearish signal indicating that it is time to sell. Instead, when the MACD rises above the signal line, the indicator displays a bullish signal. This indicates that the price of the particular asset is likely to experience upward momentum. Most forex traders wait for a confirmed crossover above the signal line before entering a trade, to avoid being misled or entering a trade prematurely.
Divergence: This is when the safety price actually deviates from the MACD indicator. Which indicates the end of the current trend.
When the MACD is very high. The shorter moving average is moving away from the long-term moving average, and is an indication that currencies are over-bought and the price will return to normal levels.
Best Forex momentum Technical indicators
Now let’s take a look at the most important forex indicators that help determine the momentum of price action on our trading charts:
Relative Strength Index (RSI)
The RSI is the first in a group of forex indicators to gauge momentum, alongside the Williams% range and stochastic. Which serves the same basic purpose, but in slightly different ways. Momentum indicators are used to indicate whether an instrument is overbought or oversold. By measuring the speed and volume of price movements.
Momentum is nothing more than the rate of price change. The Relative Strength Index (RSI) compares current and previous candlestick closing prices for the uptrend and downtrends. It then converts the result into an EMA (or in some cases a simple moving average – SMA) and then calculates how the uptrend EMA correlates with the downward EMA. When it oscillates in the range of 1 to 100. The greater the difference between today and yesterday – the stronger the momentum.
Therefore, if all of the instrument’s close is higher than the previous close, the RSI will oscillate upward. Once it reaches the 80 level – the overbought zone – it will form a sell signal. RSI is no stranger to the concept of divergence. If the price achieves a new high (high), while the RSI indicator only makes a lower high. A bearish signal is generated and vice versa.
Each technical indicator oscillates up and down in a specific range. This is how trend indicators may be oscillators in terms of their properties. As mentioned above, the stochastic oscillator. Like other volume indicators, it helps to identify overbought and oversold areas by measuring momentum. In the case of Stochastic, this is done by evaluating how close the closing price is in relation to the price range.
To the upside, the price should have closed near the highs of the trading range. During the downtrend, it should be near the lowest levels of the trading range. Stochastic is similarly plotted on a 0 to 100 corridor, with the same 80/20 threshold levels for oversold / oversold. We mention briefly. That Williams% range compares today’s closing price to the high in the past, and in relation to average highs and lows in the past. In all other respects. It works in a similar way to the forex indicators: the Relative Strength Index and the Stochastic.