The goal for any trader is to apply the right strategies and then reap benefits from his investment. In order to do this successfully, however, a lot of market experience and personal determination must prevail. Market experience involves using the top indicators available to come up with reasonable investments. Since the forex trading business is quite detailed, it is not easy to choose just a random indicator and expect that success will come. The choice of an indicator determines the effectiveness with which business will be done and ultimately the overall trading success. In order to choose the right indicator, it is important that a trader considers a good mix of the different systems. In general, it is better to have:
- A momentum indicator
- A trend indicator
In addition, a keen trader should focus on the volatility in the market and the volumes of trade. There are many good indicators but a few stand out. The following are the 4 highly effective trading indicators that every trader should know.
The Relative Strength Index is among the best momentum trading indicators (also known as “Top Indicatoren” in Netherlands). It is quite effective in tracking the momentum of the market using real-time data and accumulated market data. This indicator works especially effective on informing traders when the market is ripe for buying or selling. By depicting the overbuying or overselling points on a chart, a trader can choose to buy or sell according to the current market status.
The Stochastic Oscillator
This indicator also follows the momentum in the market. At any moment the market could either have a strong momentum or a weak momentum. The turning points in the market are accurately depicted on the oscillator and traders then make their moves. A great benefit of this indicator is that it is highly accurate and very reliable even for volatile markets. As long as the trader knows how to follow the prevailing prices in the market, this indicator can give the best technical analysis.
The Moving Average
This is the first trend indicator on this list and it is without a doubt the best in this category. The MA is a rather simple indicator that charts the average trends of a short-term period against those of a long-term period. The points where the two trends meet signals the change in trends. If the short-term line crosses above the long-term line, for instance, this shows that the market is in an up-trend. This provides traders with a chance to trade their assets in anticipation of the next change in trend.
The On-Balance Volume
The second trend indicator on the list is the OBV. Just like its name depicts, this indicator follows the volume trends compiled over a significant amount of time to indicate the market trend. The OBV is rather straightforward indicates rising and falling trends based on rising and falling prices respectively.
The above trading indicators are highly effective and very popular among traders. Each of them offers great value to traders and since they are powerful in the metrics they analyze.