Last update 2020.08.11
Talk to 10 different traders and ask for the best forex trading indicators, and you’ll likely get 10 different answers. It can be confusing to a less experienced trader and sometimes even professional traders get embarrassed with the variety of forex indicators.
Perhaps we can break the task down into a simple set of four basic technical indicator types that can be used in combination to get in at a great price.
No one indicator is best for everyone in this classification, but any indicator that helps a trader cut losses short and let profits run is the best indicator for that trader.
A typical model made of four groups of indicators could be:
- (1) Trend following.
- (2) Trend confirmation.
- (3) An overbought/oversold tool.
- (4) A tool that tells you when to get out (either for profits or stop losses).
It is important to understand that each of these indicator types generates lagging indicators. This means they give you trading signals after the move has already started so what they forecast is not price direction, but rather trading opportunity.
However the trading signal is only an opportunity if the trader manages their risk properly.
So for example, a popular trend following indicator is a moving average. Even with this one indicator there are literally hundreds of different choices, how long or short the time horizon is and whether it should be exponential (meaning giving more weight to the most recent periods) or one that gives equal weight to every period.
Traders looking to get in a little quicker choose exponential moving averages with shorter time frames but take the risk of false trading signals. As long as traders follow their risk rules and stop out of trades when the signal comes, they can find profitability over many trades.
A popular trend confirmation tool is known as the Moving Average Convergence Divergence (or MACD). This trading indicator is often used to confirm the trend of the Trend following indicators, moving average, as a way to reduce the negative impact of false signals.
So if the moving averages are bullish (or bearish), the trader then looks to an indicator like the MACD to confirm the bullish signals of the moving average. Yet even here there are a dizzying array of choices to select from.
A popular overbought/oversold trading tool is the three day relative strength index (RSI). This tool basically adds up all the days that end bullishly and compares them to those that ended bearishly over the time period measured and displays the information in a range from 1 to 100.
If all the days are bullish, the indicator will approach 100 while if all the price action is bearish, the RSI will head towards zero. Price action is considered neutral if the RSI is at 50.
All of the previous indicators are used to find entry points. The trade could choose to simply set percentage targets (both for stop loss or profit taking orders).
Or they could use forex trading indicators from among the types listed here to help them determine exits. Or they could use yet another indicator like Bollinger Bands to help them forecast their exits.
Bollinger bands take a standard deviation of price movement over a period of time, adding and subtracting it from the average closing price over that same period to create lines above and below the price movement of the chart. These lines are known as “bands” which sometimes are far apart and at other times get much closer together in a squeeze play.
There are some people who might enjoy spending the time it takes to really learn all these indicators and use them on their charts. But the vast majority of people are busy living their lives and would rather have an easier solution that doesn’t require as much time or effort but still gives the same opportunities.
Wiseinvest’s AI is the perfect solution. It watches the entire market for signals on 40 different strategies, trading automated for you with forex partner brokers. You can also trade manually with AI forex signals, which send you ready-to-go trading signals when it’s time to get in or out of a trade. What’s even better is that it’s on pace to generate a whopping 51.2% return this year.
Wiseinvest’s AI gives you the best of both worlds, an easy way to put your money to work without having to become an expert on hundreds of technical indicators and strategies, and a really high return on your money in a simple to follow and quick to implement way.
The best way to trade forex with AI
You can trade automated with AI-Trading in simple steps:
Don’t you have a broker account yet? Our AI is integrated to trade automated with the broker Oanda. Click here to open an account.
Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.
The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs. The forex broker Fxcm warns that 69.66% of retail forex traders lose money trading CFDs.
The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.