When you start trading on the forex market for the first time, chances are good that you will be overwhelmed by the sheer number of trading strategies and rules that exist. How do you cut through the clutter and choose the best trading strategy? You know that you want to keep it simple to allow you to react more quickly and get rid of some of the stress in your life, but you also want to be sure that you're profitable. Here are some forex indicators that you should watch for to be successful.
1. Look at the Relative Strength Index
The Relative Strength Index, or RSI, is an index that lets traders know whether or not a currency has been oversold. When a currency is oversold, this usually means that its worth has gone down, and it will be easy for you to buy at a very low price. When the RSI shows that the trend has switched, the value of the currency will go up. Watching the RSI of a currency will allow you to increase your chances of being able to buy low and sell high, a profitable strategy.
2. Look at Stochastics
Another option is to look at slow stochastics. This is similar to the RSI in that it helps you figure out markets that are overbought or undersold, allowing you to buy low and sell high. You can tell by looking at the stochastics charts when to buy because there are two lines, the %K line and the %D line. The signal on the stochastics chart is the exact same for both undersold and overbought markets, and the price is low for both. When the %K line crosses the %D line so that it is higher by 20 levels, then you will to want to buy because this is an indication that the trend is strong and will continue long enough for your purchase to work out.
3. Look at Moving Averages
Moving averages is one of the most simple charts you can look at. Moving average charts essentially have the average price of a currency for the day plotted over the course of several weeks or hundreds of days. This will allow you to see where the price is historically and whether or not the price is likely to continue to climb. When you see that the trend is in place and the value of the currency is going to increase, then you want to purchase. If you know that the currency usually only stays high for a set number of days due to a country's economic cycle, then you will want to sell once those days are over.
For more information, contact Winner's Edge Trading or a similar organization.