September 11th 2011
Forex Indicator – Which One is the Best
When it comes to trading FOREX, most traders concentrate on technical indicators as they are the most objective and powerful method of trading this volatile market. However, there are many indicators in the technical analysis world – and in this article we will attempt to present the best.
Moving Averages
As simple as they are, moving averages are one of the most powerful technical analysis tools. Having said that, one still needs to have a strategy of using them. The cross strategy is a the most known one though the least powerful. The most powerful method is the Bounce. A bounce happens when price touches a moving averages and bounces off it. This trading signal is extremely strong and result in very quick and strong trends. Look out for bounces next time price comes closer to a Moving Average.
Bollinger Bands
The Bollinger Bands are also a traditional technical tools which are very good for providing leading trading signals. The best way of incorporating them in your trading is to use them as boundaries for price. The lower band is the lower barrier (support) and the upper band is the upper barrier (resistance). A profitable strategy is waiting for price to touch the lower or upper band of the Bollinger, and starting to move in the opposite direction. This signal is stronger when the middle band (Simple Moving Average) is not sloped (flat).
Commodity Channel Index
This indicator was developed by Donald Lambert 30 years ago, and is still used today – a proof of its importance over changing market environments. The CCI is very useful in gauging periods of overbought and oversold in price. Readings below -100 are considered oversold and readings over 100 are considered overbought. Crosses of these levels can be used to generate trading signals. Moreover, a famous strategy is used with the CCI indicator, known as Woodies CCI. It involves interpreting patterns on the CCI indicator, and is also a profitable strategy.