Forex Trading Indicators

Forex Trading Indicators

Reliable forex trading indicators are one of the key signals traders like to have in their system to build confidence that they are going to get returns on their investment. It doesn’t really matter if you are trading on fundamentals or you are using a technical analysis approach – they are equally important.

You will normally find that one of the key forex trading indicators watched at this time, particularly in the fundamentals area is the current interest rates. So, what are the smart traders looking out for here? Well, if you are tracking the interest rate of your currency pair and you see divergence then it like a sign that says “Buy Me” painted in forty foot letters on the top of a mountain.

The reason this is such a good sign is that it is showing that there is a growing difference in one of the key factors that will influence a price movement. Now, it doesn’t really matter what the economic conditions are that are forcing this move – although the monetary policy does need to be watched at this time. The key thing is that with divergence in interest rates you have a great set up for a trade that will last a little longer than just one day. Here you have a great chance to get a decent number of pips under your belt with a reasonably low downside.

Forex Trading Indicators

So what are the forex trading tools that are going to help you in this situation? Well you really need to have you news feeds set up correctly so you can get regular updates on your chosen currency pair. A really popular site is bloomberg.com and I’d recommend you subscribe to it’s foreign exchange news program.

There are some key pages on this site that will help you keep an eye on what is going on in the currency markets that is likely to drive price change. It does take a bit of time to learn to look for the right signals but you should really keep to a set of principles that include the key economic data that will drive the market.

Clearly, the interest rates are a significant measure but the other things to look out for are the trade flow and investment. If there is big news about that country securing lucrative trade deals that will encourage investment to come in then you can bet this will have a positive impact on the interest rates.

There are other forex trading tools available but some of these require a monthly subscription. There is a danger that in the early days you could sign up to all of these, especially if there happens to be a special offer on. What normally happens is that once you have signed up on line you have to write in to end your subscription. I think this is a crazy method but organisations use this technique so people stay with the service longer.

So, my advice here is not to sign up to any subscription services until you are sure that you can use the information profitably on a daily basis. You may also find that this information can be supplied free if you are looking in the right place.

Once you find the right feeds for your particular sector of the currency markets you should check these as part of your plan for each trade. A view of the headlines is normally sufficient for a short term trade and then a close eye on news looking out for the specific forex trading indicators that will help you manage that trade most effectively.

Other indicators may be based on certain forex trading signals from a technical approach. Technical analysis involves using certain market statistics and measures like price and volume to form a picture of the historical trading pattern of that stock or currency. From those movements it is possible to predict what is likely to happen to that price under current conditions. The technical analyst will pay no attention to the intrinsic value of the currency but will be very interested in the movements in price as the key measures are tracked.

It is a very specialist area and one that is a bit misunderstood by many people as they dismiss it as impossible. It does seem a hard concept to accept – why should a price react in a certain way just because the lines on a graph are pointing in a particular direction. It’s used in forex trading and also very popular in stock trading where some say the market is driven by fear and greed. Actually the story of the commodity is played out in front of you and highly visible on a technical analysis chart. You can see the fighting between the bulls and the bears once you understand the charts and this is a strong convincer that this method is a reliable method to use in identifying your trading points.

There used to be a lot of competition between the technical analysts and the fundemental traders although now there are a number of systems that are essentially hybrid versions. There are some really strong reasons to support this approach and, if you think about it, you are much better off taking the best parts of both approaches and using them to strengthen your strategy.

One of the key indicators that is widely used is the moving average. This is because it is easy to understand and quite a reliable factor. You are able to set period lengths to ones that suit you and many strategies are based on two or more moving averages plotting different periods on the same graph. Very often when one indicator crosses another or three indicators are pointing in the same direction this will be a signal to enter or exit a trade.

This is visually easy to follow and can also be easily programmed so software systems can replicate a trading strategy quite easily. Many traders now have created their own unique values to use based on their trading history and results of their trading plans. This is where it becomes vital to keep a record of all your results because they build up a picture of success for you to follow. This will allow you to create your own forex trading indicators which may have been based initially on another technique but has been developed into your own particular style

Forex Trading Indicators

Forex Trading Systems