Forex is a complex of trading systems, those that are interconnected and simultaneously located in different parts of the world. Forex is an international platform where money funds are traded at a completely independent price. The nationwide foreign exchange market "Forex" is the youngest of the currently existing international trading markets, founded in 1971 during the period of abandonment of currency standards. To facilitate the activities of traders, there are special indicators - tools for predicting results. It is about them that will be discussed in this article.
Bit of theory
World Forex - in fact, the place where the generally accepted methods of financial earnings and increase of equity lose their relevance. The Forex currency market is one of the rather popular trading platforms due to its large volume, highly liquidity and the tendency to change the exchange rate of the monetary unit. An additional factor that causes the popularity of the trading market for foreign financial assets is that, having only 250 US dollars available, you can start investing in Forex. The growing popularity of the site supports the growth in the number of agent companies.
How the indicator works
Indicators track the behavior of charts, the market situation and help the trader make the most appropriate decision for successful trading. Conventionally, they can be divided into three main groups:
- Trend indicators. They are based on forecasting of price processes, with the help of which they confirm or, on the contrary, refute trends and market position.
- Oscillators Able to predict data for a small period of the future. The calculation is based on the speed of price fluctuations and their values.
- Psychological indicators. As the name implies, forecasts are made based on the mood of market participants.
Although these products are aimed at accelerating the understanding of processes and decision making, it is better to use several options at once. This will help to get a general picture of what is happening in the market, using data from several indicators.
Investing in a product is not a cheap pleasure, so you should carefully select your future assistant. Their market is constantly growing and filled with new versions.
Basically, all the differences between them come down to using slightly different algorithms and functionality.
Before you install and start using the indicator, you must first “run it” on the demo account. Different algorithms can predict different outcomes in some currency pairs. Therefore, if a trader specializes in one type of trading, then the tool must be tested on it. A better several at once.
Top Forex Indicators
There are certain rules on the market that determine the behavior of different currency pairs. When deciding when to place an order, not all of them are taken into account. To calculate the best time to trade, the trader conducts a thorough study of the market, schedule and current social, economic or political events. All this becomes much easier when using the best Forex indicators. To date, their rating looks like this:
- SMA
- EMA
- MACD
SMA indicator
Some people call SMA the best Forex indicator without redrawing, as this is one of those tools that is easy to understand.SMA is calculated by calculating the closing price for several periods of time, adding it, and then dividing by the number of intervals.
If the trader plans the results of such calculations on the chart and compares the SMA in different periods, he will be able to find out when the situation is favorable for buying, and when - for selling. There is a general rule that short-term SMAs are more susceptible to market changes than long-term ones. When both of them (long-term and short-term) cross each other, the trader can observe the intersection of these indicators. The last mark on the chart is the best time to place a purchase or sale order.
EMA indicator
All types of moving averages are indicators of trends, since they follow past prices and allow you to make forecasts based on the development of the trend to date. Like an SMA, an EMA uses a price over a period of time. The whole calculation formula is as follows: Current EMA = (Price (current) - previous EMA) * smoothing coefficient + previous EMA.
The whole feature of the system is to weigh the difference between the price in the current time period and the EMA for the previous interval, and add the result to the indicator of the previous period. A recent price will have more weight if the time period is shorter. Thus, the EMA is more responsive to market changes over shorter intervals. Although it’s more difficult to calculate than SMA, nevertheless, it is one of the best Forex indicators for beginners.
MACD indicator
Third and equally important is MACD (Moving Average Convergence). This is one of the best Forex indicators for intraday trading. It shows the negative and positive differences between the 26-day and 12-day EMAs on the chart. The main advantage of MACD is that it indicates not only a trend, but also an impulse. This allows traders to make forecasts of the speed of price movement (up or down).
SMA, EMA and MACD together are among the best Forex trend indicators that show the market trend in a graphical impulse. This helps both novice and experienced traders to monitor price movements, predict potential price behavior and make decisions about placing orders for purchase or sale.
Fibonacci retracement rate
Although not everyone shares the same attitude to Fibonacci retracements, they nevertheless belong to the most tested, best Forex indicators among current trading instruments. Many currency traders around the world rely on the evidence presented by this indicator when deciding whether to open their position. Fibonacci retracement is a powerful technical analysis tool and the best indicator for scalping on Forex.
There is an interesting factor associated with this indicator. It lies in the fact that the more traders use Fibonacci to determine their actions, the more accurate this indicator is. Thus, its reliability and effectiveness are determined not so much by its accuracy as by the faith of traders.
Fibonacci retracement helps to determine support and resistance levels, and then indicate expected reversal levels. This indicator uses the extreme points on the price chart and Fibonacci ratios (0%, 23.6%, 38.2%, 61.8%, 100%), by which the difference between the two extremes is divided. This procedure allows you to provide support and resistance levels in the market, since any change in the trend precedes its partial rollback.
Indicator Reviews
Many novice users have noted that the best Forex indicator for beginners is SMA. Its simplicity and functionality allow you to quickly understand and delve into the ongoing processes.
For more advanced traders, the SMA already lacks information. And, in their opinion, the best Forex indicator is EMA.Opinions differ regarding the others, as each trader uses his proven strategy and applies more functional tools.
Someone uses an extended "set of weapons", connecting several varieties at once. This helps them to see what is happening on the market from different perspectives and to adequately and quickly respond to events.
Conclusion
The article described the work of the trading market and told which best Forex indicators to choose for both a novice and an experienced trader. This area is constantly evolving and improving. Thus, knowledge of the best Forex trend indicators can help you choose the right trading strategy. It is important to remember that the market is always unstable, and everyone decides which tool to use to analyze it, often treading the path of trial and error.