How to use Forex Trading Indicators

Some successful foreign exchange traders consider forex trading indicators as their most important tools of the trade. For one, these indicators are in general reliable, objective, and consistent in generating various signals. More importantly, they require minimal to no interpretation and analysis at all. You will easily know whether a particular currency pair is overbought or oversold. You can also rely on indicators to measure a trend’s power and generate a reliable reversal signal, whenever necessary. Here are some proven tips that you may be able to use in your trading activities:

• Longer Timeframes for Better Profits – Generally, a longer timeframe can generate stronger and better signals which theoretically, help produce better trading results. Because they do provide accurate signals, refrain from trading in timeframes of 15 minutes or less. With longer 1 – 4 hr timeframes, you have more time to plan and make the proper moves. You can better analyze and confirm your positions. This way, you minimize the risk for errors.
• Utilizing Various Indicators – When confirming trading signals, avoid using indicators from the same group or classification. Instead, employ different indicators that were derived using unique methods. The signals are of better quality and you can confirm your trading positions under various market analysis techniques. There will be marked improvements in your performance if you consistently combine different indicators to generate your signals. Simply put, the use of multi-timeframe indicators can help significantly improve your overall success rate.
• Understanding the Calculation – It is important that you understand how each indicator you use is derived as this will give you an idea on the logic behind a particular position you will have to take. In general, a better grasp of these indicators can help you come up with better investment decisions.  In some cases, you will discover that things are much simpler than what you expected.
• Optimization and Experimentation – In most cases, you will not get the perfect or ideal indicator settings when you first get on the trading platform. It sometimes takes time so it is best that you study and understand all the indicators that you use. You can experiment with different settings and combinations. Take note of specific settings that will best suit and work on particular currency pairs.

There are currency pairs that are less volatile than others and may not require prompt or immediate action.  In contrast, some pairs work best with the more sensitive trading indicators. The only way to find the best way of optimizing the indicator settings that will help you achieve your investment goals is by experimenting. As you go along in your trading activities, you will note a marked improvement in your performance when you regularly use the appropriate forex trading indicators.

Source: Admiralmarkets.com.au, An Australian Forex trading Broker