Foreign Exchange Market: Main Indicators

Foreign Exchange Market: Main Indicators

Many of the losses reported by new traders in the forex market are due to not knowing in depth the indicators they use or should use, in other cases traders select inappropriate indicators.

For this reason, in this text, we will talk about the guidelines that you must take into account to select the indicators that you will use and that will favor you when developing procedures in the exchange market.

It will begin by briefly describing what a signaler is. This helps you in technical analysis when you start trading, it is a signal or data that results from a predetermined formula.

In general, the flags are already found in the different programs that exist to operate, however, these may vary depending on the program you use.

The most famous and popular indicators worldwide are The Average True Range (ATR), Relative Strength Index (RSI), the stochastic indicator, Bollinger bands, moving average convergence divergence (MACD), Moving Averages, etc.

A large proportion of indicators are known in the fx market, which is even modified, individualized, and updated from time to time.

Determination Of Indicators

Market tilts

Power of trends



Above all, they help when deciding when to buy or sell a currency pair.

Now, how to know which indicators you should apply?

The first thing that a trader should know is the fundamental rule that consists of: “Use 2 or 3 indicators to analyze and trade in the market”. This is because if you use various indicators, you will have 2 or more signals that will confirm your analysis of the market before entering a position.

First, it is recommended that you choose two indicators, which must have been understood by the operator in terms of their progress and how to use them. In general, you should choose a signal that encourages you to know trends and another that provides averages or categories.

It is significant that you generally select the ones that make you feel more secure at the moment of interpreting and that DOES NOT reproduce problems for you, that is, that it captures exactly what it is based on, how to understand, and how to assign the default formulas.

The second thing is that you have to run a lot of tests on demo accounts, no matter if you are a novice trader or an advanced trader; With the selected indicators, you must test them at different times, days, and different currencies to confirm that you are working and understanding properly, without neglecting that they support you to generate profits.

Indicators that have not provided you with any profit or have not worked correctly for you in tests with Demo accounts should be discarded and you should start choosing other indicators and conduct new tests with them.

It is not estimable to use excessive indicators when analyzing, for example, if you use 5 indicators at the same time, it is possible that the only thing that stimulates is great confusion and less visibility to interpret the market.

Choosing a trend indicator, a range indicator and a trend strength indicator may be the best option for you as a trader.

The Moving Averages are an example of trend indicators, RSI is one of strength and the so-called Bollinger Bands is a range indicator. As you can see in this case, no more than 3 indicators are used since it could create confusion.

New indicators are developed every day and with this, the form of analysis is continually growing. However, we advise you to be more traditionalist and not get carried away by new indicators without first certifying their effectiveness.

The fact that a friend recommends an indicator does not mean that it is the best, get used to working with trusted indicators that you generally use, and do not fall for tests within your real account. Don’t forget that what works for you may not work for others.

Finally, never use a single indicator, since this could cost you a lot of money. Finally, remember that you must confirm your interpretations and this should be with the use of different indicators, usually 2 or 3 markers.

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