Successful forex traders know
how to use market indicators
that reveal the best time to buy,
or sell a forex cross rate.
Here are four
of the most popular.
The first one is
a trend-following tool,
which suggests whether
to enter a long, or short position.
Essentially, trend-following tools
help traders recognize major trends,
and then profit by trading
in those trends' directions.
One method is the moving
average crossover.
If the price of a stock climbs
above its 20-day moving average,
it could be
a signal to buy.
The second is a trend
confirmation tool.
If it concurs with
the trend-following tool,
a bullish sign tells a trader
to take a long position
in the currency
pair in question.
A bearish sign means find
an opportunity to sell short.
The moving average
convergence divergence,
or MAC-D is a popular
trend-confirmation tool.
The third indicator is
an overbought, oversold tool.
Traders must decide whether to jump in
as soon as a clear trend is established,
or to wait until after a pullback
occurs, so they can minimize risk.
The three-day relative strength index
can help traders make the decision.
The RSI calculates the total sum of up
days and down days over a time period,
providing a value that
ranges from 0 to 100.
An asset is deemed overbought
once its RSI level nears 70,
and undervalued
if it nears 30.
And the fourth indicator
is a profit-taking tool.
An RSI that rises to 80 or more is an
indication that it's time to take profits.
Other good indicators are
Bollinger bands and a trailing stop.