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← 4 Types of Indicators that FX Traders Must Know

You can't trade forex without knowing these types of indicators.

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Showing Revision 16 created 04/29/2019 by Alexandre Clemente.

  1. Successful forex traders know
    how to use market indicators

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