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TEN UNDERRATED FOREX TRADING INDICATORS

By Your Trading Mentor,

Trading Angel

There are many indicators that forex traders use to gain insights into the market and make trading decisions. Here are ten forex trading indicators that are often underrated but can be useful for traders:

1. Average Directional Movement Index (ADX)

2. Ichimoku Cloud

3. Chaikin Oscillator

4. Relative Vigor Index (RVI)

5. Keltner Channels

6. Volume Weighted Average Price (VWAP)

7. Fibonacci Retracement

8. Stochastic Oscillator

9. Moving Average Convergence Divergence (MACD)

10. Williams %R

1. Average Directional Movement Index (ADX): This indicator measures the strength of a trend, and traders can use it to determine whether to enter or exit a trade.

Forex traders use the Average Directional Index (ADX) as a technical analysis tool to measure the strength of a trend. The ADX is part of the Directional Movement System, which includes the Plus Directional Indicator (+DI) and the Minus Directional Indicator (-DI).

The ADX ranges from 0 to 100, with readings above 25 indicating a strong trend and readings below 20 indicating a weak trend. Traders use the ADX to determine whether a currency pair is trending or trading in a range. A high ADX reading indicates a trending market, while a low ADX reading indicates a ranging market.

Traders also use the ADX to identify potential entry and exit points. When the ADX is rising, it indicates that the trend is gaining strength, and traders may look to enter a trade in the direction of the trend. When the ADX is falling, it indicates that the trend is losing strength, and traders may consider exiting a trade or avoiding new trades until the trend regains strength.

In addition, traders use the +DI and -DI indicators to identify the direction of the trend. When the +DI is above the -DI, it indicates a bullish trend, and traders may look to enter long positions. When the -DI is above the +DI, it indicates a bearish trend, and traders may look to enter short positions.

Traders also look for crossovers between the +DI and -DI indicators. When the +DI crosses above the -DI, it can be a buy signal, and when the -DI crosses above the +DI, it can be a sell signal. However, traders should not rely solely on these crossovers, and should also consider the strength of the trend as indicated by the ADX.

2. Ichimoku Cloud: This is a comprehensive indicator that shows support and resistance levels, trend direction, and momentum. It can be used to identify potential buy and sell signals.

Ichimoku Cloud, also known as Ichimoku Kinko Hyo, is a technical analysis tool that is commonly used by forex traders to identify trend direction, support and resistance levels, and potential trading opportunities. The Ichimoku Cloud consists of five lines, including the Tenkan-sen, Kijun-sen, Chikou Span, Senkou Span A and Senkou Span B. Here are some ways forex traders use the Ichimoku Cloud:

Identify trend direction: Traders use the Ichimoku Cloud to identify the direction of the trend. If the price is above the cloud, it is considered to be in an uptrend, while if it is below the cloud, it is considered to be in a downtrend.

Support and resistance levels: The Ichimoku Cloud can also be used to identify support and resistance levels. The Senkou Span A and B lines form the cloud, which acts as an area of support or resistance depending on the direction of the trend.

Trading signals: Traders look for trading signals when the Tenkan-sen and Kijun-sen lines cross. A bullish crossover occurs when the Tenkan-sen line crosses above the Kijun-sen line, which signals a potential buying opportunity. Conversely, a bearish crossover occurs when the Tenkan-sen line crosses below the Kijun-sen line, which signals a potential selling opportunity.

Confirmation of momentum: Traders also use the Chikou Span line to confirm momentum. When the Chikou Span line is above the price, it indicates an uptrend, while when it is below the price, it indicates a downtrend.

Overall, the Ichimoku Cloud is a versatile tool that can help forex traders identify potential trading opportunities and manage risk. However, it is important to remember that no trading strategy is foolproof, and traders should always use proper risk management techniques when trading forex.

3. Chaikin Oscillator: This indicator measures the momentum of buying and selling pressure in the market, and can be used to confirm a trend or identify potential reversals.

Forex traders use the Chaikin Oscillator to measure the momentum of buying and selling pressure in the market. The oscillator is calculated by subtracting a 10-day exponential moving average of the Accumulation/Distribution Line (ADL) from a 3-day exponential moving average of the ADL, and then applying a 10-day simple moving average to the result.

The Chaikin Oscillator can be used as follows:

Confirming trends: Forex traders can use the oscillator to confirm a trend by looking for higher highs and higher lows in the oscillator when the price is in an uptrend, or lower highs and lower lows in the oscillator when the price is in a downtrend.

Identifying divergences: Traders can use the oscillator to identify divergences between the oscillator and the price. For example, if the price is making new highs, but the oscillator is not, it may indicate that the momentum is weakening, and a trend reversal may be imminent.

Identifying overbought and oversold conditions: Traders can use the oscillator to identify potential overbought or oversold conditions. When the oscillator is above the zero line, it may indicate that the market is overbought and due for a correction. Conversely, when the oscillator is below the zero line, it may indicate that the market is oversold and due for a bounce.

Overall, the Chaikin Oscillator can be a useful tool for forex traders to identify potential market trends, reversals, and overbought/oversold conditions, and to help confirm other technical indicators and price action signals.

4. Relative Vigor Index (RVI): This indicator measures the strength of a trend by comparing the closing price to the price range. It can be used to identify potential buy and sell signals.

Forex traders use the Relative Vigor Index (RVI) to measure the strength of a trend. The RVI is calculated by comparing the closing price of a currency pair to its price range over a specified period. The resulting value is then smoothed with a moving average to produce a final value.

Here are some ways forex traders use the RVI:

Identifying trend strength: Forex traders use the RVI to identify the strength of a trend. When the RVI is rising, it indicates that the bulls are in control of the market and that the trend is likely to continue. Conversely, when the RVI is falling, it indicates that the bears are in control of the market and that the trend may be weakening.

Identifying potential trend reversals: Forex traders use the RVI to identify potential trend reversals. When the RVI starts to diverge from the price, it may indicate that the trend is losing momentum and that a reversal may be imminent.

Confirming other technical indicators: Forex traders use the RVI to confirm other technical indicators. For example, if the RVI confirms a bullish signal from a moving average crossover or a breakout, it may increase the trader’s confidence in the signal.

Identifying overbought and oversold conditions: Forex traders use the RVI to identify potential overbought and oversold conditions. When the RVI is at or near its high, it may indicate that the market is overbought and due for a correction, while when the RVI is at or near its low, it may indicate that the market is oversold and due for a bounce.

Overall, the RVI can be a useful tool for forex traders to identify potential trend strength, reversals, and overbought/oversold conditions, and to help confirm other technical indicators and price action signals.

5. Keltner Channels: This indicator shows the range of prices for a currency pair, and traders can use it to identify potential breakouts and trend reversals.

Forex traders use Keltner Channels to identify potential breakouts and trend reversals. Keltner Channels are a technical indicator that use a moving average and a set of bands that are plotted above and below the moving average. The bands are based on the Average True Range (ATR) of the currency pair, which is a measure of volatility.

Here are some ways forex traders use Keltner Channels:

Identifying potential breakouts: Forex traders use Keltner Channels to identify potential breakouts. When the price of a currency pair breaks above the upper band of the Keltner Channel, it may indicate that the bulls are in control of the market and that a trend reversal or continuation is likely. Conversely, when the price breaks below the lower band of the Keltner Channel, it may indicate that the bears are in control of the market and that a trend reversal or continuation is likely.

Identifying trend direction: Forex traders use Keltner Channels to identify the trend direction. When the price is consistently trading above the moving average and the upper band of the Keltner Channel, it may indicate that the market is in an uptrend. Conversely, when the price is consistently trading below the moving average and the lower band of the Keltner Channel, it may indicate that the market is in a downtrend.

Identifying potential trend reversals: Forex traders use Keltner Channels to identify potential trend reversals. When the price approaches the upper or lower band of the Keltner Channel but fails to break through it, it may indicate that the trend is losing momentum and that a reversal may be imminent.

Setting stop loss and take profit levels: Forex traders use Keltner Channels to set stop loss and take profit levels. Traders may place their stop loss orders just below the lower band of the Keltner Channel if they are long or just above the upper band of the Keltner Channel if they are short. They may also place their take profit orders at the opposite band of the Keltner Channel.

Overall, Keltner Channels can be a useful tool for forex traders to identify potential breakouts, trend direction, and trend reversals, and to help set stop loss and take profit levels.

6. Volume Weighted Average Price (VWAP): This indicator shows the average price of a currency pair weighted by the trading volume. It can be used to identify potential support and resistance levels.

Forex traders use the Volume Weighted Average Price (VWAP) to identify potential support and resistance levels. VWAP is a technical indicator that calculates the average price of a currency pair based on the trading volume at each price level.

Here are some ways forex traders use VWAP:

Identifying potential support and resistance levels: Forex traders use VWAP to identify potential support and resistance levels. When the price of a currency pair is trading above the VWAP, it may indicate that the bulls are in control of the market and that the price is likely to continue to rise. Conversely, when the price is trading below the VWAP, it may indicate that the bears are in control of the market and that the price is likely to continue to fall.

Confirming trend direction: Forex traders use VWAP to confirm the direction of the trend. When the price is consistently trading above the VWAP, it may indicate that the market is in an uptrend. Conversely, when the price is consistently trading below the VWAP, it may indicate that the market is in a downtrend.

Identifying potential entry and exit points: Forex traders use VWAP to identify potential entry and exit points. For example, if the price of a currency pair is trading above the VWAP and then pulls back to the VWAP, it may present a buying opportunity. Conversely, if the price is trading below the VWAP and then rallies to the VWAP, it may present a selling opportunity.

Measuring market efficiency: Forex traders use VWAP to measure market efficiency. If the price of a currency pair is consistently trading above or below the VWAP, it may indicate that the market is efficient and that the price is fair. Conversely, if the price is consistently trading around the VWAP, it may indicate that the market is inefficient and that there may be trading opportunities.

Overall, VWAP can be a useful tool for forex traders to identify potential support and resistance levels, confirm trend direction, identify potential entry and exit points, and measure market efficiency.

7. Fibonacci Retracement: This indicator uses Fibonacci ratios to identify potential levels of support and resistance, and can be used to determine potential entry and exit points.

Forex traders often use Fibonacci retracement levels as a tool to identify potential levels of support and resistance in the price of currency pairs.

Fibonacci retracement levels are based on the mathematical sequence discovered by the Italian mathematician Leonardo Fibonacci. The key levels used in Fibonacci retracement are 23.6%, 38.2%, 50%, 61.8%, and 100%.

Traders typically use Fibonacci retracement levels in the following ways:

Identifying levels of support and resistance: Traders use Fibonacci retracement levels to identify potential levels of support and resistance in the price of a currency pair. The 38.2%, 50%, and 61.8% levels are commonly used as potential levels of support and resistance.

Identifying potential entry and exit points: Traders may use Fibonacci retracement levels as potential entry and exit points for trades. For example, if the price of a currency pair is in an uptrend and retraces to the 38.2% level, traders may see this as a potential buying opportunity. Conversely, if the price of a currency pair is in a downtrend and retraces to the 61.8% level, traders may see this as a potential selling opportunity.

Confirming price action: Traders may use Fibonacci retracement levels to confirm price action. For example, if the price of a currency pair bounces off a key Fibonacci retracement level, it may indicate that the level is acting as a level of support or resistance.

Overall, Fibonacci retracement levels are a useful tool for forex traders to identify potential levels of support and resistance, as well as to identify potential entry and exit points. However, it should be used in combination with other indicators and analysis techniques for a more complete understanding of the market.

8. Stochastic Oscillator: This indicator measures the momentum of a currency pair and can be used to identify potential overbought or oversold conditions.

Forex traders often use the Stochastic Oscillator as a tool to identify potential trend reversals and overbought/oversold conditions in the price of currency pairs.

The Stochastic Oscillator is a momentum indicator that compares the closing price of a currency pair to its price range over a set period of time. The indicator consists of two lines, %K and %D, that fluctuate between 0 and 100.

Traders typically use the Stochastic Oscillator in the following ways:

Identifying overbought/oversold conditions: When the Stochastic Oscillator is above 80, it is considered overbought, indicating that the price of the currency pair may be due for a pullback or reversal. Conversely, when the Stochastic Oscillator is below 20, it is considered oversold, indicating that the price of the currency pair may be due for a bounce or reversal.

Identifying potential trend reversals: When the %K line crosses above the %D line and both lines are below 20, it is considered a buy signal and may indicate a potential trend reversal from a downtrend to an uptrend. Conversely, when the %K line crosses below the %D line and both lines are above 80, it is considered a sell signal and may indicate a potential trend reversal from an uptrend to a downtrend.

Confirming price action: Traders may use the Stochastic Oscillator to confirm price action. For example, if the price of a currency pair is making higher highs and higher lows, but the Stochastic Oscillator is making lower highs and lower lows, it may indicate a potential trend reversal.

Overall, the Stochastic Oscillator is a useful tool for forex traders to identify potential trend reversals and overbought/oversold conditions, as well as to confirm price action. However, it should be used in combination with other indicators and analysis techniques for a more complete understanding of the market.

9. Moving Average Convergence Divergence (MACD): This indicator shows the relationship between two moving averages and can be used to identify potential trend reversals.

Forex traders often use the Moving Average Convergence Divergence (MACD) indicator as a tool to identify trends and potential trend reversals in the price of currency pairs.

The MACD indicator consists of two moving averages, a faster one and a slower one, that are plotted on a chart. The difference between these two moving averages is then plotted as a histogram.

Traders typically use the MACD indicator in the following ways:

Identifying trend direction: When the MACD line (the faster moving average) is above the signal line (the slower moving average), it is considered a bullish signal indicating an uptrend. Conversely, when the MACD line is below the signal line, it is considered a bearish signal indicating a downtrend.

Identifying potential trend reversals: When the MACD line crosses above the signal line, it is considered a buy signal and may indicate a potential trend reversal from a downtrend to an uptrend. Conversely, when the MACD line crosses below the signal line, it is considered a sell signal and may indicate a potential trend reversal from an uptrend to a downtrend.

Confirming price action: Traders may use the MACD histogram to confirm price action. For example, if the price of a currency pair is making higher highs and higher lows, but the MACD histogram is making lower highs and lower lows, it may indicate a potential trend reversal.

Overall, the MACD indicator is a useful tool for forex traders to identify potential trend direction and reversals, as well as to confirm price action. However, it should be used in combination with other indicators and analysis techniques for a more complete understanding of the market.

10. Williams %R: This indicator measures the momentum of a currency pair and can be used to identify potential overbought or oversold conditions.

Williams %R is a technical indicator that is commonly used by forex traders to identify overbought or oversold conditions in the market. The Williams %R indicator is a momentum oscillator that measures the level of the current closing price relative to the high-low range over a specified period of time.

Forex traders typically use Williams %R by looking for divergences between the indicator and the price action. For example, if the price of a currency pair is making higher highs while the Williams %R indicator is making lower highs, it may indicate that the price trend is losing momentum and a reversal could be imminent. Conversely, if the price is making lower lows while the Williams %R is making higher lows, it could indicate that the price trend is gaining momentum and a trend continuation may be likely.

Traders also use Williams %R to identify overbought or oversold conditions in the market. If the Williams %R reaches the upper range (above -20) it suggests that the market is overbought, and a price correction or reversal might occur. Conversely, if the Williams %R reaches the lower range (below -80), it could indicate that the market is oversold, and a bullish reversal could be imminent.

It is important to note that no indicator is perfect, and traders should always use Williams %R in conjunction with other technical indicators and fundamental analysis to make informed trading decisions.

Until next time, Happy Trading!

Love From, Your Trading Mentor,

Trading Angel x

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HOW TO USE FUNDAMENTAL ANALYSIS WHEN TRADING THE FINANCIAL MARKETS

By Your Trading Mentor,

Trading Angel

WHAT IS FUNDAMENTAL ANALYSIS?

Fundamental analysis is a method of analysing the forex market by examining economic, financial, and other qualitative and quantitative factors that may affect the supply and demand of a currency. The goal of fundamental analysis is to identify the underlying factors that may cause a currency to appreciate or depreciate in value.

In forex trading, fundamental analysis typically involves analysing economic indicators such as gross domestic product (GDP), inflation, interest rates, and employment data, as well as political and geopolitical factors that may affect the currency markets.

For example, if a country’s GDP growth rate is strong, it may indicate a healthy economy and lead to increased demand for the country’s currency. Similarly, if a country’s central bank raises interest rates, it may attract foreign investors seeking higher returns on their investments, which can increase demand for that country’s currency.

Overall, fundamental analysis can be a useful tool for forex traders to help them make informed trading decisions based on macroeconomic factors and other market drivers.

HOW DO FUNDAMENTAL AND TECHNICAL ANALYSIS COMPARE? 

Fundamental analysis and technical analysis are two different approaches to analysing the forex market and making trading decisions. 

Fundamental analysis involves analysing economic, financial, and political factors that may affect the value of a currency. This includes analysing economic indicators such as GDP, inflation, interest rates, and employment data, as well as geopolitical events that may impact a country’s economy. The idea behind fundamental analysis is to assess the overall health of an economy and make trading decisions based on the expected impact of these factors on the currency in question.

On the other hand, technical analysis involves studying charts and using various technical indicators to identify trends and patterns in price movements. Technical analysts believe that historical price and volume data can reveal trends and patterns that can help predict future price movements. This approach involves the use of chart patterns, trend lines, moving averages, and other technical indicators to identify potential trading opportunities.

Both fundamental and technical analysis have their strengths and weaknesses. Fundamental analysis can provide a broader understanding of the factors driving currency movements, while technical analysis can offer more specific entry and exit points for trades. Ultimately, successful forex traders often use a combination of both approaches to make informed trading decisions.

Using both fundamental analysis and technical analysis in forex trading can provide a more comprehensive view of the market and help traders make more informed trading decisions. 

Fundamental analysis can provide a broader understanding of the factors driving currency movements. It takes into account economic, financial, and political factors that can impact the value of a currency, such as GDP, inflation, interest rates, political stability, and trade policies. By analysing these factors, traders can gain insights into the long-term trends in the market and develop trading strategies that align with the underlying fundamentals of the economy.

However, fundamental analysis alone may not provide a complete picture of the market. It may not account for short-term fluctuations in currency prices, which can be influenced by factors such as technical indicators, market sentiment, and supply and demand. This is where technical analysis comes in.

Technical analysis involves studying charts and using various technical indicators to identify trends and patterns in price movements. It can help traders identify entry and exit points for trades, and also help them anticipate potential price movements. Technical analysis can be particularly useful in volatile markets, where short-term fluctuations are common.

By combining both fundamental and technical analysis, traders can gain a more well-rounded view of the market and develop trading strategies that take into account both long-term trends and short-term fluctuations. This can help traders make more informed trading decisions and manage their risk more effectively.

When trading the financial markets, there are several key pieces of fundamental analysis that traders should be aware of:

1. Economic indicators: Economic indicators are statistics released by government agencies and other organisations that provide information on a country’s economic performance. Some of the most important economic indicators for traders include Gross Domestic Product (GDP), inflation, interest rates, employment data, and retail sales. These indicators can provide insights into a country’s economic health and help traders anticipate potential market movements.

2. Central bank policies: Central banks play a significant role in the financial markets, as they are responsible for setting monetary policies and interest rates. The decisions made by central banks can have a significant impact on currency values, as well as other financial instruments such as stocks and bonds. Traders should monitor the statements and actions of central banks to gain insight into their policies and anticipate potential market movements.

3. Geopolitical events: Geopolitical events, such as wars, elections, and natural disasters, can have a significant impact on the financial markets. These events can create uncertainty and volatility in the markets, which can lead to sudden price movements. Traders should stay informed about geopolitical events and their potential impact on the markets.

4. Market sentiment: Market sentiment refers to the overall attitude of traders and investors towards a particular market or asset. Positive market sentiment can lead to rising prices, while negative market sentiment can lead to falling prices. Traders can gauge market sentiment by monitoring news headlines, social media, and other sources of information.

By staying informed about these key pieces of fundamental analysis, traders can gain insights into the underlying factors driving market movements and make more informed trading decisions.

Forex traders can find details on economic news releases from a variety of sources, including:

1. Economic calendars: There are many websites that provide economic calendars, which list the dates and times of upcoming economic news releases. These calendars often include details on the expected outcome of each release, as well as the previous release and its impact on the market. Some popular economic calendar websites include Forex Factory, DailyFX, and Investing.com.

2. News websites: Forex traders can also find details on economic news releases from news websites such as Reuters, Bloomberg, and CNBC. These websites often provide in-depth analysis of economic data and their potential impact on the markets.

3. Central bank websites: Central banks often publish their monetary policy statements, which provide insights into their policies and outlook on the economy. Traders can find these statements on central bank websites, such as the Federal Reserve, European Central Bank, and Bank of Japan.

4. Government websites: Government agencies, such as the Bureau of Labor Statistics in the United States, often release important economic data. Traders can find these releases on government websites, along with detailed reports and analysis.

5. Social media: Social media platforms, such as Twitter, can also provide real-time updates and analysis on economic news releases. Traders can follow news outlets, analysts, and other traders on social media to stay informed about the latest developments in the markets.

By using these sources, forex traders can stay informed about economic news releases and their potential impact on the markets, allowing them to make more informed trading decisions.

Until next time, Happy Trading!

Love from, Your Trading Mentor,

Trading Angel x 

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POPULAR FOREX TRADING INDICATORS

And Some Lesser Known, Advanced Indicators

By Your Trading Mentor,

Trading Angel

Forex trading is a challenging activity that requires traders to analyse market trends and make informed trading decisions. One of the tools that traders use to analyse the market is indicators. Indicators are mathematical calculations based on a currency pair’s price and/or volume. When I first started trading forex I was completely obsessed with indicators as I though there was sure to be one which was the holy grail and told me the exact moment to buy and sell! I realised pretty quickly this was ridiculous. These days I’m actually more of a price action girl myself whilst also being really keen on fundamental analysis and macro economics. Having said that, technical indicators still have their place and can be useful tools either to give you a binary set of rule for your trading plan or also to give you some key information which will help you to analyse how the market is moving and there for how it is likely to move in the future 

In this blog post, we will discuss the advantages of using indicators in forex trading, I will also compare technical indicators to price action trading. 

THE ADVANTAGES OF TECHNICAL INDICATORS 

1. Identify Trends

Indicators can help traders identify trends in the market. By analysing past price movements, traders can determine if a currency pair is trending up or down. Trend-following indicators, such as moving averages, can help traders identify the direction of the trend. This can help traders make informed trading decisions and enter/exit trades at the right time.

2. Confirmation of Price Movements

Indicators can confirm price movements in the market. For example, if a currency pair’s price is increasing, but the RSI indicator is showing that it is overbought, traders may consider selling the currency pair. This is because the RSI is indicating that the price is due for a correction. Indicators can help traders confirm whether the price is overbought or oversold and identify potential entry and exit points for trades.

3. Risk Management

Indicators can help traders manage their risk. By using indicators to set stop-loss orders and take-profit levels, traders can limit their losses and maximise their profits. For example, if a trader enters a long position, they may set a stop-loss order at a level below the entry price. This can help minimise losses if the trade goes against them.

4. Objective Analysis

Indicators can provide traders with objective analysis. Unlike emotions, indicators do not change based on a trader’s mood or bias. They provide traders with objective information that can help them make informed trading decisions. This can help traders avoid impulsive decisions based on emotions, which can lead to losses.

5. Scalping and Day Trading

Indicators can be particularly useful for scalping and day trading. These trading strategies involve making multiple trades within a short period. Indicators can help traders identify potential entry and exit points for trades, and confirm the strength of a trend. This can help traders make quick decisions and execute trades efficiently.

Indicators are useful tools for forex traders. They can help identify trends, confirm price movements, manage risk, provide objective analysis, and aid in scalping and day trading. However, it is essential to note that no indicator can guarantee trading success, and traders should use a combination of indicators and other analysis tools to make informed trading decisions.

COMPARING PRICE ACTION TO INDICATORS

Technical indicators and price action analysis are two of the most popular methods used to analyse the market. I will now compare the benefits of technical indicators in forex trading to price action analysis.

Technical Indicators

Technical indicators are mathematical calculations based on a currency pair’s price and/or volume. Traders use these indicators to identify trends, confirm price movements, manage risk, and provide objective analysis. Here are some benefits of using technical indicators:

1. Objective Analysis: Technical indicators provide traders with objective analysis. Unlike emotions, indicators do not change based on a trader’s mood or bias. They provide traders with objective information that can help them make informed trading decisions.

2. Confirmation of Price Movements: Indicators can help traders confirm price movements in the market. For example, if a currency pair’s price is increasing, but the RSI indicator is showing that it is overbought, traders may consider selling the currency pair. This is because the RSI is indicating that the price is due for a correction.

3. Risk Management: Indicators can help traders manage their risk. By using indicators to set stop-loss orders and take-profit levels, traders can limit their losses and maximise their profits.

Price Action Analysis

Price action analysis is a method of analysing the market by studying the movement of price itself, without relying on technical indicators. Here are some benefits of using price action analysis:

1. Simplicity: Price action analysis is a simple method of analysing the market. It involves studying candlestick charts and identifying patterns and trends in the price movement.

2. Flexibility: Price action analysis is a flexible method of analysing the market. Traders can use it on any currency pair and any timeframe.

3. Real-time Analysis: Price action analysis provides traders with real-time analysis of the market. Traders can quickly identify potential entry and exit points for trades based on the current price movement.

Comparison

Both technical indicators and price action analysis have their benefits in forex trading. Technical indicators provide objective analysis, confirmation of price movements, and risk management. Price action analysis, on the other hand, is a simple and flexible method of analysing the market that provides real-time analysis.

Ultimately, the choice between technical indicators and price action analysis depends on the trader’s trading style and preferences. Some traders prefer to use technical indicators to confirm price movements and manage risk, while others prefer to use price action analysis to identify patterns and trends in the price movement. It is important to note that no single method can guarantee trading success, and traders should use a combination of methods and analysis tools to make informed trading decisions.

FOREX TRADING INDICATORS

POPULAR TECHNICAL INDICATORS 

Forex trading indicators are tools used by traders to analyse market trends and make informed trading decisions. There are numerous indicators available, and each one serves a specific purpose. Here I will discuss some of the most popular forex trading indicators.

1. Moving averages

Moving averages are one of the most widely used indicators in forex trading. They are used to identify trends and determine the direction of the market. Moving averages come in different forms, such as simple moving averages and exponential moving averages. Traders often use them to identify support and resistance levels, and to determine entry and exit points for trades.

2. Relative strength index (RSI)

The RSI is a momentum indicator that measures the strength of a currency pair’s price action. It oscillates between 0 and 100, with readings above 70 indicating overbought conditions and readings below 30 indicating oversold conditions. Traders use the RSI to determine when to enter or exit a trade, and to confirm the strength of a trend.

3. Bollinger Bands

Bollinger Bands are a volatility indicator that consists of three lines. The middle line is a moving average, and the upper and lower lines are two standard deviations away from the moving average. Traders use Bollinger Bands to identify potential breakouts and trend reversals. When the price of a currency pair moves outside the upper or lower band, it is considered to be a potential trading opportunity.

4. Fibonacci retracements

Fibonacci retracements are a technical analysis tool used to identify levels of support and resistance. They are based on the Fibonacci sequence, which is a mathematical pattern found in nature. Traders use Fibonacci retracements to identify potential entry and exit points for trades, as well as to determine profit targets and stop-loss levels.

5. MACD

The MACD (Moving Average Convergence Divergence) is a trend-following momentum indicator that measures the difference between two moving averages. It consists of a MACD line and a signal line, which are used to identify potential entry and exit points for trades. Traders also use the MACD to confirm the strength of a trend and to identify potential trend reversals.

In conclusion, there are numerous forex trading indicators available, and each one serves a specific purpose. Moving averages, RSI, Bollinger Bands, Fibonacci retracements, and MACD are some of the most popular indicators used by traders. It is important to note that no single indicator can guarantee trading success, and traders should use a combination of indicators and other analysis tools to make informed trading decisions.

PERHAPS SOME LESSER KNOWN TECHNICAL INDICATORS 

While most traders use popular indicators like moving averages, MACD, and RSI, there are also several lesser-known advanced indicators that can provide valuable insights into market trends and price movements. In this blog post, we’ll explore some of these lesser-known advanced forex trading indicators.

1. Ichimoku Cloud

The Ichimoku Cloud is a technical analysis indicator that was developed by Japanese journalist Goichi Hosoda in the 1930s. It consists of five lines that provide a comprehensive view of price action, including momentum, trend direction, and support and resistance levels. The five lines are:

– Tenkan-sen: A 9-period moving average of the highest high and lowest low over the past 9 periods.

– Kijun-sen: A 26-period moving average of the highest high and lowest low over the past 26 periods.

– Senkou Span A: The average of Tenkan-sen and Kijun-sen, plotted 26 periods ahead.

– Senkou Span B: A 52-period moving average of the highest high and lowest low over the past 52 periods, plotted 26 periods ahead.

– Chikou Span: The closing price of the current candle, plotted 26 periods behind.

The area between Senkou Span A and Senkou Span B is known as the Ichimoku Cloud or Kumo. The thickness of the cloud indicates the strength of support and resistance levels.

2. Fibonacci retracements

Fibonacci retracements are based on the idea that markets tend to retrace a predictable portion of a move, after which they will continue to move in the original direction. This indicator uses horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before the price continues in the original direction. The key levels are 23.6%, 38.2%, 50%, 61.8%, and 100%.

3. Elliot Wave Theory

Elliot Wave Theory is a complex technical analysis indicator that involves identifying patterns in market movements. It is based on the idea that markets move in waves, with each wave consisting of a series of smaller waves. The theory identifies five waves in the direction of the trend, followed by three corrective waves. Traders use Elliott Wave Theory to identify potential entry and exit points.

4. Volume Profile

Volume Profile is a tool that displays the volume traded at each price level over a specified period. This information can be used to identify areas of support and resistance, as well as potential entry and exit points. Volume Profile can also help traders identify areas of high liquidity, which can be useful when placing orders.

5. Relative Vigor Index (RVI)

The Relative Vigor Index is a momentum indicator that compares the closing price to the trading range over a specified period. It is designed to measure the strength of a trend and to identify potential trend reversals. The RVI is calculated by subtracting the closing price from the opening price and dividing the result by the trading range. The result is plotted on a scale from 0 to 100.

In conclusion, these lesser-known advanced forex trading indicators can provide valuable insights into market trends and price movements. However, traders should be cautious when using these indicators, as they can also generate false signals. It is important to thoroughly research each indicator and to test it before incorporating it into a trading strategy.

If you’re wondering what my favourite indicator is, at the moment I would say it is the Smart Money Concepts Indicator on TradingView. If you don’t already have a TradingView account it is my favourite place to do my technical analysis, you can sign up and trial the pro version for free for a month using this link. Just don’t forget to cancel before the month is up if you don’t want to go ahead with your subscription 

https://www.tradingview.com/?offer_id=10&aff_id=25988

Until next time, Happy Trading,

Love From Your Trading Mentor,

Trading Angel x

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