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By Your Trading Mentor,

Trading Angel

There are many technical indicators used in forex trading, and the popularity of each one can vary depending on the trader’s preferences and trading strategies. That being said, here are ten of the most popular technical indicators used in forex trading:

1. Moving averages (MA)
2. Relative strength index (RSI)
3. Fibonacci retracement
4. Bollinger bands
5. Stochastic oscillator
6. MACD (Moving Average Convergence Divergence)
7. Ichimoku Kinko Hyo
8. Average directional index (ADX)
9. Parabolic SAR (Stop and Reverse)
10. Williams %R

These indicators can be used to analyse price trends, identify potential entry and exit points, and assess the strength of market momentum. It’s important to note that no single indicator can guarantee profitable trades, and traders often use a combination of indicators to gain a more complete understanding of market conditions.

Now let’s break these down and have a look at how traders like to use these technical indicators

Moving averages (MA)

Forex traders use moving averages (MAs) to identify trends and potential entry and exit points in the market. A moving average is a technical indicator that calculates the average price of a currency pair over a specified period of time. Here are some ways forex traders use moving averages:

1. Identifying trends: Traders use moving averages to determine the direction of the trend. If the price is above the moving average, it is considered an uptrend, and if the price is below the moving average, it is considered a downtrend. Traders may use different time frames for the moving average to identify short-term or long-term trends.

2. Support and resistance levels: Moving averages can act as support and resistance levels. If the price is above the moving average, it may act as a support level, while if the price is below the moving average, it may act as a resistance level.

3. Crossovers: Traders use moving average crossovers to identify potential entry and exit points. When a shorter-term moving average crosses above a longer-term moving average, it may indicate a buy signal, while a crossover to the downside may indicate a sell signal.

4. Momentum: Traders may use moving averages to assess the strength of market momentum. If the price is above the moving average and the moving average is sloping upwards, it may indicate a strong bullish momentum, while if the price is below the moving average and the moving average is sloping downwards, it may indicate a strong bearish momentum.

Overall, moving averages can provide valuable information to forex traders, allowing them to make informed trading decisions based on price trends and market momentum.

Relative strength index (RSI)

Forex traders use the relative strength index (RSI) as a momentum indicator to identify overbought and oversold conditions in the market. The RSI is a technical indicator that measures the strength of a currency pair’s price action by comparing the average gains and losses over a specified period of time. Here are some ways forex traders use the RSI:

1. Overbought and Oversold Levels: The RSI ranges from 0 to 100 and is typically considered overbought when the RSI is above 70 and oversold when the RSI is below 30. When the RSI is in these extreme levels, it may indicate that the currency pair is overbought or oversold, respectively, and a reversal in price may be imminent.

2. Divergence: Forex traders may use RSI divergence to identify potential trend reversals. If the price is making higher highs, but the RSI is making lower highs, it may indicate that the bullish momentum is weakening, and a trend reversal may be imminent. Conversely, if the price is making lower lows, but the RSI is making higher lows, it may indicate that the bearish momentum is weakening, and a trend reversal may be imminent.

3. Centerline Crossovers: Traders may use RSI centerline crossovers to identify potential buy and sell signals. When the RSI crosses above the 50 level, it may indicate a bullish signal, while a crossover below the 50 level may indicate a bearish signal.

4. RSI Trendlines: Some traders use trendlines to identify potential support and resistance levels for the RSI. If the RSI is trending higher and remains above a trendline, it may indicate a bullish trend, while a downward trendline may indicate a bearish trend.

Overall, the RSI is a versatile indicator that can provide valuable insights into market conditions and help forex traders make informed trading decisions based on price momentum.

Fibonacci retracement

Forex traders use Fibonacci retracement levels as a technical analysis tool to identify potential support and resistance levels in a currency pair’s price movement. Fibonacci retracement is based on the idea that after a significant price move, the price will often retrace a predictable portion of that move before continuing in the original direction. Here are some ways forex traders use Fibonacci retracement:

1. Identifying Support and Resistance Levels: Forex traders use Fibonacci retracement levels to identify potential support and resistance levels. The retracement levels are calculated by drawing a line from the high point to the low point of a significant price move and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8%, and 100%. These retracement levels may act as support levels if the price is trending higher or resistance levels if the price is trending lower.

2. Entry and Exit Points: Traders may use Fibonacci retracement levels to identify potential entry and exit points. If the price is nearing a Fibonacci retracement level that has acted as support or resistance in the past, it may indicate a potential entry or exit point for the trader.

3. Trend Continuation: Forex traders may use Fibonacci retracement levels to confirm the continuation of a trend. If the price retraces to a Fibonacci retracement level and then bounces back in the original direction, it may indicate that the trend is likely to continue.

4. Stop Loss Placement: Traders may use Fibonacci retracement levels to determine where to place stop-loss orders. If the price retraces to a Fibonacci retracement level and then continues in the opposite direction, it may indicate that the trend is reversing, and the trader may want to exit the trade.

Overall, Fibonacci retracement levels can be a useful tool for forex traders to identify potential support and resistance levels, entry and exit points, and stop loss placement. However, traders should use Fibonacci retracement levels in conjunction with other technical analysis tools and fundamental analysis to make informed trading decisions.

Bollinger bands

Forex traders use Bollinger Bands as a technical analysis tool to measure volatility and identify potential entry and exit points in a currency pair’s price movement. Bollinger Bands consist of a center line, typically a 20-day simple moving average, and two outer bands that are two standard deviations away from the center line. Here are some ways forex traders use Bollinger Bands:

1. Volatility: Forex traders use Bollinger Bands to measure the volatility of a currency pair’s price movement. When the bands are close together, it indicates low volatility, while when the bands are far apart, it indicates high volatility.

2. Support and Resistance Levels: Traders use Bollinger Bands to identify potential support and resistance levels. If the price is near the upper band, it may indicate that the currency pair is overbought, and a reversal in price may be imminent. Conversely, if the price is near the lower band, it may indicate that the currency pair is oversold, and a reversal in price may be imminent.

3. Breakouts: Forex traders may use Bollinger Bands to identify potential breakouts. If the price breaks through the upper band, it may indicate a bullish breakout, while a breakout below the lower band may indicate a bearish breakout.

4. Trend Continuation: Traders may use Bollinger Bands to confirm the continuation of a trend. If the price is trending higher and remains near the upper band, it may indicate that the bullish trend is likely to continue. Conversely, if the price is trending lower and remains near the lower band, it may indicate that the bearish trend is likely to continue.

Overall, Bollinger Bands can be a useful tool for forex traders to measure volatility, identify potential support and resistance levels, and confirm trend continuations and breakouts. However, traders should use Bollinger Bands in conjunction with other technical analysis tools and fundamental analysis to make informed trading decisions.

Stochastic oscillator

Forex traders use the Stochastic oscillator as a technical analysis tool to identify overbought and oversold conditions in the market. The Stochastic oscillator is based on the idea that as prices rise, closing prices tend to approach the high end of the day’s range, and as prices fall, closing prices tend to approach the low end of the day’s range.

The Stochastic oscillator consists of two lines: %K and %D. The %K line is the main line and is calculated by comparing the current closing price to the high-low range over a specified period of time. The %D line is a moving average of the %K line.

When the Stochastic oscillator is above 80, it is considered overbought, and when it is below 20, it is considered oversold. Traders use these levels as signals to buy or sell. For example, when the Stochastic oscillator crosses above 20, it is considered a buy signal, and when it crosses below 80, it is considered a sell signal.

Traders also look for divergences between the price and the Stochastic oscillator. A bullish divergence occurs when the price makes a lower low, but the Stochastic oscillator makes a higher low. This can be a signal of a potential reversal to the upside. A bearish divergence occurs when the price makes a higher high, but the Stochastic oscillator makes a lower high. This can be a signal of a potential reversal to the downside.

MACD (Moving Average Convergence
Divergence)

Forex traders use the Moving Average Convergence Divergence (MACD) indicator as a technical analysis tool to identify trend changes and potential entry and exit points. The MACD indicator is a trend-following momentum indicator that shows the relationship between two moving averages.

The MACD indicator consists of three components: the MACD line, the signal line, and the histogram. The MACD line is the difference between the 26-period exponential moving average (EMA) and the 12-period EMA. The signal line is a 9-period EMA of the MACD line. The histogram is the difference between the MACD line and the signal line.

Traders use the MACD indicator to identify bullish and bearish signals. A bullish signal occurs when the MACD line crosses above the signal line, indicating a potential trend reversal to the upside. A bearish signal occurs when the MACD line crosses below the signal line, indicating a potential trend reversal to the downside.

Traders also look for divergences between the price and the MACD indicator. A bullish divergence occurs when the price makes a lower low, but the MACD indicator makes a higher low. This can be a signal of a potential reversal to the upside. A bearish divergence occurs when the price makes a higher high, but the MACD indicator makes a lower high. This can be a signal of a potential reversal to the downside.

In addition, traders use the MACD histogram to identify changes in momentum. When the histogram is rising, it indicates that momentum is increasing, and when it is falling, it indicates that momentum is decreasing. Traders can use this information to identify potential entry and exit points.

Ichimoku Kinko Hyo

Forex traders use the Ichimoku Kinko Hyo (Ichimoku Cloud) indicator as a technical analysis tool to identify trends, support and resistance levels, and potential trading opportunities. The Ichimoku Cloud is a complex indicator that consists of several components, including the Kumo (cloud), Tenkan-sen (conversion line), Kijun-sen (base line), Chikou Span (lagging line), and Senkou Span A and B (leading span).

Traders use the Ichimoku Cloud to identify bullish and bearish signals. When the price is above the cloud, it is considered a bullish signal, and when the price is below the cloud, it is considered a bearish signal. Traders also look for crossovers between the Tenkan-sen and Kijun-sen lines. A bullish crossover occurs when the Tenkan-sen crosses above the Kijun-sen, indicating a potential trend reversal to the upside. A bearish crossover occurs when the Tenkan-sen crosses below the Kijun-sen, indicating a potential trend reversal to the downside.

Traders also use the Kumo to identify support and resistance levels. When the price is above the Kumo, it is considered a support level, and when the price is below the Kumo, it is considered a resistance level. Traders also look for crossovers between the Senkou Span A and B lines. A bullish crossover occurs when the Senkou Span A crosses above the Senkou Span B, indicating a potential bullish trend. A bearish crossover occurs when the Senkou Span A crosses below the Senkou Span B, indicating a potential bearish trend.

The Chikou Span is used to confirm signals by showing the current closing price in relation to historical price action. When the Chikou Span is above the price, it is considered a bullish signal, and when it is below the price, it is considered a bearish signal. Traders also look for crossovers between the Chikou Span and the price. A bullish crossover occurs when the Chikou Span crosses above the price, indicating a potential bullish trend. A bearish crossover occurs when the Chikou Span crosses below the price, indicating a potential bearish trend.

Average directional index (ADX)

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.

Parabolic SAR (Stop and Reverse)

When the Parabolic SAR dots are below the price, it indicates a bullish trend, and traders may look for long positions. When

There are many technical indicators used in forex trading, and the popularity of each one can vary depending on the trader’s preferences and trading strategies. That being said, here are ten of the most popular technical indicators used in forex trading:

1. Moving averages (MA)
2. Relative strength index (RSI)
3. Fibonacci retracement
4. Bollinger bands
5. Stochastic oscillator
6. MACD (Moving Average Convergence Divergence)
7. Ichimoku Kinko Hyo
8. Average directional index (ADX)
9. Parabolic SAR (Stop and Reverse)
10. Williams %R

These indicators can be used to analyze price trends, identify potential entry and exit points, and assess the strength of market momentum. It’s important to note that no single indicator can guarantee profitable trades, and traders often use a combination of indicators to gain a more complete understanding of market conditions.

Now let’s break these down and have a look at how traders like to use these technical indicators

Moving averages (MA)

Forex traders use moving averages (MAs) to identify trends and potential entry and exit points in the market. A moving average is a technical indicator that calculates the average price of a currency pair over a specified period of time. Here are some ways forex traders use moving averages:

1. Identifying trends: Traders use moving averages to determine the direction of the trend. If the price is above the moving average, it is considered an uptrend, and if the price is below the moving average, it is considered a downtrend. Traders may use different time frames for the moving average to identify short-term or long-term trends.

2. Support and resistance levels: Moving averages can act as support and resistance levels. If the price is above the moving average, it may act as a support level, while if the price is below the moving average, it may act as a resistance level.

3. Crossovers: Traders use moving average crossovers to identify potential entry and exit points. When a shorter-term moving average crosses above a longer-term moving average, it may indicate a buy signal, while a crossover to the downside may indicate a sell signal.

4. Momentum: Traders may use moving averages to assess the strength of market momentum. If the price is above the moving average and the moving average is sloping upwards, it may indicate a strong bullish momentum, while if the price is below the moving average and the moving average is sloping downwards, it may indicate a strong bearish momentum.

Overall, moving averages can provide valuable information to forex traders, allowing them to make informed trading decisions based on price trends and market momentum.

Relative strength index (RSI)

Forex traders use the relative strength index (RSI) as a momentum indicator to identify overbought and oversold conditions in the market. The RSI is a technical indicator that measures the strength of a currency pair’s price action by comparing the average gains and losses over a specified period of time. Here are some ways forex traders use the RSI:

1. Overbought and Oversold Levels: The RSI ranges from 0 to 100 and is typically considered overbought when the RSI is above 70 and oversold when the RSI is below 30. When the RSI is in these extreme levels, it may indicate that the currency pair is overbought or oversold, respectively, and a reversal in price may be imminent.

2. Divergence: Forex traders may use RSI divergence to identify potential trend reversals. If the price is making higher highs, but the RSI is making lower highs, it may indicate that the bullish momentum is weakening, and a trend reversal may be imminent. Conversely, if the price is making lower lows, but the RSI is making higher lows, it may indicate that the bearish momentum is weakening, and a trend reversal may be imminent.

3. Centerline Crossovers: Traders may use RSI centerline crossovers to identify potential buy and sell signals. When the RSI crosses above the 50 level, it may indicate a bullish signal, while a crossover below the 50 level may indicate a bearish signal.

4. RSI Trendlines: Some traders use trendlines to identify potential support and resistance levels for the RSI. If the RSI is trending higher and remains above a trendline, it may indicate a bullish trend, while a downward trendline may indicate a bearish trend.

Overall, the RSI is a versatile indicator that can provide valuable insights into market conditions and help forex traders make informed trading decisions based on price momentum.

Fibonacci retracement

Forex traders use Fibonacci retracement levels as a technical analysis tool to identify potential support and resistance levels in a currency pair’s price movement. Fibonacci retracement is based on the idea that after a significant price move, the price will often retrace a predictable portion of that move before continuing in the original direction. Here are some ways forex traders use Fibonacci retracement:

1. Identifying Support and Resistance Levels: Forex traders use Fibonacci retracement levels to identify potential support and resistance levels. The retracement levels are calculated by drawing a line from the high point to the low point of a significant price move and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8%, and 100%. These retracement levels may act as support levels if the price is trending higher or resistance levels if the price is trending lower.

2. Entry and Exit Points: Traders may use Fibonacci retracement levels to identify potential entry and exit points. If the price is nearing a Fibonacci retracement level that has acted as support or resistance in the past, it may indicate a potential entry or exit point for the trader.

3. Trend Continuation: Forex traders may use Fibonacci retracement levels to confirm the continuation of a trend. If the price retraces to a Fibonacci retracement level and then bounces back in the original direction, it may indicate that the trend is likely to continue.

4. Stop Loss Placement: Traders may use Fibonacci retracement levels to determine where to place stop-loss orders. If the price retraces to a Fibonacci retracement level and then continues in the opposite direction, it may indicate that the trend is reversing, and the trader may want to exit the trade.

Overall, Fibonacci retracement levels can be a useful tool for forex traders to identify potential support and resistance levels, entry and exit points, and stop loss placement. However, traders should use Fibonacci retracement levels in conjunction with other technical analysis tools and fundamental analysis to make informed trading decisions.

Bollinger bands

Forex traders use Bollinger Bands as a technical analysis tool to measure volatility and identify potential entry and exit points in a currency pair’s price movement. Bollinger Bands consist of a center line, typically a 20-day simple moving average, and two outer bands that are two standard deviations away from the center line. Here are some ways forex traders use Bollinger Bands:

1. Volatility: Forex traders use Bollinger Bands to measure the volatility of a currency pair’s price movement. When the bands are close together, it indicates low volatility, while when the bands are far apart, it indicates high volatility.

2. Support and Resistance Levels: Traders use Bollinger Bands to identify potential support and resistance levels. If the price is near the upper band, it may indicate that the currency pair is overbought, and a reversal in price may be imminent. Conversely, if the price is near the lower band, it may indicate that the currency pair is oversold, and a reversal in price may be imminent.

3. Breakouts: Forex traders may use Bollinger Bands to identify potential breakouts. If the price breaks through the upper band, it may indicate a bullish breakout, while a breakout below the lower band may indicate a bearish breakout.

4. Trend Continuation: Traders may use Bollinger Bands to confirm the continuation of a trend. If the price is trending higher and remains near the upper band, it may indicate that the bullish trend is likely to continue. Conversely, if the price is trending lower and remains near the lower band, it may indicate that the bearish trend is likely to continue.

Overall, Bollinger Bands can be a useful tool for forex traders to measure volatility, identify potential support and resistance levels, and confirm trend continuations and breakouts. However, traders should use Bollinger Bands in conjunction with other technical analysis tools and fundamental analysis to make informed trading decisions.

Stochastic oscillator

Forex traders use the Stochastic oscillator as a technical analysis tool to identify overbought and oversold conditions in the market. The Stochastic oscillator is based on the idea that as prices rise, closing prices tend to approach the high end of the day’s range, and as prices fall, closing prices tend to approach the low end of the day’s range.

The Stochastic oscillator consists of two lines: %K and %D. The %K line is the main line and is calculated by comparing the current closing price to the high-low range over a specified period of time. The %D line is a moving average of the %K line.

When the Stochastic oscillator is above 80, it is considered overbought, and when it is below 20, it is considered oversold. Traders use these levels as signals to buy or sell. For example, when the Stochastic oscillator crosses above 20, it is considered a buy signal, and when it crosses below 80, it is considered a sell signal.

Traders also look for divergences between the price and the Stochastic oscillator. A bullish divergence occurs when the price makes a lower low, but the Stochastic oscillator makes a higher low. This can be a signal of a potential reversal to the upside. A bearish divergence occurs when the price makes a higher high, but the Stochastic oscillator makes a lower high. This can be a signal of a potential reversal to the downside.

MACD (Moving Average Convergence
Divergence)

Forex traders use the Moving Average Convergence Divergence (MACD) indicator as a technical analysis tool to identify trend changes and potential entry and exit points. The MACD indicator is a trend-following momentum indicator that shows the relationship between two moving averages.

The MACD indicator consists of three components: the MACD line, the signal line, and the histogram. The MACD line is the difference between the 26-period exponential moving average (EMA) and the 12-period EMA. The signal line is a 9-period EMA of the MACD line. The histogram is the difference between the MACD line and the signal line.

Traders use the MACD indicator to identify bullish and bearish signals. A bullish signal occurs when the MACD line crosses above the signal line, indicating a potential trend reversal to the upside. A bearish signal occurs when the MACD line crosses below the signal line, indicating a potential trend reversal to the downside.

Traders also look for divergences between the price and the MACD indicator. A bullish divergence occurs when the price makes a lower low, but the MACD indicator makes a higher low. This can be a signal of a potential reversal to the upside. A bearish divergence occurs when the price makes a higher high, but the MACD indicator makes a lower high. This can be a signal of a potential reversal to the downside.

In addition, traders use the MACD histogram to identify changes in momentum. When the histogram is rising, it indicates that momentum is increasing, and when it is falling, it indicates that momentum is decreasing. Traders can use this information to identify potential entry and exit points.

Ichimoku Kinko Hyo

Forex traders use the Ichimoku Kinko Hyo (Ichimoku Cloud) indicator as a technical analysis tool to identify trends, support and resistance levels, and potential trading opportunities. The Ichimoku Cloud is a complex indicator that consists of several components, including the Kumo (cloud), Tenkan-sen (conversion line), Kijun-sen (base line), Chikou Span (lagging line), and Senkou Span A and B (leading span).

Traders use the Ichimoku Cloud to identify bullish and bearish signals. When the price is above the cloud, it is considered a bullish signal, and when the price is below the cloud, it is considered a bearish signal. Traders also look for crossovers between the Tenkan-sen and Kijun-sen lines. A bullish crossover occurs when the Tenkan-sen crosses above the Kijun-sen, indicating a potential trend reversal to the upside. A bearish crossover occurs when the Tenkan-sen crosses below the Kijun-sen, indicating a potential trend reversal to the downside.

Traders also use the Kumo to identify support and resistance levels. When the price is above the Kumo, it is considered a support level, and when the price is below the Kumo, it is considered a resistance level. Traders also look for crossovers between the Senkou Span A and B lines. A bullish crossover occurs when the Senkou Span A crosses above the Senkou Span B, indicating a potential bullish trend. A bearish crossover occurs when the Senkou Span A crosses below the Senkou Span B, indicating a potential bearish trend.

The Chikou Span is used to confirm signals by showing the current closing price in relation to historical price action. When the Chikou Span is above the price, it is considered a bullish signal, and when it is below the price, it is considered a bearish signal. Traders also look for crossovers between the Chikou Span and the price. A bullish crossover occurs when the Chikou Span crosses above the price, indicating a potential bullish trend. A bearish crossover occurs when the Chikou Span crosses below the price, indicating a potential bearish trend.

Average directional index (ADX)

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.

Parabolic SAR (Stop and Reverse)

Forex traders use the Parabolic SAR (Stop and Reverse) indicator as a technical analysis tool to identify potential trend reversals and provide stop loss levels. The Parabolic SAR is represented by a series of dots above or below the price, and its position relative to the price can signal bullish or bearish momentum.

When the Parabolic SAR dots are below the price, it indicates a bullish trend, and traders may look for long positions. When the Parabolic SAR dots are above the price, it indicates a bearish trend, and traders may look for short positions.

Traders also use the Parabolic SAR to set stop loss levels. When in a long position, traders may set their stop loss level at the level of the Parabolic SAR dots. Similarly, when in a short position, traders may set their stop loss level at the level of the Parabolic SAR dots.

In addition, traders use the Parabolic SAR to identify potential trend reversals. When the Parabolic SAR dots switch from being below the price to being above the price, it can be a signal of a potential trend reversal to the downside. Conversely, when the Parabolic SAR dots switch from being above the price to being below the price, it can be a signal of a potential trend reversal to the upside.

Traders should be cautious when using the Parabolic SAR, as it can provide false signals in ranging markets. It is important to use the Parabolic SAR in combination with other technical analysis tools and to consider the overall market conditions and trend.

Williams %R

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.

the Parabolic SAR dots are above the price, it indicates a bearish trend, and traders may look for short positions.

Forex traders use the Parabolic SAR (Stop and Reverse) indicator as a technical analysis tool to identify potential trend reversals and provide stop loss levels. The Parabolic SAR is represented by a series of dots above or below the price, and its position relative to the price can signal bullish or bearish momentum.

Traders also use the Parabolic SAR to set stop loss levels. When in a long position, traders may set their stop loss level at the level of the Parabolic SAR dots. Similarly, when in a short position, traders may set their stop loss level at the level of the Parabolic SAR dots.

In addition, traders use the Parabolic SAR to identify potential trend reversals. When the Parabolic SAR dots switch from being below the price to being above the price, it can be a signal of a potential trend reversal to the downside. Conversely, when the Parabolic SAR dots switch from being above the price to being below the price, it can be a signal of a potential trend reversal to the upside.

Traders should be cautious when using the Parabolic SAR, as it can provide false signals in ranging markets. It is important to use the Parabolic SAR in combination with other technical analysis tools and to consider the overall market conditions and trend.

Williams %R

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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And why it’s important to pick carefully 

By Your Trading Mentor,

Trading Angel

WHY IT’S IMPORTANT TO PICK CAREFULLY 

Picking the right type of trader for your skills, personality, and financial goals is crucial for success in the world of trading. Choosing the wrong type of trading can lead to frustration, losses, and ultimately, failure.

Firstly, different types of trading require different skill sets. For example, day trading requires the ability to make quick decisions under high-pressure situations, while swing trading may require more patience and discipline. If you don’t have the necessary skills for a particular type of trading, it can lead to poor performance and losses.

Secondly, different types of trading have different risk profiles. Scalping, for example, can be a very high-risk strategy, while position trading may be more conservative. If you have a low-risk tolerance, it’s important to choose a trading style that aligns with your risk preferences.

Thirdly, different types of trading require different amounts of time and effort. Day trading requires a significant time commitment, while position trading may only require a few hours of research per week. If you have a busy schedule, it’s important to choose a trading style that you can realistically commit to.

Finally, different types of trading may be more or less suited to your financial goals. If you’re looking for quick profits, day trading may be a good option, while long-term investing may be more appropriate if you’re looking to build wealth over time.

Here is a breakdown on the different types of trader:

SCALP TRADING

Scalp trading is the quickest form of trading the financial markets. This means that traders are only really looking for small moves and will open and close their trades very quickly, often within the hour and sometimes only for a matter of minutes. Scalp traders will often use high leverage to make the most in the small fluctuations in price and will be looking for precise entries on small times frames at high volatility times including London Open, New York Open or big news events such as NPF.

My best piece of advice for scalp traders is to still pay attention to the higher time frames and make sure you only actually scalp in the direction of the long term trend. It might be tempting to just buy and sell every time you see a position with your strategy, but if you can establish the long term direction and where there is significant momentum on the 4H or 1D chart then you might miss a few opportunities but you will avoid big losses. If you think about time frames like the ocean, the 5M time frame are ripples, the 4H time frame are waves and the 1D time frame are tides. You don’t want to be trying to catch a ripple in the opposite direction to the tide otherwise you’ll likely drown. Dr Alexander Elder goes into this analogy in a lot of detail in his book Trading For A Living which I highly recommend and you can check out on Amazon here

https://amzn.to/3SlMXJ6

DAY TRADING

Day trading is believed to be the most common form of trading forex and the stock market. This is when traders open and close their positions within the day, closing any trades before going to be in the evening. Sometimes this involves holding trades for one hour but often it is for a few hours. Day traders will often trade on time frames such as the 4H chart but will sometimes drop to smaller times frames such as the 15M for an exact entry and will often use the 1D chart to gauge long term momentum. Day traders will often use leverage on their trades to make the sometimes small daily fluctuations in the financial markets more profitable. For day traders timing is really key and they will often utilise key times of the day to maximise their profits such as session open times when there is often more volatility in the markets

My best piece of advice for days traders would be to pay close attention to what happens at certain times of day. There are many daily fluctuations throughout the 24 hour period and you’ll need to become really familiar with those which are taking place while you are trading. For example, there is often high volatility during London open (which is 8AM UK time) and often markets can move with nice momentum up until around 13:30 when the US starts to wake up and loads of economical data gets released. This can often cause reversals in the market, so if you are in high profit for the start of the London session you might want to consider closing your trade and taking your profits before any news is realised in the US. New York open is an hour after the news releases, at 14:30 UK time and this can cause yet another direction change or a big move in the same direction as the news depending on the results. 16:00 is when London starts to close which can often mean traders are closing their positions and taking their profits which can cause yet another direction change. So timing is very important when you are a day trader, and not only will you want to plan your entries around factors such as market opens or the 4H candle closing but you’ll also want to be ready to close a trade early and take profits if it’s approaching a time when the markets often reverse and you are in good profit. 

SWING TRADING

Swing trading is a slightly longer form of trading where traders will hold their trades for at least one night and sometimes for weeks. Swing traders are aiming to make the most in the swings in the market, which are essentially the longer trends which take place. Often swing traders will look for entries on the 4h chart but will also be using 1D and 1W in their technical analysis. Swing traders will also be really interested in big news events which set the semi long term direction of trends, such as interest rates decisions, CPI or NFP.

My best advice for swing traders is so get really good at understanding fundamental analysis as well as technicals as this plays a big part in determining which way the market swings. 

POSITION TRADING

Position trading is the longest form of trading, these traders will be looking at high times frames and won’t be too interested in the small fluctuations in price. These traders won’t necessarily need as much leverage as they are really interested in the very long term trend of the market and will be happy to hold their position for weeks, months and even years. Position traders may be interested in fundamental factors such as how the country’s economy is doing long term, political parties in power can have an impact, as well as fiscal policy.

Similar to swing trading my best advice for position traders is to be really hot on macroeconomics and fundamental analysis as this is what’s really moving the financial markets in the long term. Understand interest rates decisions and how this can affect the long term direction of a currency is very beneficial. If you’d like to learn more about this in detail it is part of the trading course at Trading Angel Academy which you can check out here 

https://caroline-rundell.mykajabi.com/offers/EqUQQy4K

NOISE TRADER

A noise trader doesn’t so much focus on technical analysis or fundamental analysis but more listens to rumours surrounding certain financial markets and often enters on market hype. Noise traders often act irrationally: they tend to be emotion-driven, impulsive, reactive, and herd-like. Whilst noise trader can be quite systematic in their approach to trade entry, their chose markets are often not advised by professional investors.

ALGORITHMIC TRADER

An algorithmic trader will use automated trading instructions to enter into and out of trades. Its believed that more than 90% of trading in the forex markets is done by trading algorithms rather than humans. Some traders believe that using a algorithm is the key to success as a trader as it is able to remove the emotion for entries and exits and rather trade based on back data and logic.

ARBITRAGE TRADER

Arbitrage traders simultaneously purchase and sell assets in an effort to profit from price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies—it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time. This type of trading is often associated with hedge funds, and it can be a fairly easy way to make money when it works.

For example, if a security trades on multiple exchanges and is less expensive on one exchange, it can be bought on the first exchange at the lower price and sold on the other exchange at a higher price.

It sounds simple enough, but given the advancement in technology, it has become extremely difficult to profit from mispricing in the market. Many traders have computerized trading systems set to monitor fluctuations in similar financial instruments. Any inefficient pricing setups are usually acted upon quickly, and the opportunity is often eliminated in a matter of seconds.

SENTIMENT TRADER

Sentiment traders seek to identify and participate in trends. They do not attempt to outguess the market by finding great securities. Instead, they attempt to identify securities that are moving with the momentum of the market.

Sentiment traders combine aspects of both fundamental and technical analysis in an effort to identify and participate in market movements. There are a variety of sentiment trading approaches, including swing traders that seek to catch momentous price movements while avoiding idle times and contrarian traders that try to use indicators of excessive positive or negative sentiment as indications of a potential reversal in sentiment.

Trading costs, market volatility, and difficulty in accurately predicting market sentiment are some of the key challenges facing sentiment traders. While professional traders have more experience, leverage, information, and lower commissions, their trading strategies are restricted by the specific securities they are trading. For this reason, large financial institutions and professional traders may choose to trade currencies or other financial instruments rather than stocks.

Success as a sentiment trader often requires early mornings studying trends and identifying potential securities for purchase or sale. Analysis of this nature can be time-consuming, and trading strategies may require quick timing.

FUNDAMENTAL ANALYIST

Fundamental traders are using economic data and analysis to help them make their trading decisions. This means considering things such as interest rates, employment, balance of trade and many other specific news releases including non farm payroll. Ultimately a fundamental trader will be more interested in news releases then what is going on in the charts.

Fundamental trading has a real appeal to many investors because it is based on logic and facts. Of course, unearthing and interpreting those facts is a time-consuming, research-intensive effort. Another challenge comes in the form of the financial markets themselves, which do not always behave in logical ways

TECHNICAL ANALYST

Whilst a fundamental trader will focus on news releases and economic data, a technical analysist will be more interested in what the chart is telling them. Technical analysis will use candlestick charts, patterns, price action and technical indicators to make entry and exit decisions on their trades.

In conclusion, picking the right type of trader for your skills, personality, and financial goals is crucial for success in trading. It’s important to do your research, understand the different types of trading, and choose a style that aligns with your strengths, risk tolerance, time commitment, and financial objectives. By carefully selecting the type of trader you are, you can increase your chances of success and achieve your trading goals.

WHAT KIND OF TRADER AM I?

Well I am a mix between fundamental, technical, day and swing! I believe that ultimately the long term direction of the financial markets is determined by fundamental factors such as interest rates, however the short term entries are often found using technical analysis. I also tend to open and close my trades within the day however I do sometime make the most of the long swings and occasionally hold them overnight.

What type of trader are you?

Love from your Trading Mentor,

Trading Angel x 

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  • And Which One Is Right For You 

By Your Trading Mentor,

Trading Angel 

FOUR MAIN TYPES OF TRADER 

There are four main types of forex trader and while these can be broken down into personalty traits which assume each person is more suited to be one type of trader then another, most traders when they first start out don’t actually have a big say in what type of trader they are going to be, and often that’s due to time limitations and account size. In this blog post I’m going to describe each of the four main types of trader and go into who is best suited to each as well as to say which type and why I feel is best suited to beginner traders. 

The four main types of forex trader are:

SCALP TRADER 

DAY TRADER 

SWING TRADER 

POSITION TRADER 

SCALP TRADER 

Scalp trading is the quickest form of forex trading. Traders are just looking for small fluctuation in the market to grab some quick pips. Sometimes it will just be a matter of minutes which they hold their trades open for, other times it will be as quick as seconds. This type of trading often appeals to new traders, but if you are a beginner trader I would actually advise you not to start scalping for a bit. It might sound like it’s easier as it’s over very quick, but often it is actually more difficult than the other forms of trading. It is a very aggressive form of trading which takes enormous focus and requires traders to be incredibly decisive and have impeccable risk management. It’s like day trading but on steroids. And day trading is famously not easy. One aspect of scalp trading which I can understand is very appealing to newer traders is that it is possible to do on a smaller account, as the stop loss will often be a lot tighter than when you are trading on a higher time frame. Scalp traders often trade on small time frames such as the 5M or even the 1M. 

My best piece of advice for scalp traders is to still pay attention to the higher time frames and make sure you only actually scalp in the direction of the long term trend. It might be tempting to just buy and sell every time you see a position with your strategy, but if you can establish the long term direction and where there is significant momentum on the 4H or 1D chart then you might miss a few opportunities but you will avoid big losses. If you think about time frames like the ocean, the 5M time frame are ripples, the 4H time frame are waves and the 1D time frame are tides. You don’t want to be trying to catch a ripple in the opposite direction to the tide otherwise you’ll likely drown. Dr Alexander Elder goes into this analogy in a lot of detail in his book Trading For A Living which I highly recommend and you can check out on Amazon here https://amzn.to/3SlMXJ6

DAY TRADER 

Day traders open and close their trades within a day without holding any positions over night. Often they will be trading on the 4H time frame or even down to 15M for precise entries. Day traders will need to use bigger stop losses for their trades than scalp traders as they need to account for the increased volatility which comes with holding trades for longer periods of time over the day and taking positions on higher time frames. However day traders also benefit from not having to pay the extra costs of slippage or overnight fees. While this style of trading isn’t as quick as scalping, it still require a high level of accuracy, focus and risk management. 

My best piece of advice for days traders would be to pay close attention to what happens at certain times of day. There are many daily fluctuations throughout the 24 hour period and you’ll need to become really familiar with those which are taking place while you are trading. For example, there is often high volatility during London open (which is 8AM UK time) and often markets can move with nice momentum up until around 13:30 when the US starts to wake up and loads of economical data gets released. This can often cause reversals in the market, so if you are in high profit for the start of the London session you might want to consider closing your trade and taking your profits before any news is realised in the US. New York open is an hour after the news releases, at 14:30 UK time and this can cause yet another direction change or a big move in the same direction as the news depending on the results. 16:00 is when London starts to close which can often mean traders are closing their positions and taking their profits which can cause yet another direction change. So timing is very important when you are a day trader, and not only will you want to plan your entries around factors such as market opens or the 4H candle closing but you’ll also want to be ready to close a trade early and take profits if it’s approaching a time when the markets often reverse and you are in good profit. 

SWING TRADER 

Swing traders will hold their trades over night and sometimes for several days or even weeks. They are really looking to catch the market ‘swings’ by buying at the bottom of a trend and selling at the top. Swing trading takes a lot of patience and careful analysis. It also requires the trader to have very steady nerves as they need to ride out fluctuations and sometimes relatively large pull backs. Swing traders will often trade on the 1D or the 1W charts and will need to have larger stop losses to account for the fluctuations which might happen on these higher time frames. 

My best advice for swing traders is so get really good at understanding fundamental analysis as well as technicals as this plays a big part in determining which way the market swings. 

POSITION TRADER

Positions trading is the longer form of trading. Position traders will hold their positions for weeks and sometimes months or even a year +. They are really looking for the bigger picture of where the market is moving in the long term and are not interested in the small fluctuations in price. While position trading might sound very peaceful it often require very large trading accounts which are able to ride out any fluctuations. 

Similar to swing trading my best advice for position traders is to be really hot on macroeconomics and fundamental analysis as this is what’s really moving the financial markets in the long term. Understand interest rates decisions and how this can affect the long term direction of a currency is very beneficial. If you’d like to learn more about this in detail it is part of the trading course at Trading Angel Academy which you can check out here 

https://caroline-rundell.mykajabi.com/offers/EqUQQy4K

WHAT TYPE OF TRADER AM I AND WHICH DO I THINK IS BEST FOR BEGINNER TRADERS

When I first started trading forex I wanted to be a swing trader as I was told it was the least stressful. When I was swing trading I was checking the charts once a day in the evening on the 1D chart which worked very well for me while I was working a 9-5 job. For this reason it’s great for new traders who have a very intense job which means they can’t actually look at the charts during the day. The problem I had was that I started trading on a very small forex account of just a couple hundred pounds. It’s very difficult if not impossible to be a swing trader on a small account, although my strategy worked very well on paper I was finding that my account size wasn’t large enough to hold the trades open for long enough because I could only open about 5 positions at once. I also felt like the stop losses which I needed to use based on volatility were too big for my small account. So I tried day trading instead. I found the transition challenging as I had to completely change my stagey and rather then focusing on long trends I was having to look for momentum and breakouts and then time these very carefully based on session open times. If I wasn’t paying attention I would leave a trade open for too long and have it suddenly reverse on me having previously been in profit. My little trick which I used to get around this is to set alarm clocks first thing in the morning when I wake up which remind me to check the charts and review my trades regularly throughout the day. As a day trader I trade on the 4H chart which I found worked well still even when I was still working another job. I only had to look for trade entries once every 4 hours when the 4H candle closed and as this was at the same time every day it was pretty easy to manage and to fit into my routine. 

I think for this reason day trading is very manageable for newer traders as the 4H chart allows them to still work their other job. 

If someone comes to me looking for a trading mentor and asks what type of trader they should be I will ask them two questions. 

How flexible are you during the day? 

How much money are you able to start trading with? 

Flexibility during the day is very important. If you are a nurse working in the NHS, for example, who is not allowed to look at their phone during the day, you would find it impossible to be a scalp trader or even a day trader but you might be able to manage swing trading by checking the 1D chart once a day when the markets close in the evening – similar to what I did when I first started trading forex. If you do work during the day but have a bit more flexibility and can easily check the charts every 4 hours to get a reading when the 4H candle closes, then being a day trader might work for you. But I would also check if it was a problem to have alarms going off every couple of hours to remind you to review your trades at different sessions open and close. In some jobs this would be ok and in others it would be completely unacceptable.

With the rise of people working from home it’s actually becoming easier for more of us to realistically be day traders.

It can be a bit stressful and intense trying to juggle both day trading and your normal 9-5 simultaneously so if you are someone who finds its difficult to focus on more than one thing at a time but you do work from home and would like to try fitting trading into your daily routine, it could be an option to try scalp trading the London open. For about half an hour to an hour each morning at 8AM UK time there is a lot of volatility on the UK100 or the FTSE as the London stock market opens. It can present a good scalp trading opportunity which could potentially give you the opportunity to trade for an hour in the morning before working on your 9-5. I recently started testing out a scalp trading strategy for this period in the morning, and one thing I will say is that there aren’t good opportunities every day so definitely don’t force trades if you don’t see good set ups. Its also really important to do lots of back testing and live testing first before you start live trading as these markets move FAST!! If you are interested in this as an option, I recently made a YouTube video which is up on Trading Angel’s YouTube channel which highlights the 5 things I wish I knew when I first started trading the London Open, you can watch that video by clicking this link 

Happy Trading! 

Love From, Your Trading Mentor x 

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