Technical indicators in the Forex world plays a vital role in aiding a newbie trader. These analyzing tools assist them in interpreting the trends. It doesn’t matter whether you are a position trader or a day investor in the FX industry; this software can provide you with a lot of information and chances. This is why the beginner should choose wisely because a wrong selection can ruin the whole trade.
Generally, technical indicators are divided into five major categories – trend, relative strength, mean reversion, momentum, and volume. The most popular and powerful tools will accurately predict the currency’s price. On the other hand, the lagging software will provide the trader only with the background situation of the currency. You may find a lot of technical analyzing tools, and among them – simple moving average, Bollinger bands, exponential moving average, on-balance volume, and stochastics – are the considered best.
Indicators for novice Forex traders
1. Trend indicator
Moving average is a popular technical tool that investors use more often. It reveals an average line of a specific duration, which can be 200-days, or 100-days, or even 50-days. To get a more accurate result, professionals suggest using two different periods to draw two different average lines. The ideal pair is regarded as a 50-days exponential moving average (EMA) and 200-days EMA. One can figure out a potential entry and exit point by using the EMAs and crossovers. To improve the precision of indicators reading, always use Rakuten trade as your key platform.
2. Bollinger bands
It is another recommended technical indicator for the novices. It determines the standard deviation (STDEV) of two different average lines. One can use this tool to quickly identify the turning points of a graph. Bollinger bands will attempt to find out the turning points by calculating how far the currency’s value can go from the central pivot before executing the reversionary impulse return to the average value. Based on the fluctuations and the volatility, the bands may expand or contract, which will show the investors when there is a rapid and sharp movement.
A beginner can easily identify the price’s movement by observing the buy and sell process. Stochastics is regarded as a relative strength indicator, and the cycle touches the highest value at the oversold or overbought level. After that, it moves to the opposite flow, and the lines cross over one another. The bearish or the bullish movement dictates the duration in which the sellers, as well as the buyers, are being controlled by the ticker tape. There can be two popular signals – i) a crossover of two lines can occur near the oversold or overbought level, ii) the lines then move toward the middle point of that panel.
4. Moving average convergence divergence (MACD)
It is regarded as a powerful principle in the business world. A novice trader can use this indicator to predict any sharp movement in the graph if he realizes the utilization of this tool properly. To determine a rapid change in the market flow, this MACD can be utilized accurately. In addition to this, this momentum indicator will represent a histogram beneath the main graph, which will reveal price bars, and the height of each bar will indicate the entry point, bullish movement, bearish movement, and exit point.
In the histogram, you will see that there is a reference level (zero value). If the bar moves above the reference level, the beginner will have to understand that there is a bullish direction. The entry point or buy spot is the point where the +bar stops its journey, and the -bar starts its movement. When the bar moves below the reference level, you have to realize that there is a downward movement in the currency market.
These are the major four indicators for the Forex novice traders. They can study more about them to use their efficiency.