6 Best Forex Indicators
These 6 best forex indicators can be very valuable tools to analyze the charts in-depth details. Indicators are used by beginners and experienced traders. Using the indicators can be a simplified way to analyze the markets and find higher successful entries or exits.
Besides that, indicator tools can be used to identify potential market reversal points, divergences, support and resistance levels, and more. From the indicators, you can choose indicators based on your forex strategies.
In this article, we will list the best forex indicators such as RSI, Moving Average, Fibonacci, MACD, and Oscillator and these are the free forex indicators that work.
Relative Strength Index (RSI)
The relative strength index is one of the most used indicators in trading and easily the most popular forex indicator. The indicator has been around for decades and it is used by thousands of traders. Using the indicator on your charts can be very helpful as it assists traders in finding “overbought” and “oversold” conditions.
These conditions are known as uptrends and downtrends in the market. RSI uses different periods of movement such as 14-days, 30-days, and more. Then, the past price during these periods is shown on a small chart at the bottom of the MetaTrader software.
Besides the average movement during the past days, we also have the levels on the right side of the indicators chart. These levels are known as 70 and 30 levels act as oversold and overbought zones. However, the levels can be configured to other values, but these values are most popular amongst other traders.
When the price hits the 70 levels, that’s considered as an overbought zone. RSI indicator predicts that when the price reaches 70 levels, that’s considered as an overbought. This would give us a sign to sell, as a possible bearish momentum could occur.
In the other forex strategy scenario, when the price touches the 30 levels, that’s considered as an oversold zone. The best scenario with the assistance of the RSI indicator would be to go long (buy). RSI predicts that oversold is about to end so a bullish momentum could occur.
Besides the predictions of bearish and bullish trends, RSI can help you with “divergence”. In the market, divergence can occur often and it may be hard to find a divergence without indicators. RSI is considered one of the best metatrader indicators because of the many benefits that it has on predicting the markets. Divergence occurs when the price on the charts doesn’t match with the indicator’s chart.
As we mentioned, the RSI indicator helps to detect bullish and bearish trends. The indicators can find the potential end of a bullish or a bearish trend. For traders, this can be very informative and useful information on their trading decisions. Using RSI can help you to spot potential reversal zones on the market. And, it is one of the simple forex strategies that work.
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Moving Average (MA)
The moving average offers a comprehensive way to analyze the price using different periods of time. The MA is one of the best leading stock indicators. This technical analysis tool uses a period of time in days, weeks, or minutes. During the trends on the market, for e.x on an uptrend or downtrend, using the moving average tool can be very useful.
The moving average measures the average price of the current currency pair over a specific period of time. You can set up the moving average in any period of time you want. If you set the period for 10 days, the chart of the moving average will show the average price during the past 10 days.
Moving average is the best indicator for scalping as it can be used in shorter periods such as minutes. Honestly, many traders make a living from scalping as it is one of the simple trading strategies that work. MetaTrader platform supports the moving average on the chart. So, you can easily set up the moving average tool and analyze the market on specific periods of time.
Besides the 1 line of the moving average, you can add more than 1 line of the moving average. Adding more than 1 line of moving average can be helpful if you want to analyze the market on different periods. The moving average lines on the chart are shown in different colors and you can spot them easily. This combined with the RSI compliment simple day trading strategies.
Support and resistance can also be found with the moving average. The lines on charts from the moving average help you to spot potential support and resistance zones. Moving average can be considered as one of the best mt4 indicators.
One of the best technical indicator for trading is Fibonacci and it is an old tool that’s used very often on the market, especially in support and resistance zones. It is one of the best technical indicators for day trading. The tool uses retracement levels that can act as support and resistance zones. Besides these zones, Fibonacci can predict potential market reversal zones.
You can use the Fibonacci tool on an uptrend, downtrend, and consolidation (sideway) trends too. Fibonacci uses the 23.6%, 38.2%, 50%, 61.8% and 78.6% levels. These levels are the most popular and used levels when traders use Fibonacci. Other levels can be used and added to the Fibonacci levels, but the levels that we mentioned are the most popular ones.
The percentage levels on the numbers that we mentioned are very crucial zones. These zones could act as reversal zones or continual zones. In these zones, when the price breaks a value that can be considered as reversal zones. In scenarios where the price touches the values that we mentioned and cannot break it, that could be considered as support or resistance.
Besides the potential reversal zones such as support and resistance, Fibonacci levels can be used with stop-loss and take profits. When you set a stop-loss price on the charts, using the Fibonacci with its levels, allows you to find potential retracement or reversal zones. So, to avoid the price hitting the stop-loss, you could set the stop-loss level below the retracement or reversal zones.
You can also place your take profit target on the Fibonacci levels. Fibonacci levels can be ideal levels to place your take profit target on the correct levels.
Fibonacci levels can be drawn on trading platforms such as MetaTrader or TradingView. To find the Fibonacci retracement levels, all you have to do is find the recent swing high and swing low on the current time frame. Then, you need to connect these swings by using the Fibonacci line.
Using Fibonacci in your trading analysis can be a plus to “boost” your predictions on the market. There’s no limitation on the time frames that you can use. Fibonacci can be used for different trading styles such as scalp trading, swing trading, or day trading. The indicator can also be called as the best volume indicator forex.
Moving Average Convergence Divergence (MACD)
MACD indicator it’s used mostly to analyze the strength, momentum, direction, and duration of the trend. The indicator calculates the price from past days and calculates them mostly on the closing price. MACD values can be chosen based on your preferences, but the most popular period values are 9, 12, and 26.
MACD average values are shown on horizontal curved lines. Divergence can also be found and it’s shown on the bar graph at the bottom of your chart. MACD it’s not used often typically to identify potential oversold or overbought zones. The indicator appears on the chart with two horizontal lines. If the MACD chart shows the crossing line above the zero, that’s considered as a bullish signal. This gives a hint to buy or exit if we’re on a sell order because of a potential upcoming bullish momentum.
When MACD crosses below zero, the momentum of the market is considered bearish. In this scenario, a sell order would be the best option or if you’re in a buy position, the indicator suggests closing that order. When the two lines on the MACD chart narrow with each other, the trend can be reversed. Besides the uptrend and downtrend, the MACD indicator it’s also used on a sideways trend.
The oscillator indicator is a short-term indicator that focuses on lower time frames. The indicator provides predictions with overbought and oversold to get us the best forex trading signals. The oscillator indicator combines with the moving average tool to identify potential market breakouts or reversals.
Using the Oscillator can serve us to identify divergence, overbought or oversold confirmation, scalp trading, swing trading, and day trading. When the oscillator’s chart reaches the top, that gives a signal to a potential end of the bullish trend. This would allow us to exit from any buy positions and open sell orders.
Similar to the overbought, when the oscillator’s chart reaches the bottom, that could give a signal to buy. The bearish trend can end soon and jump on a buy position according to the oscillator would be a good idea. Oscillator is also on the list of the best trading indicators.
Bollinger Bands indicator serves mostly as an indicator to identify support and resistance zones. Besides the support and resistance, the indicator can help to identify most profitable chart patterns.
The indicators use two lines, the upper and the bottom line. These lines can tell the strength and weaknesses of a trend. If the upper line goes up, that indicates bullish momentum. This could also tell a possible strong uptrend coming in the market if the prediction is correct.
If the bottom line goes down, that’s a hint of bearish momentum. Closing a buy position would be a good decision if the indicator manages to predict correctly. Besides the uptrend and downtrend, the Bollinger Bands can help to find a sideways trend which could tell us that the market’s trend will not change.
However, if the price touches the bottom, that warns us for a potential market reversal. This could mean that the market uptrend is losing its strength and a potential bearish momentum could occur.
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