Technical Indicators Defined and Explained

On the other hand, when the short-term MA crosses below the long-term MA, it’s a sign of a downtrend. Investopedia does not provide tax, investment, or financial services and advice. Many brokers provide a sentiment tool on their website free of charge. When multiple brokers show extreme readings, it is highly likely a reversal is near. If the sentiment figures vary significantly between brokers, then this type of indicator shouldn’t be used until the figures align. When large speculators move from a net short position to a net long position (or vice versa), it confirms the current trend and indicates there is still more room to move.

  1. If you want to learn how to find the strongest and weakest currency to trade, lay your hands on the Currency Strength Indicator.
  2. At the same time, the relationship between the currency pairs is organized according to their level of strength or weakness.
  3. The technical readings of the GBP/AUD chart also confirmed that buying the currency pair here is a good trade.

You’ll often see the terms FX, forex, foreign exchange market, and currency market. As we said, this indicator calculates how wildly prices have strayed from the average. In terms of timeframe settings, many people opt for the default 20-period setting – sitting between extremes. We think the stochastic oscillator is one of the best forex indicators for its strong level of accuracy and simplicity.

When properly used, these indicators can be an invaluable resource for any currency trader. Forex traders make money by betting that the value of a country’s currency will rise relative to another’s. For example, a forex trader might trade euros for dollars if they believe the euro markets are likely to face a downturn. Forex traders can also profit from interest rates—if a country’s central bank raises the interest rate, the value of that currency will likely appreciate. All in all, the Fibonacci retracement is one of the best forex indicators for identifying when to enter the market. You will also have a much better understanding of where is a good point to place ‘stop-loss’ and ‘take-profit’ orders.

– Moving Average Convergence Divergence (MACD)

There is a huge range of technical analysis tools available that analyze trends, provide price averages, measure volatility and more. For as many technical analysis tools currency trading indicators there are available to help forex traders, there are hundreds for beginners too. Most forex traders use multiple time periods when generating moving averages.


The majority of other information websites display prices of a single source, most of the time from one retail broker-dealer. MACD, aka, Moving Average Convergence Divergence, identifies trends and momentum. The Awesome Oscillator belongs to a family of oscillators and is used to tell the trend’s momentum. The Awesome Oscillator is calculated by taking the difference between two SMAs, and it creates a histogram on the chart. Additionally, you can check the space between Senkou Span A, and Senkou Span B can be used to identify areas of support or resistance.

Currency Strength Trading Strategy

Forex signal systems can create trades that are either manual or automated. A manual system involves a trader with a computer, looking for signals, and interpreting whether to buy or sell. A trade signal can be complex; however, traders tend to keep things simple by using a small number of inputs. It is easier to manage a simple signal generator and periodically test it to see what components need adjusting or replacing.

Quick option to select where you want your lines to be placed (High, Low, Open or Close). You can also write any text you want to add your particular notes and comments. Another available option to benefit from is the one that allows to configure the color of each of the drawing you put on the board, as well as the line weight (thin, regular or bold).

How does the currency strength meter work?

Although the MA is a fairly rudimental technical analysis tool – it is undoubtedly one of the best forex indicators, largely due to its simplicity. Put simply, momentum indicators are a measure of short-term trends. Illustrating the durability and general health of the aforementioned price shifts – this is when ‘oversold’ and ‘overbought’ signals are generated.

An outdated or badly coded currency strength indicator can lead to freezing, wrong signals, memory leakage, stutters, and the CPU constantly working at 100 percent. Since currencies are traded in pairs, it becomes very difficult for the trader, especially the beginner, to gauge the performance of just one of those currencies. If, say, the AUD/USD currency pair is trending higher, looking to open interest in Australian dollars futures provides additional insight into the pair. Increasing open interest as the price moves up indicates the trend is likely to continue. Leveling off or declining open interest signals the uptrend could be nearing an end. The forex market is “over-the-counter” with independent brokers and traders all over the world creating a non-centralized marketplace.

Tips For Trading During News in Forex

You may recognize some of these economic reports, such as the unemployment numbers, which are well-publicized. However, each indicator serves a particular purpose and can be useful. Here at Learn 2 Trade, we have many forex courses to choose from – so you can learn from the comfort of your own home. People who fall into the ‘kinesthetic’ category, meaning they learn better by ‘doing’, would likely prefer to use a demo account. For those unaware, most online forex brokers offer clients a free demo account, packed with paper funds.

One of the most popular tools utilized is forex indicators, of which there are many different types. In this guide, we run through the 10 best forex indicators available and how you can use them to take your trading endeavours to the very next level. Ichimoku Kinko Hyo or the Ichimoku Cloud is one of the forex indicators with elements to create a complete trading strategy. Traders often use it as a primary indicator to create a trading strategy.

You can get good currency strength meters for free, and they are easy to understand. Some of the best trading websites offer it or you can build it, but the most important is to know how to read it. It’s a quick way for Forex traders to see whether market conditions positively or negatively affect their positions. We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools. We’re also a community of traders that support each other on our daily trading journey.

When the forex charts do not clearly indicate the value of a currency, a currency strength indicator may be needed. Price channels or Donchian Channels are lines above and below recent price action that show the high and low prices over an extended period of time. These lines can then act as support or resistance if price comes into contact with them again. For a deeper look at using this tool successfully, read Breakout Trades and the Power of Price Channels.

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