5 Ways To Spot Trends In The Forex Markets5 Ways To Spot Trends In The Forex Markets
People approach forex trading from many different angles. Some like to look for overbought and oversold markets to try and trade price reversals, whilst others look for potential breakouts. However the most profitable trading strategies are generally those that trade with the overall trend. So let me provide you with 5 indicators that will help indicate the current trend. 1. MACD The first indicator is the MACD indicator. This is widely used amongst forex traders and is one of the most popular. You can use this indicator to highlight the current trend because if the actual MACD line is above 0 the pair is in an upward trend, and vice versa if it is below 0. 2. RSI Another indicator you can use is the RSI indicator, short for Relative Strength Index. A lot of people use this indicator to find overbought or oversold pairs, but it is just as useful for identifying the current trend because if it is above 50 it is trending upwards, and if it is below 50 it is trending downwards. 3. Stochastics The Stochastics indicator can be used in a similar way. The 50 level is again the critical level and is the difference between an upward trending market and a downward trending market. 4. Exponential Moving Average Moving averages are really popular as well and I particularly like to use the exponential moving average (EMA) ahead of all the others because it is more relevant to the recent price action. There are lots of settings you can use. You can use a 5, 20, 50 or 200 period EMA, for instance, but whichever one you use, the current trend will depend on whether the price is currently above or below this indicator. 5. Supertrend The Supertrend indicator is not one of the mainstream indicators like those mentioned above, but it is no less valid. In fact it is one of the more effective indicators. It is really easy to use because a green line indicates a bullish trend and a red line indicates a bearish trend. These are 5 technical indicators you can use to identify the current trend and find out which way you should be trading. However there are lots of others you can use such as the CCI, TRIX and Smoothed Repulse indicators. The point is that you have a much greater chance of making money on a consistent basis if you always trade with the trend. So it is always worth consulting some of these indicators from time to time in order to spot the latest trends in the forex markets.
For more articles on forex trading, click here to learn about the merits of trading the 5 minute forex charts and to read a full review of the Forex Profit Accelerator trading strategies and software. James Woolley may be contacted at http://theforexarticles.com More Forex Income Articles and Tips |
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