Indicator- based trading strategies
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Luis Aureliano When it comes to currency trading, there is a vast range of different strategies you can adopt to generate trading profits. For example, you could pursue an event-focused strategy, where you place trades just after large market-moving macroeconomic or political events.
You could also become an expert in selected particular currency pairs and focus on your trading activities around those. This is the strategy we will discuss in the article.
Discover the Best Forex Indicators for a Simple Strategy
Popular technical indicators There are a substantial amount of technical indicators focusing on different areas, such as volume, momentum, volatility, and trend following. However, it is important to note that using just one single indicator will not help you generate a trading profit.
If you want to trade forex using chart analysis and technical indicators you must always combine complimenting indicators to generate trading signals.
The list goes on as new indicators are created as the popularity of chart analysis tools rises. Combining these three indicators you can gauge price movements based on moving averages, momentum, trend, and volatility. The way to turn these three indicators into a trading strategy is to trade when three out of the three indicators say buy or sell then you buy or sell. This would be a strong signal. If two out of the three indicators give you a trade signal, you could also trade, but it would be a less strong trading signal.
Best Combination of Technical Indicators – Market Maker Methods
The Bollinger Bands, which indicator- based trading strategies volatility bands placed above and below a moving average, show the price moving through the moving average from bottom to top during a low volatility phase as indicated by the tight bands around the moving average.
This would indicate a price increase.
Being the largest financial market in the world, it is full of surprise. The novice traders always love to trade the market with indicators. They think this is the best way to find great trades. They overload their charts with too many indicators with a hope to find the best possible trade setups.
The RSI, which shows the momentum of the price movement, is close to pushing through the centerline indicating a change in trend towards a price rise. Finally, the MACD shows three, albeit weakish, buy signals.
Firstly, it shows a signal line crossover of the fast moving average through the slow moving average the black line crosses through the red line.
Secondly, it shows the trend line moving towards the zero line and, thirdly, it shows the divergence between the two signal lines increasing.
Furthermore, it is important to back test technical indicator-based trading strategies using historical data. That way you indicator- based trading strategies check how accurate your chosen indicator combination is at determining profitable trade signals for your chosen currency pairs.