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Forex Charts - 5 Essential Technical Indicators For Bigger Profits

By : Monica Hendrix
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If you are using forex charts then you need to know about the indicators we are about to discuss if you use forex charts and these great indicators you will enhance your profitability - so here they are.

Here are your 5 indicators for bigger profits.

1. Relative Strength Index RSI

The RSI, measures the relative strength of price currently compared to the past:

The formula usually uses a 14-period input.

As an oscillator, above 70 is considered overbought and below 30 is considered oversold.

Watching prices turn down from overbought levels and up from oversold levels, can help you spot contrary trades and you can also use it to define the strength of the overall trend when trend following.

2. Stochastic

Is a momentum oscillator that can warn of strength or weakness in the market, often well ahead of time and allow you to initiate trades.

Is based upon the fact that when a financial instrument is trending strongly it tends close, closer to the high than when it is falling, where it will tend to close near its lows.

The best use of the stochastic is as a timing tool and taking crosses with bullish or bearish divergence to indicate trend changes.

If you combine it with RSI It is the ultimate combination for timing trade entries - a fantastic but neglected trading tool.

3. Bollinger Bands

Bollinger bands give you an idea of volatility and standard deviation of price from the norm.

Bollinger Bands are based upon a simple moving average and standard deviation levels are plotted above and below a moving average.

Bollinger Bands are a technical tool used to determine whether a currency pair is high or low relative to its history.

Great for helping you pick areas of high volatility to buy and sell - they should be used to spot the opportunity then use other tools to time entry.

You can also in strong markets use the middle band as value area to get into existing trends.

4. Average Directional Movement

The ADX is a momentum indicator which tries to determine if the market is trending, or is trading sideways.

As you should always trade with the trend this is a great indicator for picking the strong trend.

Apart from determining the trend, it can be useful for taking profits - look for a rise above 40 and a turn down, to alert you to a trend change. 5. Moving Averages

Moving averages identify trends over specific periods smoothing out the day-to-day price fluctuations that are simply caused by market volatility and can be used to great effect with support and resistance to identify areas of entry to a trend.

The equation is:

The closing price is added up and divided by the period of the moving average.

Moving averages as a trend identification tool are great but you must use a period that is longer term.

40 or 200 day averages are great to use to identify areas of support and resistance then you can use momentum indicators to time your entry.

Don't ever use them on there own or in to short a time frame use them for longer term trend identification only.

These are 5 of the best indicators you can learn and study and if you do so correctly with support and resistance levels you will catch more profits from them, spot turning points and time your entries with greater accuracy, for bigger profits.

If you use forex charts then make sure you study and use these tools.

About the author:
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