The effectiveness of an indicator is confirmed when it becomes easier to find the exit and entry points of investment opportunities. Indicators use the market’s volume activity, price and history to determine the best times to buy or sell. There are many indicators available for both technical and fundamental analysis. Technical indicators are widely considered to be the best when it comes to predicting prices in the market. Of the many indicators available, the Bollinger Bands, Moving Average (also known as “stratégie bande de Bollinger” in France), Stochastic and Keltner Channel indicators are the most effective. Here is a quick look at these four indicators.
Bollinger Bands
This indicator is very effective for showing trend and volatility changes in the market. The two bands in this indicator represent the upper and lower signal limits. The limits are determined by the calculation of the moving average over a period of about three weeks. The standard deviation during the period is used to arrive at the positions of the bands. This indicators signals are considered to be accurate and authentic. When the anticipated signals appear on the bands, therefore, it is usually a clear signal to buy or sell.
Moving Average
The Moving Average is a great metric for trends and reversals in the market. This indicator is very effective at tracing and showing up-trends and down-trends in the forex market. In addition, it is possible to observe the momentum of an item in the market using the Moving Average. These properties make it a great tool for confirming a trend that has been prevalent in the market for a while. Using strategies like Stop-loss and Take-profit with the indicator makes it the most effective indicator for low-risk trading.
Stochastics
When it comes to showing the relationship between the price action of an item against its closing price, the Stochastics is the best solution around. This indicator can be used to analyze data of any trading period from a day, to several weeks and even months. The basic premise of the indicator is that the trend of any specific item in the market tends to close at a high over a given trading period. The indicator uses 14 units to calculate any specific trading period. Since the Stochastics is very effective in showing oversold or overbought items, forex traders of all skillsets use it a lot.
Keltner Channel
The Kelter Channel indicator is one of those used by skilled traders to analyze the movement of items in the forex market. This indicator is used to track the volatility in the market. The indicator only has a slight difference with the other volatility tools in the market. While other technical indicators make use of the standard deviation, this indicator uses the average true range. This makes it comparatively more technical and sophisticated. Professional traders, however, admire the effectiveness of this indicator in showing multiple buying and selling signals.
To conclude, it is not necessarily bad to use multiple indicators to improve your forex trading strategy. Using several indicators is indeed a great strategy for raising trading odds. Whether you use single or multiple indicators, it is always crucial to choose ones that are effective. The above four indicators represent the most effective of those available in the industry.
