Indicators are helping tools for retail traders. If you want to make a vigorous profit in the retail trading industry, you must learn to trade this market with strong confidence. Unless you rely on long-term goals and focus on the important market variables, it will be really challenging to overcome the major obstacles at trading. You might be wondering that trading is an easy task. But if you do the math, you will realize trading is one of the toughest jobs in the world.
In this article, we are going to discuss the top four indicators used by professional traders. Go through this article as it will help you to make wise decisions and let you trade this market in a very organized way.
Relative strength index
The relative strength index or the RSI indicator is very popular among novice traders. Most retail traders use it to find the overbought and oversold condition of an asset. As a new trader, you might be thinking that taking the data reading from the RSI indicator is a very tough task. But if you carefully assess the overall market condition, you should be able to take your trades in a very standard way. This will help you to make a big profit even in the most complex state of the market. If the RSI reading is above 70, you should be looking for a selling signal. On the contrary, if the RSI reading falls below the 30 levels, you should be looking for the buying signal. Take the data reading in the higher time frame to get much more accurate signals.
The stochastic indicator is one of the most popular overbought and oversold identifiers in the market. If you want to trade in a higher time frame, you should learn the use of the stochastic indicator in the demo account. Check out the demo trading platform at Saxo and try to learn the use of this tool. Once you learn about the basic functionalities of this indicator, you should be able to take the trades with a high level of precision. If the reading in the stochastic indicator stays above the 80 levels, consider the market in the overbought zone. On the contrary, if the reading stays below the 20 levels, consider the market is in the oversold zone. Based on this reading, you should be able to filter out the bad trade signals in the market.
Simple moving average
The simple moving average is one of the most powerful tools which you can use to trade in a higher time frame. But the problem begins when the traders try to look for the trade signals without knowing the predefined period for the moving average. To make things easier, you can set 100 periods in the moving average and expect to make a big profit in the market. If things seem complex, you may rely on the 200 periods moving average. But without learning the proper use of the moving average, you should not trade the market. First of all, make yourself comfortable with the moving average and then start trading with real money.
The Bollinger band
The Bollinger band indicator is one of the best tools which you can use as a currency trader. With the help of the Bollinger band, you will get an upper and lower channel. The upper channel will act as the major resistance level and the lower channel will act as the major support level. Based on that, you should be taking the trades. If possible, use the price action confirmation signals to trade the Bollinger band. Once you become comfortable with the Bollinger band trading strategy, you should be able to take your trades in a very strategic way. So, focus on the important market details and try to improve your basic skills to find the best trade setups.