Forex Trend Indicators

The Power of the Forex Trend Indicators

Forex Trend IndicatorsForex trading can be quite puzzling & appalling at times. The experience gained in currency trading can be either very beneficial or sometimes can be very thwarting. A lot of money can be generated if you have the right knowledge, experience and tools. If you can understand the trend of currency then you can earn an extraordinary amount of money by making a decision of selling or buying at a given moment. As a trader if you understand the trend’s direction means you are at upper hand in the market.

Nowadays the forex trend indicators are the very catchy type of trading indicators available to the traders. Just like any other indicator, this piece of software pulls in data and statistics of latest market trends and then based on their internal algorithms it tries to predict that when they are coming to an end. These algorithms have been designed using the principles of forex trading and with the help of researches done on the past forex trends. The forex trend indicators reflect the three tendencies in price trends/movements i.e. up moves, down moves & sideways price moves. You get to know about the prevailing trend of the money with the help of these indicators that smooth the price data over certain period of time. The traders who trade by their own hand find these forex trend indicators as their best trading tool. These indicators prove to be an asset to an experienced or an amateur forex trader.

The forex trend indicators act as an unbiased tool that calculates every moment of money in your trading arsenal. Gauging the strength & trends of money is the foremost use of these indicators. When compared to other methods used by technical analysis the forex trend indicators have granted the greatest profit to their users over the years. Sustaining the fundamental trend drivers mean confirming the trends which is the best way to identify the trends. While calculating the trends the late stage entries should be avoided.

What are the reasons behind the success of the forex trend indicators?

  • The process of the forex trend indicators simply means to know the long term trends without giving much importance to other technical analysis. This means that this is the most reliable method & the other methods should be disregarded unless & until the resistance lines are the short or medium term. Once the trend line is touched by the price action you can buy or sell according to the direction of the trend.
  • As the forex trend indicators calculate the multiyear resistance lines thus they are very successful as most of the major economic changes & events in forex trading are ever lasting. Trend events are long lasting as these events augment themselves & the indicators follow the results of these driver forces. The short term trends are never dependable.
  • To identify the trends at the early or intermediate state of the trader’s development period the forex trend indicators are used to identify the trends.

The forex trend indicators can be characterized in the following two types:

1.       Leading indicators- it is a type of forex trend indicators that tells you at what time you should buy before a new trend starts. The leading indicators are like virus scan. The main disadvantage with them is that they are not accurate. Its main principle is to know the changes in the market & the repetitive patterns. Don’t completely depend on them as they sometime results in fake signals.

2.       Lagging indicators- these indicators tells you when the new trend started. These are more trustworthy than the former because of the fact that their results are visible as they give exact result. Its disadvantage is that it lags the beginning of the trend which is the most beneficial time.

Discussing about some commonly used forex trend indicators:

  • Moving average- it is the simplest type of indicator used. To know the indicators present value it divides the latest n-period by the n of the period. Their simplicity is their strength & utility.
  • Bollinger brands- it comprises of two bands; one at the upper & other at the lower boundaries to give you the moving average. As soon as the price action moves beyond the lower or upper Bollinger brands the buy or sell signals are generated. They give you the present results but not the future ones. It is one of the good forex trend indicators.
  • ADX- the high & low of two consecutive periods are compared. It gives you the strength of the trend. But during the absence of any trend it sometimes gives many false results.

The success of any trading strategies mainly depends upon how you use that strategy. Regardless of the strategy used by you, some tuning is also required. This tuning is provided by such softwares like forex trend indicators.

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