In this discussion, we will discuss the best indicator characteristics. As a forex trader, you are certainly familiar with indicators, especially technical indicators that can be posted on price charts.
According to Investopedia, a growing number of technical indicators are available for traders to study, including those in the public domain, such as a moving average or the stochastic oscillator
Technical indicators are tools or technical equipment made based on mathematical calculations of prices, volumes, or a reflection of market sentiment towards a currency pair. Then, the main function of the indicator is to help map the current market conditions and predict future price movements. It is based on charts that have been formed. Usually, traders use indicators to read signals, know the direction of the forex market trends, or as a signal confirmed.
Types of Technical Indicators in Forex Trading
The types of indicators are only divided into two types, that is Leading and Lagging. In the Leading indicator, the movement will lead or overtake prices, such as Stochastic, Ichimoku, and Relative Strength Index (RSI).
Conversely, the Lagging indicator tends to be slow in giving signals because its movements follow prices, such as Moving Average and Bollinger Bands. To find out the details of the differences, please read the Leading and Lagging indicator article.
Thus, what kind of technical indicators are the best?
If that’s your question, then the answer is very relative depending on strategy, trading style, and level of understanding. In addition, you must realize that each indicator has advantages and disadvantages.
Let’s check out some of the best indicator characteristics below:
Easy to understand
A good indicator is easy to understand. However, the perspective of ‘easy to understand’ each person will be different. It depends on the level of understanding of each person. Thus, the first step you can take is to choose the indicators that are the easiest indicators.
As we know, there are many technical indicators and we are unlikely to be experts at all. Many forex traders try to find the right trading momentum by trying various technical indicators. They expect to immediately find the most appropriate indicators or in accordance with the personal trading style. Thus, these indicators can help maximize trading activities in making profits.
Therefore, you have to make sure that the selected technical indicators can facilitate you in reading signals based on market conditions that are happening. When prices have reached a certain increase or decrease, you can analyze and pick up the right price momentum to determine open positions.
Conversely, if you feel that the selected indicator makes you confused, then there are two possibilities. Firstly, your understanding of each indicator is lacking, so the information obtained is not perfect. Secondly, the technical indicators do not match your trading style, which results in frequent mistakes in decision making.
At such times, you should not force yourself to use these indicators. There are still many types of technical indicators that you can use, including the Custom Indicator group that you can search outside and install manually in MetaTrader.
Read more: Swing Trading, The Most Profitable Technique