A trend following or a trend trading strategy is one where the role seems very simple right off the bat - to catch a profitable trend and ride it, but in reality, it's easier said than done. As a trend trader, the first task, catching trends, in itself is a difficult one. You will need to perform meticulous technical and fundamental analysis to have precise knowledge of when and where a trend might rise, how valuable it will be, and whether or not it is worth trading. Indicators are provisions that help traders get a clearer perspective of trading charts and make decisions more inclined to yield profitably.
Here are 3 of the best indicators for traders employing the trend following strategy:
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| Forex Trend Indicators to Create Trading Strategies |
1) Moving Average: A top-notch Forex trading indicator, the Moving Average (MA) is us by thousands to eliminate noise from charts and narrow in on the necessary. It is exactly as the name suggests an average of a security's value over a set period of time. MAs are used in Forex trading strategies predominantly to find out trend direction and see the support/resistance levels. Though incredibly useful on its own, it is often paired up with other technical indicators (MACD for example).
2) Relative Strength Index: The RSI is known as a momentum oscillator, used to study the speed at which price movements occur in a chart and the frequency at which they change. Oscillating between 0 and 100, the RSI indicates an overbought trend when it is above 70 and an oversold trend when below 30. It gives an overall idea about the efficiency and viability of a trend.
3) MACD: The Moving Average Convergence Divergence is a trend-following momentum indicator employed in Forex trading strategies to study the link between two moving average of an asset's value. By subtracting a 26 period EMA from a 12 period EMA, a MACD line is obtained. This line functions as a trigger for buy/sell signals.
As a Forex trading professional, these 3 will be your go-to indicators. Trends are indeed a trader's friend, and with the right indicator in your arsenal, you can catch the best of trends swiftly! Partner up with WesternFX - the world's leading Forex broker today, and employ from an array of meticulous trading tools! Our Forex exchange experts will provide you with the necessary guidance through trades, and equip you with the latest of trading platforms, to make sure your exchanges bring home wins. Call us today to know more!
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