Top Forex indicators every beginner should know

Forex Indicators are considered an essential part of trading in the foreign exchange market. Many forex traders use forex indicators daily, which helps them understand when they can buy or sell in the forex market. 

Forex indicators are known as essential parts of technical analysis.

Every technical or fundamental analyst should have a great understanding of the indicators we are covering today. If you’re planning to be profitable in forex, you should have a good understanding of them too.

It is important to master at least five of the following indicators and train and practice with them to get comfortable using them. Note that there are many more indicators that can be helpful in trading forex.

Here are the top Forex indicators that every trader should know without further explanation.

Moving averages (MAs)

The moving average concept is so fundamental and important that every trader should know it.

As you may know, central banks and multinational companies drive the forex market. Therefore, it is crucial to understand what is happening at the macro level.

The moving average shows the average price of the last number of candles that represent the overall trend of the price.

If the price is trading above the moving average, it indicates that bulls (buyers) are controlling the price of the pair. And the opposite is also true, meaning that if the price is trading below the moving average, bears (sellers) control the price of the pair. 

Therefore, you should focus on buying trades if your trading strategy’s price is above the moving average. 

*insert pic of MA*

There are two types of moving averages: 

• Simple: indicates the average price of the last number of candles, which helps traders understand the market context.
• Exponential: shows the most recent movement that helps traders enter a trade.

MACD (Moving Average Convergence and Divergence)

MACD is one of the most used indicators in the forex market. 

MACD is an indicator that consists of a histogram (a graphical representation that organizes a group of data points into user-specified ranges) and an exponential moving average (EMA). 

The primary goal of the MACD indicator is to calculate divergence with the price. 

MACD often serves as a primary indicator for creating trading strategies; however, it is also helpful in finding possible reversal or continuation points.

*insert pic of MACD*

The regular divergence with MACD and price indicates a market reversal (meaning there’s a move in the opposite direction). In contrast, their hidden divergence indicates a market continuation (meaning there’s a move in the same direction).

Relative Strength Index (RSI)

The relative strength index is another forex indicator ranging from 0 to 100. This indicator shows where the price is likely to reverse.

When the price moves above the 70 levels in an uptrend, it indicates a bearish move is expected. 

Similarly, you can expect a bullish move if the pair’s price moves below the 30 levels in a downtrend.

*insert pic of RSI*

Bollinger Bands (BOL)

John Bollinger is the creator of Bollinger Bands indicator. The main component of Bollinger Bands is moving averages.

There are two standard deviations above and below the classical moving average, which sits in the middle.

Generally, the BOL indicator is easy to utilize and provides you with reliable entry points. The upper and lower line in the Bollinger bands indicator can serve you as powerful support and resistance levels.

Any rejections from these levels show a potential entry point. Moreover, any breakout from these levels gives profitable trade opportunities.

*Insert pic of BOL*

Stochastic

Stochastic is a popular momentum indicator (meaning that shows the direction of moving prices) created in the early 1950s. The main goal of stochastic is to identify the overbought and oversold zone.

Forex traders often need to find a possible profit-taking area in their trading strategy.

Therefore, you can use this forex indicator to find the location from where the price is expected to reverse. The Stochastic indicator moves from 0 levels to 100 levels.

If the price moves above the 70 levels, the price will likely reverse. On the other hand, if the price moves below the 30 levels, it creates the possibility of a bullish reversal.

*Insert pic of stochastic*

Ichimoku Cloud

Ichimoku Kinko Hyo, which is better known as the Ichimoku cloud, is one of the forex indicators with enough elements to create a complete trading strategy, all on its own.

The Kumo Cloud is the first element of this indicator that can help you understand the market context. If the price is trading below this cloud, the overall trend is bearish, and if the price is trading above this cloud, the general trend is bullish.

There are other elements in the Ichimoku cloud, including Tenkan Sen and Kijun Sen, which basically are both moving averages. These two moving averages move with the price, and any rejection from them creates a trading entry opportunity.

*insert pic of Ichimoku cloud*

Average True Range (ATR)

The Average True Range indicates the volatility of a currency pair. 

Measuring volatility is extremely important for direct market movement in the forex market.

In every financial market, the volatility increase indicates the market reversal, and the volatility decrease indicates the market continuation.

The lower ATR indicates lower volatility, and the higher ATR indicates higher volatility. 

Therefore, you can extend your take profit (move your TP farther) if the volatility is down and vice versa. 

*insert pic of ATR*

Pivot Point

Pivot point indicators show the equilibrium level of supply and demand of a currency pair, which means that the power of bulls and bears cancel each other out at this point.

If the price reaches the pivot point level, it means the supply and demand of the particular pair are at the same levels.

If the price moves above the pivot point level, it means that the demand for a currency pair is high. On the other hand, the supply would be high if the price moved below the pivot point.

The price tends to move at the equilibrium point in the financial market before making any big moves. 

*insert pic of pivot points*

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What can Arongroups do for you?

Aron Groups is a Forex Broker that can make scalp trading easier for you. You can deposit and withdraw easily and with no commission and wages, using Visa, Mastercard, PayPal, etc. You can also enjoy a 2% cashback by depositing USDT.

You can open up different accounts such as standard, VIP, Nano and Cash, and use the most up-to-date MT5 trading platform.

Aron Groups provides you with security and excellent customer service that any other broker cannot match.

To register with Aron Broker, Click Here, Or you can read about frequently asked questions here.

Final thoughts on forex indicators

Traders use several forex trading indicators to build trading strategies or pick good entry points. The most important indicators include moving averages, MACD, RSI, BOL, stochastic, Ichimuko cloud, ATR and pivot points. 

Having a basic understanding of these indicators is rudimentary; however, it is not enough. To understand the functionality of an indicator, you need to practice it, try it in combination with different chart patterns and other indicators, and then make a trading strategy. 

When used right, indicators are a powerful tool in the experienced trader’s arsenal.