Forex Trading & Combining Indicators

By: Sacha Tarkovsky

If you are involved in forex trading, you obviously need to generate forex trading signals for profit and you will be able to make bigger profits and achieve long term currency trading success, if you combine a visual view and then trade off shifts in price momentum, so let's look at how to do this.

A Visual view

Be objective! The right price is the market price and you can see this clearly by using trend lines. There is no better way to spot areas of support and resistance to trade than to use trend lines.

Many traders however like to use subjective indictors to do this like cycles and Elliot wave but these require you to decide where support and resistance lies.

Why bother?

Drawing trend lines and looking at support and resistance gives you the reality and objective areas you can trade against.

You can use other indicators such as moving averages and Bollinger bands, but you need to start with trend lines and use these as back up.

Furthermore avoid Fibonacci retracments, they are simply assumed levels and they break at least as often as they hold.

An internal view.

As we have discussed above, good old fashioned trend lines will give you the reality of price and important support and resistance levels clearly right in front your eyes.

You now need to calculate the odds of success of trading into these levels.

You will need some momentum indicators to do this - these will tell you the strength of price movement up or down and help you calculate the odds of success.

For example if price momentum weakens into resistance chances are it will hold if it increases on a break of resistance chances are the trend will continue.

There are two great price momentum indicators that any novice can use effectively:

The relative strength Index (RSI)

Developed by trading legend Wells Wilder (if you have not read new concepts in technical trading get a copy) its over 25 years old but a classic work and this is a classic powerful indicator.

The stochastic indicator

Developed by George Lane, this is one of the best momentum indicators if not the best, you can use.

There easy to use in forex trading and are covered in our other articles in more detail.

Trading is an odds game!

Trading is an odds game and for this you need to see the reality of price as it is and then get the odds in your favour by watching shifts in price momentum.

It is the shifts in price momentum you can use to execute your trading signals and get the odds in your favour.

If you follow the above tips and get both an external visual view and combine this with price momentum, you will have the basis of a powerful currency trading system.

Furthermore, you will be using objective analysis and trading on the facts, rather than using subjective analysis, which means you have to predict, which by its very nature is doomed to failure.

Follow the above tips and they will help you get the odds in your favour when trading forex and lead you to currency trading success.



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