Indicators are one of the most important tools that many traders use to make a perfect trading strategy. As the name suggest, indicator gives the indication of future price movement of the trading instrument in the Forex industry. Oscillators are special kind of indicators which are used to determine the future price of movement of ranging market. Professional traders use indicators and special oscillators mainly for three major reason
Four major reasons behind the trending popularity of indicators
- Trend Identification tools
- New trend confirmation tools
- Exit and Entry Point
Use of indicators and oscillator in USDCHF weekly chart.
Figure: Use of indicator in USDCHF weekly chart
Forex market can have only two possible scenarios of price movement. “Trending movement and the ranging movement.” Indicators help us to identify the prevailing trend in a market with great accuracy, if used properly.
Currency pair movement is always changing its direction with different momentum. Indicator can be a great tool for identifying the new trend or giving confirmation to an existing trend. “Professional traders use a combined approach of different indicators for identifying the new trend and reversal.”
A trader can use indicator as a profit making tools also. The use of simple moving average helps the trader to find the “dynamic support and resistance level” of a currency pair. These levels act as potential take profit and entry point area for the professional traders.
The trader also uses indicator as their entry and exit point. They use dynamic support and resistance level to identify the potential trade and oscillator in order make a confluence.
There are more than thousands of indicator out there in the world. Every single indicator has their own coding with a specific purpose. It very important that trader uses the correct combination of indicators while taking the trading decision in the forex market. The professional trader uses clean chat with a maximum of three indicators in their trade setup. “Don’t mess up your chart by loading too many indicators for a better result.”