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Even though forex market trading is not as easy and simple as it looks; you can spot many traders making a consistent profit from it. If you study all these traders; you find on common factor, I.e., they all successfully use forex indicators. They do not believe the forex market to be a random walk but understands its fixed behavior under certain conditions. Let’s check out some of such leading indicators.
- Simple Moving Average
It is the average price or the arithmetic mean price for a specific time period. Using it smoothens out the price movements and helps you to identify the trend better. The more extended period you take into consideration; the greater is the smoothening and the slower will be the reaction to the change in the market. It is best used to confirm a trend.
- Exponential Moving Average
This indicator is quite similar to the first, but it focuses on more recent prices and thus responds quicker to price changes in the market. It can help .you look at both long and short position. You can easily identify the market trends with it and take a judicious decision. They use different combinations to fit their time frames best.
- Moving Average Convergence/Divergence (MACD)
This indicator helps you gauge the momentum of the market. It not only enables you to identify the trend but also helps you to know the strength of the trend. It is one of the best indicators in the Forex to let you know the level of strength behind a move. The key concept behind this indicator is to calculate the divergence between a slower EMA and a faster EMA. This indicator draws two lines in the price chart. Like all, experimentation with it will help you find the optimal settings that will work for you.
Once you find all the indicators that work for you and practice with them; you would soon turn into a successful trader.
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