Forex Indicators: A Guide for Trend Following

With the immense popularity of Forex, it is not surprising to find an abundance of indicators being developed for the purpose of trend following. While having a wide range of indicators can be beneficial for traders, it can also be overwhelming trying to decide which ones to use. In this article, we will look at the different types of indicators available for trend following and explore the advantages and disadvantages of each. Furthermore, we will discuss how to effectively combine different indicators for maximum accuracy in a trading strategy. So, let’s get down to business. Here’s our list of the top forex indicators for trend following that will help you to make more money in your forex trading.

1. Moving Average Convergence Divergence (MACD): The MACD is the classic trend-following indicator. It measures the difference between two moving averages, the short term, and the long term. When the short term average crosses under the long term average, it is taken as a signal of trend reversal, and a trading opportunity.

2. Stochastic Oscillator: The stochastic oscillator is a momentum indicator, used to detect the strength and direction of the trend. The indication is given when the oscillator crosses either over or under the key levels of 20 and 80.

3. Commodity Channel Index (CCI): The CCI is a momentum indicator, apart from determining the direction of the trend, is also used to measure the strength of it. The indication is triggered when the CCI crosses the 0 line.

4. Relative Strength Index (RSI): RSI is a momentum indicator, used for measuring overbought and oversold levels, and thereby spotting potential reversals. Again, the indication is given when the RSI crosses over/under the key levels of 30 and 70.

5. Average True Range (ATR): ATR is a cutting-edge indicator, designed to measure the level of risk associated with a particular trade. It is very useful for determining the stop-loss level of a trade. A trader should always endeavor to place the stop-loss outside of the range defined by the ATR indicator.

6. Moving Average Envelope: The moving average envelope is composed of an upper and lower band, which swing around the main moving average. It can be used to help identify short-term trend reversals, as the price moves away from the moving average envelope, and volatility starts to increase.

7. Parabolic SAR: Parabolic SAR is a tool used for determining the direction of the trend. It helps to identify potential entry and exit points in a trending market. The signal is triggered when the parabola touches either price highs or lows.

These are some of the top trend following indicators, and we hope that they prove useful to you in your journey to becoming a successful forex trader.

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