With the birth of the internet came the great opportunity for want to be forex traders. It became very easy to set yourself up as an independent trader, trading from home via technical indicators from a charting platform such as Metatrader or Ninjatrader.
A decade or so later the trader has to face the problem of too much information. Which forex indicator should he use? Which type of market does he want to identify; trend or range bound? With thousands of indicators to choose from it becomes a difficult choice to make.
I think the key to getting the right forex indicator is to keep it as simple. Don’t over complicate your trading.
You’ll most likely need two indicators; one to determine the trend and one to trigger you into a trade. They can be one of the same set to different lengths or periods. What you should try to avoid are indicators which have many lines, indicators which are too fast or too slow and most importantly, indicators which repaint.
I personally like paint bar indicators. The paint the bar or candle stick a certain color when they are in a long signal and a different color when they are in a short signal. Things like Heiken Ashi MA indicators, TTM trend, or nonlagdots are all great indicators. Then you have momentum indicators such as BBsqueeze, ultra trend and fisher transform. These are great trending indicators which you can use to decide which direction you will trade in.
I will always try not to use indicators to get me out of positions as I find you’ll either get stopped out for a loss or a profit much slower than if you just used the price. However, if you really need to use an indicator to create your stop in your forex trading system then I would suggest something like metatrader’s Supertrend indicator. It really is one of the better stop indicators around.
Once you have decided which indicators will go into your trading system then just stick to your trading plan what ever that may be. Such things like; trading only in direction of your trend indicator will help keep you on the rights side of the market, trading with a stop (will help protect your trading capital); not entering on forex data releases will all go towards forming strong foundations for a great trading system.
After that it comes down to the testing, backwards and forwards, of your trading system and making small adjustments to your rules or settings. If you need to make drastic changes then I would suggest that accept that that trading idea/concept didn’t work and move on and try something else.
You can download Metatrader Indicators for free on our website where you can also find Forex trading systems and information on how to create a forex system to suit your trading.