Trend trading is the most reliable and profitable, which is why most of the strategies that bring profit in the long run are based on trend trading, and not on corrections.
To determine the direction of movement of the trend (it can be upward, downward and lateral) use technical analysis, in particular, various indicators. Determining an uptrend or downtrend provides an opportunity to open a position by a trend and make money on price movement in a certain direction.
Talking about specific Forex indicators that are optimal for use is very difficult for the following reasons:
– a lot of them;
– each indicator must be configured by setting a number of parameters;
– each indicator has its own preferred indicator;
– Indicators indicators may vary depending on the time interval on which you are trading;
– the indicator must be selected for the trading system, depending on other technical analysis elements that you use in trading.
Thus, the choice of the indicator should be individual, and it is better to select it experimentally during the tests of the trading system on a demo account.
What are the indicators of trend reversal?
In addition to identifying the direction of trend movement, it is necessary to accurately and accurately determine the moment of its reversal. In this case, it is very important to understand whether the change in price movement is a temporary correction or a change in the direction of the trend. Since the correction needs to be “sit out”, whereas a change in the direction of the trend should be a signal to close the position.
Trend reversal indicators can be:
– the Volume indicator, which shows an increase or decrease in the tick volume of Forex transactions;
– Stochastic indicator or Pinball – the entry of prices into the so-called overbought or oversold zones is a signal of a possible trend change;
– the actual figures of technical analysis (“double top”, “head shoulders” and so on).
What are Forex Trend Strength Indicators?
Trend strength is another important parameter that determines how steady the trend is and how likely it is to reverse. It is important to use this indicator in conjunction with others to increase the accuracy of forecasts and improve trading performance.
One of the most prominent indicators of trend stability is the MACD indicator, through which you can determine both the direction of price movement and its strength.