Monday, September 27 , 2021

Your Guide to Day Trading: The Five Best Forex Indicators

Let’s be honest – if you’ve been into forex for just a couple of months, you know that there’s a ton of different indicators out there – and most of them are no good. But due to the sheer amount of indicators, testing them, giving them a fair shot, and seeing whether they’re really good or not is almost impossible. 

Finding out the right forex indicators is a lot easier said than done.

However, it isn’t impossible. You just need to know a few things. For instance, you need to have a good starting point. Having a shortlist of the best indicators and knowing what characteristics would suit your trading style is extremely important. And that’ why we’re here today. To help you get started. Most of the work will be up to you, but we’re going to give you a good starting point. 

Now, let’s look at everything you need to know about finding the best forex indicators

The Best Forex Indicators for Day Trading

Image Source: Pixabay

Our mission is that by the end of the article, you know exactly what you’re looking for and that you go out and try these indicators for yourself. In reality, that’s the only way to know whether an indicator will work with your trading strategies and ambitions.

Nonetheless, all of these indicators can help traders with accurate tips and opportunities. Some of them will help you with up to 50 pip trades a day. You can also automate some of them in your broker of choice. But enough of that, let’s start the list… 

  1. A Short Explanation of Bollinger Bands 

Bollinger Bands are charts used to measure how volatile the market is. For traders, they are mainly used for dynamic support. But Bollinger Bands are not only used for volatility measurements. They’re also often used as reversion tools. What do we mean by that? 

When the market is trading two to three deviations away from the mean, the chance of the market reverting to the mean is pretty high. You can use this chart to see when the market will revert. This forex strategy has made Paris Trading so popular in the past. 

  1. What’s the Linear Regression Indicator

LRI or Linear Regression Indicator is one of the most underutilized tools available today. By following these indicators on the aforementioned Bollinger Bands chart, the indicators focus on showing the mean price of a certain currency pair. You want to profit from the market going back to the mean price, after noticeable movements in the market. 

How does LRI work? The trader plots the near-term swing high and low like they would with the FR tool. In turn, this will plot a line and give you the mean price in return. Certain tools will also plot the extremes like a between-price channel. This can be useful as once you’ll be able to see the price moving around the extremities. 

  1. What Exactly Are the Donchian Channels 

All of the readers with even a marginal interest in forex before this have probably heard about the Donchain Channels before. Unfortunately, they probably didn’t hear anything too good about it, because of the infamous Turtle Trader experiment. However, this indicator is nothing to scoff at. In all actuality, it’s pretty close to the Bollinger Bands we discussed in the previous entry.

The Donchain Channel is used to detect breakouts from a pre-defined period. Most traders set it for 20 periods, therefore, the breakout happens if the price trades higher than the higher band. What’s more, the setting is based on a trading month – for traders, months have 20 working days – so it would be best to experiment with the length in accordance to your liking if you use it. 

  1. An Introduction to the Ichimoku Kinko Hyo

For many Japanese forex traders, this is one of the most important indicators. It’s one of the most popular indicators for traders in Asia. Translated from Japanese, the name means “equilibrium.” This is actually a Swiss Army knife indicator that already has a great track record behind it. When you use this indicator, you have two ways of making a trade happen.

This includes breakout trades and trend following. Considering its versatility, it’s surprising that this indicator isn’t more popular outside Japan. Here a few terms you need to be familiar with if you want to use these indicators:

  • Kijun Sen (blue line)
  • Tenkan Sen (deep red line)
  • Chikou Span (green line)
  • Senkou Span (red lines)

The indicator gives traders dynamic support as well as resistance levels, so it’s hard to find such a versatile tool out there. 

  1. What’s the Hull Moving Average

Last but not least, we have the Hull Moving Average. You’ve never heard of this indicator? That’s because it’s rather unique, and only traders focused on predicting movements know about it. As far as predictions are concerned, this indicator works better than a simple moving average in many people’s eyes. 

The HMA was originally created to eliminate the lag that occurs between the price and the indicator. And wouldn’t you know it, the HMA does a fantastic job in eliminating it. It’s the quickest and smoothest moving average indicator and for traders looking to improve their trading strategies in 2021, this indicator is simply a must-have.  

Closing Thoughts 

Those some of the best forex indicators out there. In our opinion, these are the perfect indicators for day traders that will be easy for you to learn, no matter how much – or how little for that matter – experience with the forex market you have. Make sure to try multiple indicators from the article. 

These indicators will help you learn the ropes, get some much-needed experience, and most importantly, make a healthy profit right from the get-go. But which one of these is the best? All of the indicators are good for different scenarios, so we can’t pick the best one. That’s up to you.

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