It is overwhelming for even the sharpest of minds to meticulously watch and analyse the Forex market for several hours at a time. Accurate Forex indicators can help traders, especially scalpers; focus on important data without wasting time scouring the market. Comparable to a lot of processes today, Forex indicators are a great way to automate your analysis. Below are three of the most effective strategies.
Ribbon Entry Strategy
The ribbon entry strategy uses a 5-8-13 simple moving average to indicate strong trends that prompt a trader to buy or sell. By scanning the chart, traders can quickly see ribbons, which determine a trend. The simplicity and visual presentation of its data makes this strategy time effective. Most traders will use this strategy on 2-minute charts. However, this average can be used for longer time periods, smoothing out the volatile trends in the Forex market. Moreover, the moving average can be used to signal upcoming changes in price.
Relative Strength & Weakness Exit Strategy
The relative strength and weakness exit strategy focuses on profits and losses. This indicator measures momentum and pinpoints potential trend reversals by determining whether a currency is overbought or oversold. Using Bollinger bands to forecast trends, scalpers can find the best entry and exit points in the market based on pullbacks. Scalpers should use this strategy to find trends, which will prevent them from chasing the market.
Parabolic SAR, (“stop and reverse”), is a strategy which is used to trail the price as the market trend develops. This strategy analyses momentum of a currency to determine when a trend ends. Quick decision-making is not obstructed by this strategy as it uses trends in price to signal, instead of buy or sell conditions. The makes it easy to interpret. In addition, this indicator effectively safeguards profits by focusing on price. However, when the conditions in the market are not sporadic or trending, this indicator is not as effective.
The aforementioned indicators all analyse the market based on different variables. The effectiveness of each one is subjective depending on the scalper’s focus. Furthermore, each indicator can be amalgamated with another to yield more precision and accuracy. For instance, the ribbon entry strategy can be used in conjunction with Parabolic SAR to prevent traders getting caught selling or buying due to a reversal that doesn’t materialise.