Forex signals allow traders to make more consistent profits than using gut instincts. With the advent of programmable trading systems, every sophisticated Forex trader employs methodology based around indicators. These indicators reveal future directions for a Forex currency pair with probabilities for each trade.
While not a guarantee of making consistent profits, using these five top Forex signals may dramatically increase your chances on each trade.
Comparing the 50 day moving average to the 200 moving average is one of the simplest trading methodologies available. Forex signals are often on a shorter timeline than 200 and 50 day averages. Traders should consider using the same principle with moving averages of hours versus minutes or three days versus two hours. The specific range is not the critical factor.
Comparing a longer moving average range versus a shorter moving average range gives traders the ability to spot trend reversals and estimate the strength of a foreign currency trading pairs trend.
Equally as important as moving averages, trading volume for Forex determines the demand and supply side of the trades. With buy and sell dynamics, traders can predict Forex trends. When more traders are on the buy side of a currency versus the sell side of a currency, the Forex signals will quickly reflect the market dynamic. The challenging part of tracking volume in the Forex world is that it is a difficult number to get.
One of the easiest ways to determine volume is to restrict the volume number to your trading platform. Only in rare cases will the buy or sell side be country specific. If you are using Trade Station, then the volume numbers on Trade Station probably represent what is happening in the market as a whole.
Reversals are among the most profitable Forex trades. Spotting the reversal early enough and jumping on board can result in big hits of earning five and ten times your investment. The challenge is determining when these reversals are going to occur before they have already run their course.
One of the greatest commodity traders in all of history developed candlestick analysis for determining trend reversals. Once a trader understands the relatively simple analysis that goes into spotting reversals, he has definitely made another step towards becoming a pro.
Open interest is reported by the Comex on all commodities and currency futures. By assessing what professional traders see as the future developments for each currency on a long-term basis, Forex traders can develop short-term plans.
Fortunately, the Comex open interest reports generally lead to predictable market moves. High levels of open interest on either the short or long side indicate the direction for that particular contract.
Bollinger bands show when a currency is an extreme either above or below the typical band of performance. The safest trading employs going counter to the position of the currency relative to the Bollinger bands. When a currency is in the bottom of the Bollinger band, the high probability trade is to expect it to rise back up in the channel. The same trade applies in reverse.