Indicators play an important role in trading. Without knowing about the use of the indicators, traders shouldn’t apply them. Because different types of indicators are used in different situations. So, as a trader, if you apply them in the wrong situations, you may face problems. Sometimes,traders take a decision based on the wrong signals. That’s why they face major problems. Bear in mind that if you want to make money, you have to make the right decision. For this, you have to learn about the use of different indicators. However, before learning the usage, you should know, which indicators you need to use.
In this article, we will discuss the five indicators which are used by pro traders. We hope it may help you to understand the pros and cons of the indicators and choose the right one. So, let’s learn about these.
A moving average helps you determine the common direction of the market and breaks in the value actions. By using indicators, traders will be able to find the average price of a currency pair. However, normally, pro traders don’t use the moving average individually. They use the moving average with other indicators. The moving average may be suitable for a position trader. But, if you’re a short-term trader, you shouldn’t choose it. Because, if day traders choose it, they may struggle with it.
Traders normally use oscillators to determine the overbought and oversold positions. Oscillators mainly help to specify if the market comes to a limit. However, as a trader, you should try to buy the asset in an oversold position and sell the asset in an overbought position. If you do so, it might be better for you. However, oscillators also help to determine the break in the value movement. Along with this, it helps to identify the current trend of the market which aids the traders to make large profits. But remember that you should always use these indicators in conjunction with a premium platform. To avoid any unwanted technical issues, visit Saxo Bank and look at the features of their trading platform.
The Stochastic indicator also help determine the position of overbought and the oversold. Besides this, it helps to determine the price reversal. However, as it provides the correct signal, most of the traders use it. On the other hand, newcomers prefers to apply this stochastic indicator as it is easy to use. However, stochastic helps the traders to get the advantages. But, sometimes, it provides the wrong signal. That’s why traders face the loss. So, to avoid this, if you see that the reading is below 20, you should choose the call option. If the reading 80 or above, you should choose the put option.
Fibonacci retracement lines
Fibonacci retracement help to find out the support and resistance level. Besides this, the indicators help to quantify the risk-reward ratio. To get success, traders need to maintain the risk-reward ratio properly. Otherwise, it’s not possible to increase the account balance. However, pro traders have used these indicators for a long time. However, some newcomers think that Fibonacci retracement was developed on the basis mathematical theory. But, in reality, this indicator was developed based on some general ratios.
Relative strength index
RSI also helps to determine the overbought and the oversold position. However, this indicator is mostly used by novices because it is user-friendly. Sometimes, pro traders avoid it, because it provides the wrong signals. As a trader, if you want to buy low and sell high, you shouldn’t use this indicator as it can be disadvantageous to you. Before choosing this indicator, you need to understand it’s not as reliable as some others.
So, you may now choose the right indicators for you. One thing you need to understand is that if you are not comfortable with using these indicators, you should not choose to use them. Because, if you can’t apply them properly, you may not get the right signals.