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6 free indicators you should know when start trading the markets

November 9, 2022
/
Jens B.

Making trading decisions can be difficult, especially if you are new to the market. However, with the help of some free indicators, you can make more informed choices and improve your profitability. Of course these tools need to be used with price action (checkout our solutions here).

So in this post, we will discuss six of the most helpful free indicators for traders, so you can start straight away with testing. These indicators can help you decide when to enter or exit a trade, and enable you to make better trading decisions. So, without further ado, let's get started!


1. Moving averages

Trading forex can be a complex and challenging endeavor, but one of the most important tools that any trader can use is a moving average. A moving average is simply a calculation that takes the average price of a currency pair over a certain period of time. For example, if the EUR/USD pair is trading at 1.0500 and the moving average is calculated over a period of 10 days, then the moving average would be 1.0505. Moving averages are used by traders to help identify trends in the market, as well as potential support and resistance levels.

The best Moving Average input for a longer period trend: 200 EMA

The best moving Average input for shorter period trend: 8- and 20 EMA

This all comes to personal preferences, so make sure to test them yourself. I find myself using the 200 a lot - this can be different for you.

2. Bollinger Bands

Bollinger Bands are one of the most popular technical indicators used by traders in the forex market. The indicator is composed of two lines that are placed above and below the price action. These lines are typically 2 standard deviations away from the 20-period moving average. Bollinger Bands represent a trading range, and the space between the lines is referred to as the trading channel. When prices are trading near the upper line, it is said to be overbought, and when prices are trading near the lower line, it is said to be oversold. Bollinger Bands can help traders to find trading opportunities, and they can also be used to confirm other trading signals. One of the main advantages of Bollinger Bands is that they can be used in all timeframes, from very short-term to long-term.

3. Relative Strength Index (RSI)

The Relative Strength Index, or RSI, is a technical indicator that is used by traders to measure the strength of a currency pair. The RSI is calculated by taking the average of the difference between the closing price and the moving average over a period of time. The resulting number is then divided by the average of the absolute value of the difference between the closing price and the moving average. The resulting number is then plotted on a scale from 0 to 100. A reading of 70 or above is considered to be overbought, and a reading of 30 or below is considered to be oversold. The RSI can be used to identify trends and reversals, as well as to set entry and exit points.

4. Stochastic Oscillator

The forex market is notoriously volatile, making it difficult to predict where prices will go next. However, technical indicators like the stochastic oscillator can help traders make more informed decisions. The stochastic oscillator is a momentum indicator that measures the speed and direction of price movements. It is based on the premise that prices tend to close near the highs when momentum is strong and near the lows when momentum is weak. By using the stochastic oscillator, traders can get a better sense of whether prices are likely to continue moving in the same direction or reverse course. While no indicator is perfect, the stochastic oscillator can be a valuable tool for forex traders who are looking to take advantage of price movements.

5. MACD

MACD is a forex trading indicator used by traders to make decisions about when to buy and sell currency pairs. The MACD stands for Moving Average Convergence Divergence. The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. The result is the MACD line. A 9-day EMA of the MACD line is called the "signal line." Traders look for crossovers of the MACD line and the signal line as potential buy and sell signals. Trends can also be identified using the MACD. When the MACD line is above the signal line, it indicates an up trend. When the MACD line is below the signal line, it indicates a down trend. The MACD can be used in conjunction with other technical indicators to trade forex successfully.

6. Money Flow Index (MFI)

The Forex market is one of the most popular markets for trading. Among the various Forex indicators, the Money Flow Index (MFI) is a valuable tool that can help traders to make informed decisions. The MFI is a momentum indicator that measures the flow of money into and out of a currency. It is based on the premise that buying pressure is increased when money flows into a currency, while selling pressure is increased when money flows out. As such, the MFI can be used to identify potential reversals in the market. For example, if the MFI indicates that money is flowing out of a currency, it may be an indication that the currency is about to decline. Conversely, if money is flowing into a currency, it may be an indication that the currency is about to rise. As such, the MFI can be a valuable tool for Forex traders seeking to make profitable trades.

So that where all of the six indicators. While these indicators are not a guaranteed indicator of future prices, they may help you make more informed trading decisions. We suggest that you experiment with each of them on your favorite instrument and see which ones work best for you. And like always we suggest you to use it beside price action and fundamentals and use this tools as extra confluence upon your analysis.

Hope you guys found this helpful!