works all the time by itself and the way you combine them is essential. Many traders make the mistake of the thinking the more indicators they combine the better - Wrong!
Right lets build our Forex trading system and look at some of the best Forex trading indicators to help you build a trend following system.
First Identify the Trend.
This is obvious by looking at a bar chart but you also want to use moving averages as well. Simple moving averages are great in terms of smoothing out the fluctuations and two great periods to use are first, the 40 day MA to identify the long term trend. Secondly, use the 20 day MA to buy and sell back to in a strong trend and you will find this moving average is excellent for getting in on a trend in motion, with optimium risk / reward.
We don’t have time to cover this in detail here but there are a couple of points that are the key to maximizing profits. Firstly, be patient and only trade high odds set ups and secondly, make sure you trade breaks to new highs and lows all the big trends start and continue from them so you need to trade them.
Bollinger Bands - Check Volatility and Standard Deviation
Ask most traders what standard deviation of price is and you will probably get a blank look but an understanding of standard deviation of price and volatility is something that all forex traders need to know about and if you don’t, make part of your forex education and learn about Bollinger Bands.
Bollinger Bands are not used to for market timing - but give you an all round view of volatility price and when you understand this concept, Bollinger Bands can help you in 3 ways:
