Forex trading offers a lot of opportunity and benefits for the astute and well trained traders. And understanding technical indicators and how to use them can be one advantage any trader will have in his trading strategy. There are many technical indicators in the forex trading platforms of different brokers and they can be grouped into two types of indicator 1. momentum indicator, 2. oscilators indicator. They are so many that one can get confused in making a choice of which to use and how many indicators to plot on your charting software, but remember that you only need simple indicators and a simple strategy to win in the forex market. what indicator then should one use for best result? i would recommend using any oscilator indicator, but my favourite and easiest to use is the relative strength index (rsi). The rsi indicator is an indicator that goes from 0-100 and then goes back to the water mark or center that is 50. it keeps going back and forth just like a pendulum.
How do you use RSI?
When the rsi is below 50 or its water mark this indicates that we are in a down trend, and if it is above 50 we are in an uptrend. But as we all know in forex trading nothing is black and white you should consider checking other indicators like macd or stochastic to determine the genuity of the trend as indicated by the rsi before taking any trade or entering into any position.
The rsi typically indicate whether a currency is overbought or oversold with readings of 20-30 oversold and 70-100 overbought. The rsi indeed is a leading indicator and it can be used to know and identify the current trend of the market, but you should remember not to use it in isloation look at other indicators to confirm what rsi is saying. Trading currencies online does not involve the need for you to plot many indicator on your platform but it requires you to use simple and less indicators to trade successfully. remember the saying kiss “keep it simple stupid” it applies to the forex.
Source by John Okon