There are so many different indicators that a trader can use, but there are only a few that we believe are useful and can be used as powerful tools to add to your strategy. Some of the indicators you will learn to use are Moving Averages, Andrew's Pitchfork, Momentum, MACD, Fibonacci and Pivot Points.
Moving Average - The exponential moving average (EMA) differs from a simple moving average (SMA) by more weight being given to the most recent data. The EMA reacts more quickly to recent price changes than the SMA does. The EMA is very popular in forex trading, so much that it is often the basis of a trader's primary trading strategy. You will learn more about EMA's in this lesson as well as in The ChrisCross strategy toward the end of the course.
Andrew's Pitchfork - Andrew's pitchfork is available on both platforms. It is comparable to regular support and resistance lines; the indicator offers two formidable support/resistance lines with a middle line that can serve as both support and resistance. It is believed that market price will gravitate towards the median line 80% of the time with broad market fluctuations accounting for the other 20%. As a result, the overall long-term trend should, in theory, remain intact regardless of daily small market fluctuations.
Momentum - The “Momentum” indicator is another member of the “Oscillator” family of technical indicators. The creator of the Momentum indicator is unknown, but Martin Pring has written much about the indicator. It attempts to measure the momentum behind price movements for the underlying currency pair over a period. Traders use the index to determine overbought and oversold conditions and the strength of prevailing trends.
The Momentum indicator is classified as an “oscillator” since the resulting curve fluctuates between values about a “100” centerline, which may or may not be drawn on the indicator chart. Overbought and oversold conditions are imminent when the curve reaches maximum or minimum values. The addition of a Smoothed Moving Average with the indicator improves interpretation of immediate trend changes. We attached a lagging indicator like the smoothed moving average to momentum to give a stronger confirmation when there is a trend change.
MACD - The “Moving Average Convergence-Divergence,” or “MACD,” indicator is a member of the “oscillator” family of technical indicators. Gerald Appel, a stock analyst in New York, created it. It is also described as a “lagging” indicator since it was designed to confirm a stock trend after it had formed using a combination of exponentially smoothed moving averages.
Although originally developed for use with stocks, the MACD oscillator is a common tool utilized in many markets, including forex trading. Trading signals are generated when various MACD crossovers occur and by MACD divergence. The technical MACD definition includes the computation of three moving averages, but only two lines are displayed “oscillating” about a “zero” line.
Fibonacci - Forex traders use the Fibonacci application to anticipate critical support and resistance levels for both bullish and bearish trends to get ready for long and short position trades. Just like any technical indicator, Fibonacci will never be 100% accurate in the signals it presents, but the signals are consistent enough to give a trade an "edge." Skill in interpreting and understanding Fibonacci signals will take time to develop.
Pivot Points - Experienced forex traders and market makers use pivot points to identify potential support and resistance levels. The best way to put it, pivot points and its support/resistance levels are areas at which the market price can change direction and trend. Below you will find a video attached showing you how to apply these indicators to your charts.