Most forex traders make every endeavor to search for the perfect moment of entering the position. This may seem exciting, but the result in a long term is mainly negative. The truth is that there is no right way for profitable trading on the financial markets. Successful traders often rely on a set of indicators to help them in the proper timing on the market. Here are some of the most commonly used indicators.
It is essential to choose the right moment to enter a position, but you should do the same thing for exit and take profit. This group of indicators is useful for making such decision.
Here we also have a wide variation of indicators, including the overbought and oversold indicator RSI. On taking long positions in a confirmed uptrend, you may come out of a position when the RSI values are 80 or more.
Another useful indicator for exiting position is known as the Bollinger bands. Bollinger bands is a trend indicator, which is named after its creator John Bollinger and shows both the direction and the volatility in the price of the currency pair. The indicator itself consists of two bollinger bands, the upper and lower sides of a moving average.
Usually, Bollinger bands are based on the 20-day moving average. Standard deviation is a statistical term that on its turn measures the deviation of different prices close to the average closing price. The upper part is for two standard deviations above the 20-period moving average, and the lower part – two standard deviations below the 20-period moving average.
Therefore, the 20-period bollinger band shows to traders how volatile the closing price was during the last 20 periods. When the price is very volatile, the upper and lower lines will be extended, and when the price is held in a narrow range, the lines will be narrowed.