Discovering the "Best" Indicator to Use
The first thing to remember when using an indicator, any indicator, is that it is a function of price action. The indicator itself is not the ultimate tool when it comes to trading…it comes in behind price action. Price action governs the information that the indicator will ultimately provide on the chart.
Price action is Indicator #1.
As such, a trader must determine what price action is doing (i.e. the trend) before consulting the indicator for an entry signal. Once the trend is determined, the trader can then consult the indicator for an entry signal in the direction of the trend.
Now, let’s take a look at the 1 hour chart of the EURGBP below…
First of all we note that the currency pair is in a downtrend. We know this because on longer time frames, the Daily and the 4 hour, the pair has been making lower highs and lower lows which signify a downtrend. Also, on each of the charts, the pair is trading below the 200 SMA. Lastly, when we do a Strong/Weak analysis, we find that the EUR is weak and the GBP is strong. Given each of those pieces of information, we know we want to sell the pair since that is the direction of the trend and that will be the higher probability trade.
Now, let’s take a look at the indicators on the chart.
The three indicators that we have on the chart are oscillators…Slow Stochastics, MACD and CCI. In a downtrend, the entry signals for a sell from each indicator are as follows: Stochastics – when the K line (blue) crosses over the D line (red) to the downside; MACD – when the MACD line (red) crosses over the Signal line (blue) to the downside; and, CCI – when the CCI line crosses below +100.
As can be seen on the chart, each of the indicators provides a sell signal at virtually the same time. So, given that, which one of the three is the “best”? In my opinion, in this key area they are all the same. They all provide the same signal at the same time. The choice will depend on the one that each individual prefers.
As in the case of so many things in trading, there are no absolutes.
To determine which is the best one for you, we recommend that traders simply try all three individually over the course of many trades (100+) before they decide…kind of like test driving a car before you buy. Once you make your decision on which you like the best, stick with that one and discard the other two. Having all three on a single chart would be redundant.
Most of us would have taken vacations and planned trips at least once in their lifetime. The one thing that is essential to have a good memorable vacation is the plan made before the start of the journey. Most of us are also aware that planning is very important in all aspects of life, may it be personal or professional. Then why would Forex trading be any different.A successful forex trader would tell you that one of the reasons of his/her success is a forex trading plan. A good trading plan can make a difference between success or failure. Hence the significance of having a forex trading plan. A good forex trading plan will help you identify your goals. As a forex trader it is very important to understand the extent you are going invest, have an idea about what the output should be. Another point is when to invest and where to invest. These are the basic questions that get answered when setting a goal.Now you have set your goals, next comes the preparation towards the journey. You will need to analyze the markets, understand the analysis given, and keep a track of the forex news and the forecast made. This is the second step towards becoming a successful trader. As in any plan, preparation is very important. This is where the hard work and minute attention to details come into play. The forex trading plan is as successful as the preparations and decisions made before the actual trading. The preparatory phase will give you the direction to take and when to take the position.Now, you are ready to start the journey of trading. All that can be done is done, it is your turn as a person to take the step forward. As in any adventure towards the unknown, the steps you take gives direction and the person you are, will again decide on the course of the journey. You need to be emotionally stable and decisive to be successful in the forex trading process. This is the most critical aspect of the whole process. You need to be calm and quick with your decisions or the opportunity slips away.A forex trading plan needs to give you profitability goals, determine the size of positions, the positions that need to be taken , manage the trade once the position has been taken and finally give the trader information that will help him or her be objective for selecting entry positions and exit positions.The forex trading plan can be simple or complex based on the amount of experience you have gathered in the trading market and the confidence you have gained. As any experienced traveler would tell you, the first journey is just the beginning, its only on repeated traveling will you start gaining the fruit of the travel. Similarly it is imperative to continue using the trading plan and over time you can fine tune it to reap the benefits. The forex trading is not feasible without a forex trading plan, hence its significance!
The traders in the financial markets forecast the currency exchange rate from time to time so that they can rely on these predictions for calculating the monetary value of a currency. There are various methods which support this forecasting. The article brings out the top trending ways for all levels of traders. Approaches For Currency Exchange Rate Forecast The two primary methods for forecasting currency exchange rate are as follows: 1) Fundamental Approach: It is the forecasting strategy which uses direct information related to a country such as productivity, unemployment rate, inflation rate, GDP and balance of trade. The main principle behind is, “true value” of a particular currency will finally be determined at some point. This type of approach is generally used for long-term investments. 2) Technical Approach: In this method, the trader sentiments decides the fluctuations in the currency exchange rate. It makes assumptions by drawing a chart of the trends and patterns. Along with this moving-average trend-seeking rules of trade, forex dealer’s customer-flow information and positioning surveys are used in this method. Top 4 Models For Forecasting Currency Exchange Rate Some crucial models for determining the currency exchange rate are: 1. Purchasing Power Parity Model The PPP or purchasing power parity forecasting is a method which follows the principles of Law of One Price. According to this law, the same goods or products in different countries must have similar prices. For instance, this law demonstrates that a table in Africa will have the same price as a table of equal size and dimensions in the United States (considering the rate of exchange and excluding shipping and transaction costs). Thus, this will eliminate the arbitrage opportunity to purchase cheap in one country and sell it in another at a profit. 2. Relative Economic Strength Model The relative economic strength approach defines the direction of currency exchange rates by making use of growth and the strength of the economic development of various countries. The basic idea behind this model is that the economic development of any country will automatically attract more foreign traders to invest in the country. To buy these investments in a specific country, the traders will purchase the country’s currency. It will result in an increment in the price and demand and eventually appreciate the value of the currency of that specific country. Another factor which will play an essential role in bringing traders or investors to a specific is its rates of interest. Higher the rates of interest the more it will attract the investors, and with this, the demand for the currency will surge, which will eventually appreciate the currency. Unlike this, the low-interest rate will compel investors not to purchase or invest in a particular country. The trader may even borrow its low-value currency for funding other types of investments. It was the case when yen interest rates fell below a level. It is generally known as the carry-trade strategy. 3. Econometric Models It is a model which can be used for forecasting currency exchange rates by collecting all the required relevant factors which might affect a particular currency. It extracts the essential information from these factors to generate the result of the forecast. 4. Time Series Model The Time Series approach is entirely technical and does not accommodate any economic theory. This famous model is also known as the ARMA process (autoregressive moving average). The basis of this model is that the price patterns and past behaviours can significantly affect future’s pattern and price behaviour. The information used in this method is the time series of data which is used to choose parameters for creating a workable model. The Bottom Line In the end, one can say that forecasting the currency exchange rate is a hard task, and it is the reason why several investors and firms tend to hedge only the currency risk. Still, some people do not believe in the hardship involved with the task; they just need better and profitable results anyhow. These people can use any or all the methods listed above. For starting your trading journey in the currency market choose for the right broker. The choice of the right broker itself cut half the risk and other trade-related problems. Two leading names in the list of brokerage firms are T1markets and TradeATF.
Top 10 South African Forex Brokers: Trading in forex markets is subject to risks, so one has to be very careful in choosing the right broker for trade. As there might be many brokers in South Africa, but there are only a few with which you can work for a long time. Down below is the list according to their registration fee, the technology used by them, third party instrument, commission and trading research and experience along with strong customer support. With the help of our thorough analysis, you will be able to find the top forex traders in south African markets. This review is irrespective of novice to experienced market players. South African forex brokers AVATrade Founded in 2006 and having an experience of over 11 years, the company has also gained and retained the trust of over 1 Million active users. Hence in our review of the top 10 brokers of South Africa. This trader has ranked on no 1. Check out the trade facilities that AVA trade is providing to its customers. - Regulated: by FSB, ASIC, FSC, FFA - Instruments available to trade: More than 20 plus instruments including Forex and cryptocurrencies. - Learning & research: Huge library of videos and PDFs are available. - Minimum deposit: $ 100. - Security systems employed: SSL systems for secure transaction. - Technical support: 24*7 customer support is available. - Technology implemented: MT4, MT5. Just Forex They believe in long term customer relationships; hence they have reached a customer base of over 1 Million. And hence they are on 2nd position of our broker review Just Forex. - Regulated or authorised: by FSA. - Instruments available to trade: 170 plus trading instruments including stocks and indices. - Learning & research: 100% analytics and educational support are provided by them. - Minimum deposit: $1 only to begin. - Security systems employed: SSL Systems supported user transaction. - Technical support: best customer support 24*7 - Technology implemented: MT4, MT5. Tickmill They use two types of an account using MetaTrader 4 platform. One is free, and one is pro. - Regulated or authorised: by CySEC, FCA, FSC - Instruments available to trade: Forex. Stocks, indices and CFDs - Learning & research: a full library of videos and PDFs are available for learning and research. - Minimum deposit: $100 - Security systems employed: User transactions are secured by SSL systems. - Technical support: 27*7 - Technology implemented: MT4, MT5 CM Trading It is the biggest broker of SA. - Regulated or authorised: by FSCA (Financial Sector Conduct Authority) - Instruments available to trade: Stock, Forex, indices etc. - Learning & research: A whole bunch of e-library is present to understand the things. - Minimum deposit: $250. - Security systems employed: SSL Systems - Technical support: Live chat and email facility is available 24*7. - Technology implemented: MT4, CopyKat. FXTM FXTM is South Africa’s 2nd largest and trusted broker. - Regulated or authorised: by FSCA, IFSC, CySec, FCA, FSC. - Instruments available to trade: 250 plus trading instruments including oil and metals. - Learning & research: Learning repository is available for beginners and experienced ones. - Minimum deposit: $10. - Security systems employed: SSL Systems is employed through all platforms including iOS, Android etc. - Technical support: 24*7 technical help is available. - Technology implemented: MT4, PMAM and web trader. Iron FX Now Notesco Financial Services Limited. This broker particularly provides its services and speculations in the retail foreign exchange business. This broker is famous for its steady spreads during volatilities in market conditions. - Regulated or authorised: by CySEC (Cyprus Securities and Exchange Commission) - Instruments available to trade: Forex, metals, shares, indices, commodities. - Learning & research: is Available 24*7. - Minimum deposit: $ 100. - Security systems employed: SSL Systems. - Technical support: Auto trade facility is available, Guaranteed stop-loss order support is available by them. - Technology implemented: MT4, PMMA. Exness With their 12 years of expertise, they work on 0 spread & 0 commission policy. Hence they are peoples favourite for trade in volatile markets. - Regulated or authorised: by CySEC. - Instruments available to trade: They give instant execution facility in forex currency pairs, and in gold and silver etc. - Learning & research: can be availed Through webinars and e-repository. - Minimum deposit: is starting from just $1. - Security systems employed: SSL Systems security for a hassle-free transaction. - Technical support: 24*7 - Technology implemented: MT4, SunGard’s IntelliMatch software. FBS This is also the official partner of Football Club Barcelona. This allows a low spread of 1 PIP and leverage ratio from 1:3000 to 1:500. - Regulated or authorised: by the IFSC (International Financial Services Commission) - Instruments available to trade: Metals, CFDs, Fore Exotics etc - Learning & research: Yes, they provide analytics and educational support. - Minimum deposit: is starting from just $1. - Technical support: Zero spread account, fully automated deposit and Withdrawal. - Technology implemented: FBS Trader, MT4, MT5. IG They are famous for making profits out of both rising and falling prices when a user invests in CFDs. - Regulated or authorised: by BaFin (Federal Financial Supervisory Authority), FCA(Financial Conduct Authority). - Instruments available to trade: Commodities, Forex, cryptocurrencies, indices. - Learning & research: They provide learning through e-learning materials like videos and webinars. - Minimum deposit: $300. - Technical support: 24*7 technical support is available. - Technology implemented: API, ProReal time, MT4. Markets.com Along with their little high deposit plan, they provide a demo account for their beginner customers. - Regulated or authorised: by ASIC (Australian Securities and Investment Commission), the FSC (Financial Services Commission), and FSCA (South Africa’s Financial Sector Conduct Authority). - Instruments available to trade: Indices, Bonds, ETFs. - Learning & research: yes. - Minimum deposit: $250. - Technical support: 24*7 live chat is available. - Technology implemented: MT4 and Apps. Note: Abbreviations used are:- ASIC (Australian Securities and Investment Commission) FSC (Financial Services Commission) FSCA (South Africa’s Financial Sector Conduct Authority) IFSC (International Financial Services Commission) CySEC (Cyprus Securities and Exchange Commission)