Monday, September 10, 2007

Forex Trading - Combine Indicators Correctly & Watch Your Profits Soar

If you want to trade forex markets you need to have a forex trading strategy that generates trading signals and the fact is, most novice traders and many so called pros fail to do it correctly.

Here we will look at 3 simple steps that if followed, could see your forex trading profits soar and lead you to long term currency trading success so here they are.

1. Identification of the Opportunity

First of all, you need to identify the trading opportunity and for this there is no better way than using good old fashioned trend lines, to indicate areas of support and resistance.

My view is that trend lines with the back up of moving averages and Bollinger Bands are all you need.

Many traders make the mistake of then buying into resistance and selling into support, but this simply means you are relying on hope and if you hope a level holds you will lose.

You need to get the odds on your side!

You need to time your trading signals in any investment market and that includes forex trading, with indicators that will allow you to see shifts in price momentum, that support your view of market direction.

2. Entry to the trade

What you ideally want is to get confirmation of either a break of support or resistance to go with the break or a waning of price momentum, to indicate the levels will hold.

If you dont trade with price momentum backing you up you will lose as you cannot get the odds in your favour and trading is an odds game.

What are good indicators to use well there are two that are great and should be looked at by any forex trader looking to make consistent profits and they are:

The relative strength index ( RSI ) and the stochastic quite simply, their the best timing indicators you can get there simple to understand and apply and if used correctly, you will increase your odds of success dramatically.

We have covered these articles in other articles so check them out.

3. Exiting the market

If you are exiting the market, then the same indicators above will give you signals when you reach your target levels and you can uuse some others to here are our favourites

We also like to use the ADX Line and use a move above 40% and turn down to take profits.

In a good sustained up trend, you can use surges outside of the top Bollinger band to bank profits, or if prices dip and penetrate the midline exit the trade.

One of the hardest parts of FX trading

Is deciding on when to take profits Many traders like to trail up stops closely to get taken out of the market, but I personally favour working with a target and moving stops up very slowly its all down to individual preference you dont want to be stopped out to soon and you want to make as much as you can.

Experiment with the above indicators and take your time to get a strategy that suits your personality and forex trading strategy.

There are other indicators of course in addition to the ones we have outlined above but you should seriously consider these first in your forex trading, as they can get the odds in your favour and lead you to currency trading success.


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