Useful Trading Indicatros for Forex and CFD Trading
Welcome to CFD trading, where we will discuss forex indicators and how you can use them for your own trading strategies. You will learn what they show and why they are essential. A trader is only as good as his broker, and that is why we have forex broker reviews to show you how to navigate the world of hunting brokers so you can get the best forex broker in the world. At the end of this, you will learn the most popular forex indicators and how you can use them in forex and CFD trading.
When it comes to the forex market, the essence of everything you do is encapsulated in the indicators, the tools you use, and the expertise you have. CFD trading requires that you have trading indicators. Often when trading CFDs, you will be using the forex indicators that you use when trading currencies.
However, the data they rely on to give you the findings that you need come from different sources. Currencies and other assets do not necessarily rely on the same kind of action and news to experience price movement.
But that is not the point. The point is that we are going to be looking through the native forex indicators, so you are familiar with them.
In this article, we are going to summarize the indicators into how useful they are to a trader. When looking for the best forex broker in the world, you should always check out our forex broker reviews.
The review will guide you so that you end up with some of the best forex brokers in the world, who provide you with access to all the tools that you need.
How To Be Better At CFD Trading
You will need to use the forex indicators a lot, to be able to turn a profit. Strategy depends on data. You can have the perfect strategy but, if you do not know how to read and interpret the data correctly, you will find yourself making avoidable mistakes.
We will introduce you to the various forex indicators. When you start using them, they will be set by default on some levels. There is a chance that you could pick out some custom indicators for use in select scenarios, to make sure that you have extra-accurate data.
In discussing the CFD trading and the forex indicators, we will look at the best native indicators which come with the MT4 platform and also look at some from external sources that you can add.
The Forex Indicators You Should Use for Forex and CFD Trading
Let’s get to it. Here, in no particular order of importance or otherwise, are the forex indicators that you need to know about for your forex and CFD trading.
Among forex indicators, we have those that we call oscillators. This is one of them. As a forex trader, you can use it in two ways:
- It can be a way for you to spot when there are price extremes (like when the market is overbought or oversold)
- You can also use it to detect the divergences.
These are the two main things that the oscillator will show you. As forex indicators go, this is a beneficial function that you cannot do without. When forex and CFD trading, you will need to know when long-term and short-term price reversals will happen.
You can use the stochastics in tandem with other forex indicators and, in that way, always be ahead of the curve. Price reversals always happen in the market. That is the reason why you will need this one among your forex indicators toolbox.
When a trend has run to almost the end of its course, you will need to know when the next price movement is coming.
Oscillators are the leading forex indicators for detecting that kind of thing. It does not matter if you are CFD trading or currency trading, you will always need to know when the next move is coming and how it is going to look like.
In our other articles, we have talked about leading indicators. Stochastics are leading forex indicators, which show trends before they happen. In forex and CFD trading, you will always need to know what pattern to expect next.
When you have stochastics forex indicators, you will not have a hard time detecting the overbought and oversold areas. It pairs very well with the Fibonacci retracement tool. You can use them to recognize the re-entries into the long-term trend after price retracement.
Last but not least, the divergence and extremes in prices, are usually accurate and can be converted into very profitable trends.
2. The Market Profile Indicator
This is one of those forex indicators used in forex and CFD trading. It can show you on the charts, where there is a maximum offer volume or maximum bid, for a currency pair or a CFD asset.
With the ability to see the price at which the institutional traders are buying and selling an asset in substantial volumes, you can then know at which price you need to be buying or selling an asset in CFD trading or forex.
This will ensure that you do not get stuck making lifeless trades that do not seem to go anywhere.
There are many sources of the market profile indicator. You do not need to pay for some of them, but others require you to pay. The forex indicators are useful, and if you feel like paying will get you somewhere, then, by all means, buy one.
Sometimes, this forex indicator is called a volume profile indicator because you can see the volume profile for any asset (in the case of CFD trading) at any given time when the markets are live.
The advantage you get when using this market profile forex indicator when compared to other volume indicators is that it can plot volume on the Y-axis of price and not on the X-axis.
The reason why this is so important in forex and CFD trading is so that you have better volume information at every specific price level.
The movements and activities are all plotted out as things happen, and not after they have happened.
3. The Auto Pivot Point Calculator
This is another excellent forex indicator that you will need when doing forex and CFD trading. With it, you can derive pivot points on the chart from the previous day on closing, low, and high prices. Instead of crunching the numbers yourself (math is hard), you can use this tool, which will automatically work for you.
There are two versions of this forex indicator. One of them calculates the weekly pivot points and the common one that we are used to calculates the daily pivot points. We are going to focus on the one that calculates the daily pivot points.
When you are doing day trading on forex or CFD trading, you can be able to see the daily price levels and be able to find the support and resistance. Typically, we have three resistance levels and three support levels and then the central pivot.
Even though they are named like this, the reality is that the pivot levels above the market price can function as resistance, and the ones below the market price can work as the support.
You can use them individually and separate from each other, or you can combine them with different forex tools and indicators so that they produce entry and exit signals for your forex and CFD trading activities.
With a forex indicator like this, you can be very exact in what you do as they will show you where the price activity for intraday trading starts and where it stops. Using the pivot points, you can comfortably choose 3-5 setups on currency pairs and get at least 20 pips on each of them on a trading day.
4. Fibonacci Tools
Do not ever fail to use the Fibonacci tools in forex and CFD trading. You will deny yourself one of the most significant opportunities to make money in the world of forex. Fibonacci tools base their function on a sequence of numbers discovered and described by a mathematician named Fibonacci, from several centuries ago.
These numbers alert us to retracement and continuation points, which then correspond with wave sequences that you find in price actions, according to the definitions provided by Charles Dow and Elliot.
With the use of Fibonacci numbers, it is easy to trade the retracements, set prices to target re-entry for trades, and the Elliot sequences as well.
With the Fibonacci forex indicator, you can draw retracements at 23.6%, 38.3%, 50%, 61.8% and 78.6%. This will include swing lows to swing highs and the reverse when in a downtrend. As a trader doing forex and CFD trading, you will be able to have a clear idea where a retracement from a low or high that has happened, will end.
With this, you know where the re-entry opportunity will be on the long-term trend.
The Fibonacci expansion tool is something you can use to define price targets from re-entry trades that have a clear definition from the Fibonacci retracement tool. With something like this, you can avoid all the times when you give profits back to the market by leaving your retracement trades at the best time.
Other Forex Indicators You Should Know About
The ones we have listed do not even begin to cover what you should know. So, just so you know what to look for, we will list a few more of the ones that we have not covered here. You should look them all up in our forex education sections.
While you’re at it, read our forex broker reviews, to find out who the best forex broker in the world is. There are many selections there who will give you access to a world of tools you will need.
Let’s finish this, shall we:
- The moving average (MA)- Used in identifying the direction of a current price trend with no interference from short-term price spiking.
- The exponential moving average (EMA)- A form of moving average, placing more weight on the recent data points.
- Relative strength index (RSI)- With this, traders identify momentum, market conditions, and warning signals about risky price movement.
- Average directional index- It shows the strength of a trend in price.
- Moving average convergence divergence- This one detects a change in momentum by comparing two moving averages.
- Ichimoku cloud- This one identifies support and resistance levels
- Standard deviation- With this one, you can measure the size of price movements.
- Bollinger bands- Bollinger bands are good for when you want to get a range within which the asset price, like in CFD trading, usually trades.
In the market, you can use the knowledge you have gained for forex and CFD trading and use these tools to see which ones suit your best strategy. You should know that our list is not a ranking based on anything. We are just talking about the most important ones that we think you should know about.
To reiterate, read the forex broker reviews we provide, to find the best forex broker in the world.
In both forex and CFD trading, it is always essential to ensure that you have all the tools to ensure you survive the changes in the market. The forex indicators that we have discussed are at the forefront of your stay ahead of the curve.
You will need to be in touch with everything at the same time. The forex indicators are an excellent way to reduce the work you need to do to be profitable and a way for you always to know when to enter and exit the market.
Be it price extremes, trends, price movements, or anything else, you will find it much easier to understand and use it all to your advantage if you have the forex indicators we have discussed. The CFD trading department is one that also requires that you always be mindful.
For all these reasons, you will need to ensure that as you get the best tools, you also have a broker, you can trust. That is why we have the best forex broker in the world, listed in our forex broker reviews.
That is where you should start as you make your way on your journey to become a trader.