Using the two indicators outlined here, with your currency trading charts, will help you gain a trading edge and the chance to bank huge profits. Lets look at these indicators individually, with currency trading charts - and see how you can combine them for huge profit potential. Indicator #1 - The Stochastic This is the best short-term indicator of all, for defining the strength of the trend. Stochastics are great at warning of corrective moves against the primary trend - and for swing trading in non-trending markets. Generally speaking, indicator values over 75 are considered overbought, and below 25 oversold. An over bought market simply means that a pullback will occur when the market is over sold, and a rally is due. In consolidation periods, youll see on currency trading charts that this indicator is extremely accurate. However, during strong trends, it can be misleading. In strong trending markets only, consider divergences in the overbought zone to be important. In addition, an up turn from oversold areas - or near midrange, can warn the trend is resuming. Advantages - use on your currency trading charts for entry and exit positions. Also, use Stochastics in periods of consolidation, to swing trade - and in trending markets, to take profits, or load up positions. Indicator #2 - The Bollinger Band If you use futures trading charts, but you have never used this indicator, then you should! Why? - Because, its a great indicator for defining entry and exit levels, in trending markets - and it also to warns of trend changes. Bollinger Bands really are a great indicator - but very few traders really use them properly. On currency trading charts, the Bollinger band indicates overbought and oversold levels, relative to a central moving average - with a band either side. On futures trading charts the following rules generally apply: Contracting bands warn that the market is about to trend: The bands converge into a narrow neck - followed by a strong price movement. Note: The first breakout can be a false move - preceding a strong trend in the opposite direction. A move that starts at one band normally carries through to the other, in a consolidating market. A move outside the band indicates that the trend is strong, and likely to continue - unless price quickly reverses. A trend that hugs one band indicates that the trend is strong and likely to continue. Wait for divergence on a momentum indicator, to signal the end of a trend. A trend that dips to central band in trending market - if it holds central band, then this normally means that the market will reverse - and continue to primary trend. Advantages - on currency trading charts, Bollinger bands indicate the strength of the trend, and they can be used to enter and exit positions. By themselves, Bollinger bands can give many false signals - but combined with the stochastic, they prove to be a very powerful tool. Using Bollinger Bands and Stochastics Together For example, if you are in a strong trend, and prices dip to the middle band - should you take a position? If stochastic momentum turns up, then a trade can be initiated in the direction of the primary Trend. In periods of consolidation, a break to the upside, supported by stochastic momentum, can be an indication to buy. A market hugging the top of the Bollinger band, in a strong bull market, can be sold by short-term traders - if stochastic momentum crosses with bearish divergence. Defining the Strength of the Trend You get the picture! - On currency trading charts, the Bollinger band gives us a clear view of trending, or non-trending markets - and stochastics indicate the short-term momentum - so they can be used together by swing, or long-term traders. If you only use these two indicators, in association with trend lines, on your currency trading charts - you will improve your trading edge - and your profit potential. Practice makes perfect - so take some time to look at your currency trading charts, and see how these indicators complement each other use them, and get ready for huge profits! |
