The 5 Best Indicators for Predicting Forex Price
- By FXT
- August 31, 2023
- FXT Analysis
There’s no doubt that predicting the future price of forex or stocks would allow a trader to be successful. Knowing when price is likely to continue on a trend, turn around or spike means getting an incredible entry price in a fast moving market. With so many indicators on the market and even free, what are the best ones to help predict future price?
5. Fibonacci Retracement
The Fibonacci sequence is a mathematical concept that is seen to play out in a range of natural settings. From pine cones, to water flow to behavioural concepts, Fibonacci can be tied to the way things look or operate. Take financial markets for example, often it can be seen that when measuring a full movement from low to high, the price will retrace and bounce off a Fibonacci number, like the 61.8% or 38.2% mark for example.
Often times after a distinct move, price will retrace back to a key point based on the Fibonacci sequence. Sometimes when looking for extended targets, the Fibonacci Expansion tool can find points to target, such as the 161.8%.
4. Stochastic Oscillator
Stochastic oscillator uses the momentum of an asset’s price to determine trending or turning points. Often turning points will be measured on the extremes of 80, or 20 while trend continuations may be considered in between the normal ranges shown on the indicator, between the extreme levels.
Some traders adapt the Stochastic oscillator’s buy or sell levels, like the 80 and 20, to other numbers that match previous turning points based on the indicator. For example, if price turned down several times but the indicator was showing 70 each time, the trader might set the high setting to 70 instead of 80 to make a turning point easier to identify visually.
3. RSI – Relative Strength Index
The strength of an asset can determine the direction of it’s price, so the RSI or Relative Strength Index indicator makes the list. Understanding the strength of an asset using the RSI may help work out if now is a good time to get in or not. The RSI measures the speed and magnitude of price change which is then reflective of potential overvalued and undervalued pricing.
The RSI can be a great tool to help determine the possibility of the market retracing. Combining this tool with other indicators and using Fibonacci may help traders find more accurate turning points along with target prices to aim for.
2. Moving Average
Moving averages are probably the most commonly used and talked about indicators. They represent an average price over the period and act as a great visual representation of where the average price is compared to the price now.
Traders often use the moving average to predict areas where the price may turn around, if touching the moving average after falling or rallying. This is particularly the case for the 200 day moving average, while it doesn’t happen too often, when it does, the moving average is a price point not to be overlooked.
1. Bollinger Bands
One of the best indicators used to find the price area where the market is more likely to turn around, is arguably the Bollinger bands indicator. It uses standard deviation to plot lines above and below the mid-line. When price touches an outer line and turns around often in the chart’s history, this can indicate it could happen again if price reaches the same area.
By combining a range of these indicators into a strategy, traders may look to identify and filter their trading decisions. Using some of these indicators may also help to avoid getting into trades too early in some cases. While there are many indicators out there, using some of the best, and freely available indicators on your chart could be just what you need to level up your trading.