Everybody seems to want to find out what the best forex trading indicator is? While you don't need to understand the math that underlies the calculation of the MACD trendlines, by understanding more about how the MACD indicator works, you'll be better positioned to avoid getting fooled by its false signals or lack of signals, such as when the price turns but the MACD doesn't provide any warning.
The stochastic indicators can warn of when these overbought and oversold levels may be potentially reached, allowing traders to either tighten their stop losses to avoid giving back too much to the market or closing their trades and taking their profits before the market drops and erases any profits they had open.
While using either of the two (shorter period versus longer period) classes of moving averages is acceptable with each having its own merit, some traders like to use a combination of short and long term moving averages, most often as part of moving average crossover” trading systems.
Of course, as well known in their arsenal, there is a lot of research and a deep knowledge of the fundamental factors that influence the market, but as far as technical analysis is concerned, JP Morgan's, City's traders and other big names in the industry are very conservative.
While shorter term moving averages usually work well in strong trending markets (consider the last part of market action in the chart above) as you find several occasions when price bounces off them as support or resistance, in sideways market conditions they can yield far too many touches often resulting in conflicting and weak signals.
Firstly, there is no such thing as a best forex trading indicator on its own, as no indicator works all of the time however if you combine the right Forex technical analysis trading you can build a robust forex trading strategy and seek currency trading success.
Ichimoku Kinko Hyo, also known as the Ichimoku Cloud or simply as Cloud, is a ‘complete' indicator which uses moving average data to show the trend of an instrument, the strength of that trend, dynamic areas of present and future support and resistance, and more.