There are numerous currency trading indicators you can choose from - but can they help you make bigger Forex trading profits? The answer is yes but you need to know how to use them correctly and you must avoid the errors which most traders make. Lets take a look at how to use Forex trading indicators correctly, to enhance the overall profitability of your trading strategy.

The problem for most traders is - they see loads of different indicators and rather than just select a few, they use as many as possible and think the more they use the better the accuracy of their trading signals will be and this leads to losses.

Don't Use too Many Indicators!

If you cram a trading strategy with to many indicators, you will simply make it top heavy and it will to many elements to break. In Forex trading less is more and a successful trading system will normally be simple and robust. In an odds based market such as currencies, simple systems will always work better than ones which are to clever or complex – so don't make work for yourself – keep you strategy simple!

So how many indicators should you use to help you gain better accuracy with your trading signals?

Momentum Indicators for Better Market Timing

In terms of timing your trading signals, you need to use momentum indicators and we have discussed all the best ones on this site and I tend to use between 2 and 4 depending on the trading system I am using.

While there are new and ever more complex ones developed all the time, the best ones tend to be established ones which have been around for many years and my favourites include:

The Stochastic, the MACD, the Stochastic, the Relative Strength Index and the ADX, these FX trading momentum indicators, may have been around a long time but they are all very effective.

The Importance of Moving Averages

If you are trend following you need to keep an eye on key moving averages, because they will smooth the long term trend and tell you, where value is in the market so you know areas to buy and sell into in an existing trend. In short term trends and swing trading, we like to use the 9 and 20 day moving average and in longer term trends, the 40 day moving average is very effective.

Volatility Indicators

You also need to keep an eye on volatility when trading and if you want to see volatility then use Bollinger Bands.

Trading Charts and Indicators

So using moving averages, Bollinger Bands and a few momentum indicators to measure the velocity of price and help you gain an edge in terms of entering your trading signals with greater accuracy is all you need, to put together a simple robust Forex trading strategy which can make big profits.

Today, people like to use FX trading indicators and not bother looking so much at the high odds chart patterns but in my opinion, you should look at the chart formations first and then use technical indicators as back up. There are many high odds chart patterns which work and wil always work and my favourite is the symmetrical triangle. If you watch this formation and select some indicators, to confirm the breakout when it comes, the signals can give you some huge Forex gains.

Final Words

Forex trading indicators if used in the right way can enhance the profitability of your trading strategy and while no indicator works all of the time, if you combine the right ones together you will have a powerful combination of Forex trading tools for bigger profits.