Envelopes are based on a simple moving average. It uses a deviation to show an upper and lower trading band. When the market reaches the upper band, it indicates a short may be in play. The same applies to a long trade. An extremely useful tool.
Category: Trading Education
Another indicator that can assist with determining the strength of a market move. The ADX is best used with a stochastic or RSI. Shows whether we have a weak or strong trend, not whether the market is overbought or oversold.
Often known as the “stop and reverse” indicator. It plots little dots above and below the price and helps identify a change in direction. Can also help with where to place stop losses.
The Relative Strength Index shows the magnitude of the recent price movements. The RSI shows the strength of the market move in one direction or the other.
This indicator shows the momentum of a trend. It shows when a current trend may be over bought or over sold.
The MACD is a trend following indicator that helps identify the strength of a trend or a change in trend.
Bollinger bands have a number of valuable uses. Whether it is following trends or looking for possible entry and exit points. Understanding these can be very useful to FX traders.
Now that you understand how moving averages work, let’s take a look at how they are applied in real trading decisions.
Like moving averages, EMA’s allow you to identify trends a little earlier. They give extra weighting to the more recent move.
Like trend lines, moving averages help identify trends in the market and assist with changes in direction and trade entry.