Forex Oscillators to Know
When it comes to indicators in FX trading, a certain type you need to be familiar with are Forex Oscillators. Indicators help to form the base of technical analysis, and being familiar with Forex oscillators can go a long way in helping you become a better trader.
What are Forex Oscillators
Before we get into talking about the best Forex oscillators out there, let’s explain what these are and what they do. An oscillator is a type of indicator which moves between two levels on a price chart, and they are designed to show you if a security is overbought or oversold.
These function as barometers, if you will, which measure the momentum of a price, particularly if there will be a trend extension or a reversal. Forex oscillators are very important as they help determine the state of a particular market, as well as entry and exit points.
The Best Forex Oscillators
Let’s quickly take a look at a few of the best Forex oscillators around and what they can do for you.
One of the most valuable Forex oscillators to be familiar with is the Stochastics oscillator, which is specifically designed to inform traders if a security is overbought or oversold.
This is done by comparing the periodic closing price of a security with a price range for a set amount of time. This is one of the most popular oscillators out there as it is one of the most versatile indicators out there.
RSI – Relative Strength Index
The RSI or relative strength index is a momentum oscillator. This oscillator helps to gauge the strength of evolving price action. When it comes to technical Forex traders, it is one of the most widely used indicators.
Just like with other oscillators, RSI can tell you if a security is overbought or oversold, and whether or not there is a big change coming in the near future. This is measured on a scale of 0 to 100, with 0 meaning that a market is oversold, and vice versa.
MACD – Moving Average Convergence Divergence
In layman’s terms, the MACD indicator compares two exponential moving averages with each other, usually with periods of 12 and 26.
This helps traders observe whether the two EMAs are moving closer together, diverging, or crossing over, which then helps traders determine the future course of price action in relation to a specific security. Most technical Forex traders really like the MACD Forex oscillator due to its ease of use and versatility.
When it comes to Forex oscillators, this is another favorite. The Parabolic SAR is a great oscillator which helps to identify trend directions as well as potential reversal points, and of course, it also established whether markets are oversold or overbought. This is an oscillator that often gets integrated into trend following and trend reversal strategies.
Best Forex Oscillators – Final Thoughts
Folks, we would definitely recommend further familiarizing yourself with these indicators, as they are indeed a technical trader’s best friend. If you want to learn everything there is to know about this type of indicator, the Income Mentor Box Day Trading Academy is the place to be.