This is a question that is on the minds of many beginning Forex traders. In reality, the best indicator to use in Forex trading is not something that is set in stone. They're a number of factors that go into the selection of the indicator that is best for you.
With that said we would definitely have to say that the best indicator for you will be the one which allows you to trade profitably. It may also be that the best indicator for you may simply be no indicator and all. Trading without indicators has become extremely popular. This type of trading is known as “price action trading”.
Let's keep an open mind about indicators. By trying to find the best indicator we may be limiting ourselves to only using one indicator and that's not particularly correct. If we try a number of different indicators and take the time to do a little experimentation, we can find several indicators which will be suitable for our needs. You may find that using an exponential moving average works well for you and your long-term trading. Someone else may find that using a moving average in their day trading isn't working out very well for them.
Something else to keep in mind is that there is no hard and fast rule that says you have to only use one Forex indicator in order to trade successfully. Many traders use multiple indicators in order to enter and exit trades. For instance, you may use an exponential moving average to enter a trade, you will only enter when your stochastic indicator confirms the entry in that direction. Using a secondary or tertiary indicator to confirm a Forex trading signal makes good sense. Many successful traders have found it best to keep things simple and not have a chart with so many indicators that they can't see the actual price of the Forex currency pair.
So at this point you may be wondering how to go about experimenting to find some good indicators for your Forex trading. That's good that you are doing testing. Learning through experimentation should always be done before actually placing trades. Don't be afraid to vary indicator parameters in order to see what affect it may have. This is very simple to do with most charting software and you can see the position or level of the indicator change immediately after varying a parameter.
After you start changing indicator parameters make notes of your observations. Don't skip this important step. The reason for this is it's very easy to take a cursory glance at a Forex chart and notice that the indicator seems to be catching all the good moves. What you will often find is that the particular section of the chart you are currently looking at may be the only one that looks promising. I can tell you right now that this is going to happen a lot. Don't be discouraged by this, rather think of all the money you saved yourself by not rushing into trading ideas which you had not tested thoroughly first. By doing the necessary Forex research you will be on the road to successful Forex trading.
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