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Financial indicators can be a stunning help to any trader’s toolset. With the sheer number of Forex indicators out there at the moment, many of which are available free on charting programs and software, there would be a fair question to ask whether or not they will work.
Most traders use one or two separate indicators to give them some indication of what is going to happen with a particular currency pair. As professional traders will tell you, basing trading decisions solely on the analysis of one indicator is one of the easiest ways to fail in the industry.
Additionally, these people will tell you that applying six or seven different indicators to one chart is absolute overkill, and will only work to confuse you and make life a whole lot harder.
So what should you do? If you want to trade with the help of indicators, how many should you use, and which ones should they be? Let’s take a look at the answer to this question now.
The Most Popular Indicators
At the last count, there were approximately 1000 indicators available to apply to any foreign-exchange chart. This adds to the confusion, and leads us to the question of which ones are the best to use?
Throughout time, experience has shown us that the most popular indicators are the MACD (moving average convergence divergence), the RSI (relative strength index), the Stochastic oscillator, and something called “Pivot Points”.
Take a look at the indicators section on your charting platform, and the chances are that you will probably see all of these things listed either right at the top, or throughout the list of indicators. Whilst some people play around with the settings of these indicators, for beginners, we would recommend that you stick with the default settings set by your charting provider.
By doing this, you will have the best chance of being able to utilize the indicator, without being misled by inappropriate variable inputs.
As for the question of how many indicators you should use it once, a few people say that you can use a maximum of three per chart, whilst others say that two is more than sufficient. At the end of the day, it is a personal preference and something which you will need to work out for yourself.
