It is leading Forex Indicators! Being a step ahead of the game is an advantage any Forex trader would enjoy. It is not just about jumping into a trend and riding it out. As has been said many times, nothing in the Forex market goes straight up, and nothing goes straight down. Getting a jump on leading Forex indicators will give you an idea of when a call will likely turn. It’s always best to get in on the start of a reversal than to try to catch up. If possible, you want to avoid leaving money on the table.
When dealing with leading Forex indicators, you will hear talk of three different types. There is the Relative Strength Index, Stochastic, and Parabolic SAR. If you do a fair amount of research, you’ll be able to find others as well, but these are the most common and the ones you’ll come across most often.
The stochastic and Relative Strength Index are built to determine if and when a market has been overbought or oversold. When these things happen in any market, you can expect a reversal. Much of this has to do with simple profit-taking. Particularly with the big banks and financial institutions, once they start to sell off (or buy back) to secure profits, you can expect many in the retail trade to do the same. This will naturally determine a change in the market’s direction. Leading Forex Indicators
This may not cause an all-out reversal. It may just cause a minor retracement, but more often than not, it could trigger a move you don’t want to get caught in if you’re on the wrong side. So beingness of the leading Forex indicators may not get you into a trade, but it could protect you by getting you out of business, which can be equally important.
As for the parabolic SAR, it will not show you whether the market is overbought or oversold. Instead, it is designed to signal whether the market has changed its trend by placing a dot below or above the candles. This is a significant warning signal in itself. In essence, the Forex trader doesn’t care why a market is doing what it’s doing; he wants to know what it will do ahead of time.
If these methods were fool-proof, everyone would have them, and everyone would be following them. What continues to make the Forex market remain interesting is the unknown. There are times when the leading Forex indicators can be misleading. If there is some real news coming out, a news flash, or any number of things that can happen during the day, the indicators may put out a false signal, which, when followed unthinkingly, can cost the Forex trader some money.
Be careful. Like everything else, the leading Forex indicators should be used as just one tool, from your technical charts to your real news. Your ever-present stop-loss order safeguards even the most tested trading method.