Forex trading can be a minefield for many, with technical analysis providing countless ways of analysing the same thing, leading to a so-called ‘analysis paralysis.’ Sometimes less is more, and instead of trying to use every indicator under the sun, it is important to focus on a handful to use alongside the traditional price action.
Learn to utilise each tool properly rather than spreading yourself too thin. The following list is not exhaustive, but gives a good idea of what tools can be used to build up a comprehensive toolkit to take on the forex market.
Simple moving average
Alternatives: exponential and smoothed moving averages (SMAs)
Moving averages are often one of the first tools a trader will use when approaching technical analysis. However, these averages can be utilised in a number of ways and the popularity of them means they can be very useful.
Among other things, moving averages can be used as support/resistance, a tool to determine the strength of a trend, and the sign of a potential impending reversal. Bear in mind that when the price comes back to long-term averages such as the 200-day, it will become a big news story and as such people will pay attention.