Forex Trading Techniques

Bollinger Bands

Bollinger Bands are used to measure market volatility. It tells us the conditions of the market whether the market is quiet or loud. When the market is quiet the bands contracts and when the market is loud the bands expand. Notice on the chart below when the market was quiet the band were close together and when the market was moving up the band spread apart.

Parabolic Sar

While is important to know where new trends start it is equally important to know when the trends stop. An indicator that is very good in identifying the end of a trend is Parabolic Sar (Stop And Reversal). A parabolic places dots or points on a chart that indicates potential reversal in price movement.

Stochastics

Stochastics is another indicator that helps us determine when the trend might be ending. By definition a Stochastics is also an oscillator that measures overbought and oversold market conditions.

Relative Strength Index

Relative Strength Index (RSI) is similar to stochastics in that it identifies overbought and oversold market conditions. It is also scaled from 0 -100. Typically readings below 30 indicate oversold market conditions while reading above 70 indicates overbought market conditions.