10 Best Forex Trading Indicators to Improve Your Results

Trading indicators are mathematical formulas that give you a way of plotting data on a price chart. This data can then be used to identify possible shifts, tends and signals in momentum. Although indicators can be fallible, they can give you an overview of the market and the trends.

In this article, we will look at the popular forex trading indicators you can use to become an excellent trader as well as their specifications. Before diving deep into each indicator, here’s a quick overview of our top 10 forex trading indicators at WR Trading and their key benefits:

List of 10 Best Forex Trading Indicators:

#1 Moving Averages

The Moving Average (MA) is one of the most trusted forex indicators. At WR Trading, our traders use it to smooth out price data and identify the direction of a trend. The MA indicator combines the point of a financial instrument over a specified time frame and divides it by the number of data points to represent a single trend line.

To use the Simple Moving Average indicator, add up the price points for a specified period of time and divide by the number of price points. For example, let’s say you took a 12-day SMA, and the daily closing prices were: 1.2 + 1.0 + 1.1 + 1.1 + 1.4 + 1.3 + 1.2 + 1.5 + 1.3 + 1.2 + 1.5 + 1.4, the moving average for this indicator based on the above prices would be: 15.2 / 12 = 1.26. 

On the other hand, using the Exponential Moving Average indicator will mean you will first need to find the SMA. You then need a multiplier which is gotten by dividing 2 by the number of price points (+1). Finally, find the difference between current and past EMA’s and multiply it by the multiplier. We recommend Moving Averages as one the best indicators for a beginner; it has a simple calculation formula and the interpretation of signals is straightforward.

Specifications for Moving Averages

Moving Averages	Details
Type	Trend Indicator
Default Periods	20,50,100,200
Best Timeframes	M15-M30 and Longer
Trading Applications	Trend following, support/resistance
Calculation Base	Price (typically closing prices)

#2 Volume Indicators

This is a tool whose formula takes into account trading volumes as well as the averaged price values for each part specified in the settings. Trading volumes is a measure of how much an asset has traded for a period of time. Unlike the common Forex averaging indicators, volume indicators distribute the weight of each part depending on the transaction volume.

In order to be able to use this indicator, traders need to know the formula for calculating it, which is the total number of shares or contracts traded during a specified period. This period can be over a single or multiple trading sessions, depending on the timeframe of analysis.

Specifications for Volume Indicators

Volume	Details
Type	Volume Indicator
Default Display	Histogram
Best Timeframes	M15, H1, H4
Trading Applications	Trend confirmation, breakout validation
Calculation Base	Trading Volume

#3 VWAP Indicator

VWAP indicator is another useful indicator we recommend that is used by retail, institutional and market traders in several ways. The VWAP is usually displayed as a moving average time on the chart and this tracks the price value traded over the total value on an intraday chart. In order to use this indicator, the VWAP is calculated taking the average of the high, low and close for the period and weighing that against the total volume traded by that period.

Specifications for VWAP Indicator

VWAP	Details
Type	Volume/Price Indicator
Default Period	Daily
Best Timeframes	M5, M15, M30
Trading Applications	Price reference, institutional trading
Calculation Base	Price and volume

#4 RSI

The Relative Strength Index (RSI) is a momentum indicator that measures the speed and change of price movements. It ranges from 0 to 100 and is used to identify oversold or overbought conditions in the market. An overbought condition is when the RSI is above 70. This suggests that the currency pair might be overbought and die for correction. However, an oversold condition has an RSI below 30 and indicates that the currency pair may have oversold and there’s a possibility of an increase soon.

The best way to use an RSI is through an online calculator. Once you have inserted the relevant price data, you will be given a percentage score from which you can access whether you overbought or oversold. The RSI tool can be used on any type of assets as well as by traders of any experience. However, it is not recommended to use the RSI on scalping.

Specifications for RSI Indicator

RSI	Details
Type	Momentum Oscillator
Default Period	14
Best Timeframes	H1, H4, daily
Trading Applications	Reversal trading, trend confirmation
Calculation Base	Price momentum

#5 Moving Average Convergence Divergence (MACD) Indicator 

The Moving Average Convergence Divergence indicator shows the comparison between to moving averages in order to clarify if the prices are converging or diverging. If two prices are coming together, it means the momentum is decreasing. However, if it is moving further, we can see that the momentum is gaining ground. In order to use the MACD indicator, traders will need to plot a MACD line on a graph, which shows the distance between two moving averages.

A signal line is also added to the mix. If the MACD line cuts the signal line from above, it can be used as a sell signal. But if it cuts it from below, it can be used as a buy signal.

Additionally, it can work with any type of trading strategies, except for scalping and fundamental trading. It is however used by traders who are familiar with the MA types and would like to try on more tools.

Specifications for MACD Indicator 

Parameter	Details
Type	Trend/Momentum Indicator
Default Settings	12, 26, 9
Best Timeframes	H1, H4, Daily
Trading Applications	Trend following, momentum trading
Calculation Base	Moving Averages

#6 Volume Profile

This indicator displays trading activity at different price levels and shows the parts where significant trading interest exists. In order to use the volume profile, traders need to identify the high volume price levels, look for potential support/resistance areas and use the price of control as a reference. This indicator is recommended for any type of trading strategy as well as for traders with any type of skill.

Specifications for Volume Profile 

Volume Profile	Details
Type	Volume/Price Structure Indicator
Default Settings	Variable
Best Timeframes	H4, Daily
Trading Applications	Support/resistance, price structure analysis
Calculation Base	Price and volume distribution

#7 Bollinger Bands

Bollinger bands is an indicator that shows the volatility of the price of an asset per time. The indicator consists of a lower and an upper band. It also consists of three simple moving averages, the distance of which is measured by a standard deviation formula. The Bollinger Bands indicator is employed in the channel breakout trend, a trend that happens at the lower band and a price rebound trend, which occurs at the lower band. 

When a price touches the upper band, the market may be overbought and when it hits the lower band, it might be oversold.

The calculation formula for this indicator is Standard Deviation=√(Close -(SMA. N)² /N

• Where Close= is the closing price of the candlesticks from the sequence;
• (SMA. N) = is the arithmetic mean of the closing  prices in the sequence;
• N= period

Many traders prefer this indicator because it adapts to market conditions, making it one of most effective technical indicators for Forex. We also recommend it for beginners, who after training with moving averages, would like to get familiar with another technical tool.

Specifications for Bollinger Bands

Bollinger Bands	Details
Type	Volatility Indicator
Default Settings	20 period, 2 standard deviation
Best Timeframes	M15, H1, H4
Trading Applications	Volatility trading, trend following
Calculation Base	Standard Deviation

#8 Fibonacci Retracements

At WR Trading, we use this indicator  to determine how much the market will retract from a current trend. A retracement is when the market experiences a temporary dip. Traders who use this indicator will look for these dips and use it to gauge whether or not the market might be moving into a new trend. It can also help them to decide when to apply stops and limits or when to open and close their positions.

In order to use this indicator, traders divide the highest and lowest prices during a set period. The result is then put into a set of ratios that follows the Fibonacci numbers. You can find Fibonacci Retracements for both upward and downward trends. Also, you can also use this indicator with an online calculator.

The Fibonacci retracement is suitable for scalping and swing trading. This is because orders are put when the steady trend resumes. Fibo levels are also often used in trading currency pairs, cryptocurrencies and stock assets. 

Specifications for Fibonacci Retracements

Fibonacci Retracements	Details
Type	Retracement Indicator
Default Period	Variable
Best Timeframes	H1, Daily
Trading Applications	Support/resistance, price structure analysis
Calculation Base	Price and Volume Indicators

#9 Pivot Points

Pivot points are levels calculated based on the previous day’s high, low and closing prices. They help to identify potential support and resistance levels for the current trading day. If a price reaches a pivot level, the demand and supply of that particular pair are at an equal level. If the price crosses the pivot level, it shows that there’s a higher demand for that currency pair. Finally, if the price goes beyond the pivot level, it shows that there’s a higher supply for the currency pair.

The pivot point can be used for any type of asset. It is equally efficient as a trading strategy with currency pairs on Forex cryptocurrencies as well as stock assets. It also works with any type of trading strategies, from day trading to long-term strategies. Essentially, Pivot Point can be recommended to traders of any expertise, as it fits well with other technical indicators.

Specifications for Pivot Points

Pivot Points	Details
Type	Support/Resistance Indicator
Calculation Period	Daily, Weekly, Monthly
Best Timeframes	M15, H1, H4
Trading Applications	Range trading, support/resistance
Calculation Base	Previous period prices

#10 Average True Range

The Average True Range (ATR) measures the volatility level. It is not bound by a fixed range as the current values are always compared with the previous ones. The higher the value of an average true range, the higher the volatility and the faster the price change. The ATR does not indicate the direction of a trend. To use the ATR, traders need to know the moving average, the largest absolute value of the obtained differences and the calculation period.

ATR = Moving Average (TR, m). 

The ATR is suitable for analysis of longer timeframes to determine the volatility level and then switch to a shorter time frame. It is also used for scalping, fundamental trading and swing trading for any type of asset. However, the ATR isn’t very useful for forex newbies due to its low information and its narrow application scope.

Specifications for ATR

ATR	Details
Type	Volatility Indicator
Calculation Period	14
Best Timeframes	H1, H4, Daily
Trading Applications	Risk management, volatility trading
Calculation Base	True Range Applications

Which Types of Forex Indicators Exist?

At WR Trading, we categorized Forex indicators into several main types:

• Trend Indicators:.These help identify the direction and strength of market trends. Examples include Moving Averages and MACD.
• Momentum Indicators: These measure the speed of price movements and help identify potential reversals. RSI and Stochastic Oscillator fall into this category.
• Volume Indicators: These analyze trading volume to confirm price movements and market sentiment. Examples include Volume Indicator and On-Balance Volume (OBV).
• Volatility Indicators:.These measure market volatility and potential price ranges. Bollinger Bands and ATR are prime examples.
• Support/Resistance Indicators: These help identify potential price levels where the market might reverse. Pivot Points and Fibonacci Retracement are commonly used.

What Is The Best Software for Using Forex Indicators?

When choosing software for Forex Trading indicators, we at WR Trading typically focus on two leading trading software: TradingView and MetaTrader. Each offers distinct advantages for different trading styles.

TradingView

TradingView excels as an indicator platform because it offers the most comprehensive set of built-in indicators (over 100 pre-built indicators) with unmatched customization options. Its Pine Script language allows traders to modify any indicator’s parameters or create custom ones easily. 

The platform’s real-time calculation engine ensures indicators update instantly, while the multi-timeframe analysis feature lets traders view the same indicator across different time frames simultaneously. Most importantly, TradingView’s cloud-based system means your indicator settings and customizations are saved and accessible from any device.

MetaTrader (MT4/MT5)

MetaTrader is considered the gold standard for indicator usage due to its powerful calculation engine and extensive indicator compatibility. The platform supports all major technical indicators with virtually no lag time, even when running multiple indicators simultaneously. Its MQL programming language allows for complex custom indicators that can process large amounts of data efficiently.

MetaTrader particularly shines in automated trading, allowing traders to combine multiple indicators into automated strategies through Expert Advisors. The platform’s back-testing capabilities also enable traders to test how indicators would have performed historically.

What Are The Pros and Cons of Using Forex Indicators?

Here are some of the major pros and cons of using forex indicators that we noticed at WR Trading, explained in detail:

Pros

Objective Analysis

The primary benefit of using forex trading indicators lies in their ability to provide objective analysis. Rather than relying on gut feelings or emotional responses, traders can make decisions based on mathematical calculations and statistical data. This objectivity helps remove emotional bias from trading decisions, offering a consistent framework for market analysis that can be particularly valuable during volatile market conditions.

Trend Identification

These indicators excel at identifying market trends and potential turning points. They process market data into visual representations and can reveal patterns that might not be immediately apparent on a price chart alone. 

Cons

Lagging Nature

Since they rely on historical data to generate signals, indicators can look backward rather than forward. This delay means traders might miss immediate market opportunities or receive signals after the optimal entry point has passed.

Analysis Paralysis 

With the vast array of indicators available, there’s a temptation to apply too many simultaneously. This approach can lead to conflicting signals and confusion, potentially paralyzing traders from making timely decisions. The key is to find a balance, using enough indicators to confirm.

Learn to Use Forex Indicators With WR Trading

Ready to transform your trading journey? At WR Trading, we offer comprehensive education for mastering forex indicators through a structured learning approach. Our program combines theoretical knowledge with practical application, teaching traders how to interpret signals correctly and implement effective trading strategies.

Join our community of successful traders and benefit from live trading sessions, one-on-one mentoring, and expert guidance. Take the first step toward becoming a confident forex trader – visit WR Trading today and discover how our proven methodology can help you achieve your trading goals.

Frequently Asked Questions on Forex Trading Indicators