Often the simplest Currency trading indicator might be the most efficient.
When ever trading currency trading techniques that include the very common Hedged grid trading technique or applying the Good vibrations technique it is important to find out the typical trading range of every currency cross you would like to trade.
The average trading range is simply and average of the range the price moves from its biggest high to its lowest low in a selected timeframe. So if someone informed you that the average trading range for the EURUSD has been two hundred and fifty pips a day over the previous two weeks, they are describing the average range between the day’s high and day’s low over the last two weeks.
So how is this beneficial and how can the range of a currency be used when trading the Forex market?
Many traders use this knowledge as a guideline as to where to position their stops and others use the data to decide entry points. If you are a breakout trader you would view the fact that the currency is exceeding its average daily range as a sign that a trend maybe starting. If you are a bounce trader you would regard the fact that the price has already moved by its the average daily range at any given time when the price movement is probably to get exhausted and may retrace.
The wonderful news is that you do not have to do the average trading range computations yourself. There is a industry-standard indicator that is available on most currency trading charting services called the Average True Range indicator. The indicator will give you the accurate trading range of a currency cross based on the timeframe you are specifying and the period you have selected.
There are also other cutting-edge signals where high readings warn of market bottoms or tops. In general the indicator will top before a market bottom or top making it a good leading indicator.
Somewhat low readings can warn of ranging, slowly trending and controlled markets. Some traders even use trend-lines on the indicator to determine when the market is shifting from a trending market to ranging market.
Experienced Forex traders place two variations of this indicator on top of each other. The one they would specify to measure longer periods of say twenty one days and the other they would set for shorter periods of say seven to four periods. When the two moving averages cross they would take the cross over as a sign of the start of trending market or a consolidation market.
The Average True Range indicator is also a great volatility indicator. If currency one has an average range of say one hundred pips and currency two has an average range of two hundred pips you can use this information in many ways.
Firstly your stops for currency one can be much smaller compared to currency two.
Secondly your target for currency two can be much smaller than currency two.
Thirdly, some forex traders would regard currency two more risky to trade and it has more volatility than currency one.
Irrespective of what your forex trading objectives are and which systems you use the Average True Range indicator is sure to supply you with Forex trading information and facts which will help your currency trading espicially when using the long term Good Vibrations technique. Use the brief comments above to guide yourself to all the virtues of this very simple and yet powerful indicator.
When ever trading currency trading techniques that include the very common Hedged grid trading technique or applying the Good vibrations technique it is important to find out the typical trading range of every currency cross you would like to trade.
The average trading range is simply and average of the range the price moves from its biggest high to its lowest low in a selected timeframe. So if someone informed you that the average trading range for the EURUSD has been two hundred and fifty pips a day over the previous two weeks, they are describing the average range between the day’s high and day’s low over the last two weeks.
So how is this beneficial and how can the range of a currency be used when trading the Forex market?
Many traders use this knowledge as a guideline as to where to position their stops and others use the data to decide entry points. If you are a breakout trader you would view the fact that the currency is exceeding its average daily range as a sign that a trend maybe starting. If you are a bounce trader you would regard the fact that the price has already moved by its the average daily range at any given time when the price movement is probably to get exhausted and may retrace.
The wonderful news is that you do not have to do the average trading range computations yourself. There is a industry-standard indicator that is available on most currency trading charting services called the Average True Range indicator. The indicator will give you the accurate trading range of a currency cross based on the timeframe you are specifying and the period you have selected.
There are also other cutting-edge signals where high readings warn of market bottoms or tops. In general the indicator will top before a market bottom or top making it a good leading indicator.
Somewhat low readings can warn of ranging, slowly trending and controlled markets. Some traders even use trend-lines on the indicator to determine when the market is shifting from a trending market to ranging market.
Experienced Forex traders place two variations of this indicator on top of each other. The one they would specify to measure longer periods of say twenty one days and the other they would set for shorter periods of say seven to four periods. When the two moving averages cross they would take the cross over as a sign of the start of trending market or a consolidation market.
The Average True Range indicator is also a great volatility indicator. If currency one has an average range of say one hundred pips and currency two has an average range of two hundred pips you can use this information in many ways.
Firstly your stops for currency one can be much smaller compared to currency two.
Secondly your target for currency two can be much smaller than currency two.
Thirdly, some forex traders would regard currency two more risky to trade and it has more volatility than currency one.
Irrespective of what your forex trading objectives are and which systems you use the Average True Range indicator is sure to supply you with Forex trading information and facts which will help your currency trading espicially when using the long term Good Vibrations technique. Use the brief comments above to guide yourself to all the virtues of this very simple and yet powerful indicator.
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Last Updated on Tuesday, 06 December 2011 21:37