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The stock market and forex trading have become a craze for most people. This is because it is a way of making money. According to IG, these forex and stock are the famous markets in the world.

Today you will learn about the three most valued trading indicators. Additionally, about VWAP and how does VWAP work.

Top 3 Trading Indicators You Should Use

Below are the three best trading indicators most professional traders use. They include;

1. Moving Average

MA is a trading indicator many traders and investors use to analyze and determine the average price. Additionally, it shows the direction of the trend. This is without short spikes in the price of the trend.

The moving average sums up all the trend prices on a given period over the data points on the same or single trend line. Let’s take an example of a 50-day moving average. It will need 50 days of data to get the market trend.

Two types of moving average consist of;

·  Simple moving average (SMA)

·  Exponential moving average (EMA)

When it comes to SMA, it involves adding the data points and dividing the total by the number of periods. E.g., SMA = (A1+A2+A3+A4+A5)/5.

EMA includes calculating the simple moving average for the period, multiplier, and the current exponential moving average. The 12-day and 26-day EMAs are popular as they are short-term averages that most traders prefer.

2.  Moving Average Convergence Divergence (MACD)

To buy or sell, you can also consider using the moving average convergence divergence indicator. The MACD has the MACD line, signal line, and histogram, which indicate the average of two trends (buy or sell).

The analysis tool enables you to see the momentum changes of the trade. For example, when the red histogram changes to green, it informs you that the signal is almost appearing, which will be a buy and vice versa.

As for determining the price of a trend, you need to follow the signal line. The signal line shows you the momentum and triggers you to either sell or buy. When it comes to the histogram, it is essential to indicate the difference between the signal and the MACD line.

3.  Stochastic Oscillator

There are two types of the stochastic oscillator. They include;

· Slow stochastic oscillator

·  Fast stochastic oscillator

This indicator is similar to the ROC and RSI. It takes a look at which range a price is changing. On checking this indicator, it works similarly to the relative strength indicator, and the stochastic indicator will inform you whether the market is overbought or oversold.

This is determined by comparing the current and previous prices of a trend. Furthermore, this indicator is bounded by zero to 100. If a value is above 80, it means it is overbought, while if it’s below 20, it means it's oversold.

The fast stochastic generates false signals. That’s why it is preferable to use the slow stochastic as it eliminates such an occurrence.

What is VWAP?

The VWAP is an alternative trading indicator to the three analysis tools.

VWAP is almost similar to the MA indicator. This indicator considered the volume of trades to average the price of a trend. Therefore, to get VWAP, you need to get the cumulative price by volume divided by the trade volume.

The volume-weighted average price indicator is not accessible for use, but you need to purchase it for it to work. When you have this analysis tool, you can check the indicator signal. Suppose the price is above the VWAP line for an extended period. This means the trend is upward.

Additionally, this indicator represents a resistance or support level. And if the price is below the VWAP line for long it shows a downward trend. For example, when the current price is more than the average price for a period, you will pay more. But when the current price is lower than the average, you will buy an asset at a profit.

Furthermore, if the price is near the VWAP line, it shows that the current price of the trend is at a balance.

Conclusion

Technical trading indicators help determine when to buy or sell. Therefore, make use of any of the above indicators to gain more while trading.


3 Most Valued Trading Indicators Used by Professional Traders Revealed!
Digital Mag

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