As a trader, being able to identify overbought and oversold market conditions can help you determine when to enter and exit a trade, what position to take, and when a trend reversal may be imminent. This insight allows you to manage risk and make more informed trading decisions. 

The most popular indicators used to identify overbought and oversold conditions are the relative strength index (RSI) and the stochastic oscillator. Both tools are momentum indicators and are plotted on a separate graph adjacent to that of the price action. They are also banded oscillators and, as such, have a set graphic range between 0-100. Overbought and oversold readings bookend the upper and lower bands, or extremes, of this range.

Timing is everything in forex trading. Enter a position too late, and you might miss out on the price movement you were hoping to use to generate a profit from your trade. 

The same is true when exiting a trade: If you exit too early, you might miss out on additional price action that would have fattened your profits. But if you hold on to a position too long, your profit margin could come crashing down as the price movement reverses and puts you at risk of taking a loss.

Experienced traders understand the importance of exiting as close to the peak of their potential profit as possible. Forex exit indicators can offer the foresight and information you need to identify the right exit opportunity and take a profit from your trading action. If you’re unfamiliar with these indicators, it’s worth educating yourself on your options so you can experiment with different strategies and identify the indicators that work best for you. 

Here are some popular forex exit indicators to consider using in your own exit strategy.

When analyzing chart patterns to identify potential volatility with an asset’s price, an inside bar indicator is one of the stronger signals traders can spot. Inside bars on a candlestick chart represent consolidation of price action where the bulls and bears are both struggling to move the price higher or lower from its current position.

The bottom line is that money management will make or break you as a trader. This is a widely accepted fact.  Proper money management rules have been proven over long periods of time and are not secrets to anyone. The rules of ‘keeping your trades small’ and ‘cutting losses’ for example, have worked for hundreds of years, yet many people ignore them. 

No matter what aims you may identify when first determining what you are setting out to achieve with your trading, all aims are secondary to your primary goal — preserving your trading capital. This is by far the most important aspect of successful trading. Simply stated, you need capital to trade.

I believe one of the most often overlooked yet simple decision to make when developing your trading plan is the timing.  What will your trading style be like and what type of trends will you look to trade?

I also believe this is critical as trying to trade a wide range of trading styles and time frames at the same time, becomes counter-productive.  It makes it difficult for the trader to focus on one approach and master that approach. 

There are numerous scientific studies alleging that forecasting market movements is practically impossible. In 2013, Eugene Fama, Lars Peter Hansen and Robert Shiller got the Nobel Prize in Economic Sciences for a study that questioned our abilities to accurately forecast short-term asset price changes.  This raises the question of how traders can gain an edge in the market and consistently profit. 

I personally use technical analysis (the study of price action) to identify trading opportunities.  I think it is important to distinguish what we are doing as traders - as a technical analyst however, at no time do I attempt to forecast – I think this should be left to economists

Technical analysis is the study of actual movements in the price of a financial product.  However in my opinion, technical analysis is less about trading and more about the study of mass psychology.  We study the way people react in certain situations in the market, which is quite prevalent when identifying and trading using chart patterns. 

One of the most common questions I am asked is how you can develop a trading strategy to use in the foreign exchange markets.  Like trading any product, there is a time-tested process to work through to develop a trading strategy or plan that you will be able to implement with confidence.  As simple as it sounds, you need to work out what will and won’t work in the market as you look to develop some trading rules. 

Pattern recognition software is a broad name for programs that use mathematical algorithms and artificial intelligence to identify specific graphic patterns in price movement. This type of software is used by traders in tandem with charting software to inform their trading strategy, timing, and position. Using AI, pattern recognition software scans price action charts for specific breakout patterns that are commonly understood as indicators of market change, thereby alerting traders to possible profit opportunities and helping them manage risk.

Technical analysis is the study of actual movements in the price of a financial product.  However in my opinion, technical analysis is less about trading and more about the study of mass psychology.  We study the way people react in certain situations in the market, which is quite prevalent when identifying and trading using chart patterns.