There are some staple indicators that most traders will by enlarge use consistently when analysing their foreign exchange rates chart. Even the newest of traders most likely would have flirted with the likes of the moving average, MACD, Stochastic and Bollinger Bands to name but a few. However, there are literally hundreds of different indicators and trading tools out there – in this article we’ll hob knob with a few that you may not yet have come across. Just maybe, one of these could prove to be that elusive missing piece of your foreign exchange rates trading puzzle!
Forgotten Foreign Exchange Rates Indicators
Balance Of Power Indicator (BOP) – A rather smart indicator that was devised by a trader called Igor Livshin at the turn of the millennium. The BOP is a handy tool for traders that are looking to determine whether the bears or bulls currently hold the upper hand – it does this by assessing each ones ability to propel price action to previously unseen levels. At any one time, the BOP gives one of two market signals. When the BOP is rising, market sentiment is turning bullish – when moving down, market sentiment is bearish. Traders should also be on the lookout for divergence between the BOP and price action, and trade these by taking the lead of the BOP trend direction. So, when the BOP makes lower highs, while price makes higher highs this is negative divergence – bet on the downside in this instance. Conversely, when the BOP makes higher lows while price is seeing lower lows, this is positive divergence – traders should look to adopt long positions.
Choppiness Index – This interesting tool was built by E.W.Dreiss to help traders understand whether foreign exchange rates markets are in a trending or ranging state. It’s somewhat akin to the Average Directional Index (ADX) in that sense. The Choppiness index is really very easy to interpret. When the index spouts readings of 61.8 or above, the markets are likely to be highly choppy – sea sawing randomly and in a state of unpredictable consolidation. In contrast, readings of under 38.2 suggest that the foreign exchange rates market is trending. It’s therefore easy to see how this simple indicator could strengthen the trend traders market analysis.
The Darvas Box – Fancy making $2 million? That’s allegedly what hotshot trader Nicolas Darvas did using his Darvas Box. The tool is essentially simple to use – when price action pushes above the top box, traders should open long positions. When the price action ducks below the bottom box, traders are prompted to go short.
The Coppock Curve – This indicator dates back to 1962 and was designed by a trader called Edwin Sedgwick Coppock. He believed that prices often move in a psychological way based on the past relative movement. The Coppock Curve essentially works as an oscillator and will produce buy and sell signals when markets have reached extreme levels. In some ways it is not too different from oscillators such as the Stochastic and the Relative Strength Index which identify overbought and oversold foreign exchange rates levels. Additionally, the Coppock Curve can also be highly useful when a trendline break or divergence is spotted.
Get a free Forex PDF PLUS:
- 14 Video Lessons
- Free One-on-One Training
- A 5000$ Training Account
- In-House Daily Analysis
- Get FULL ACCESS