If you have been searching around for the best forex indicator then this should get your attention! I am tired of seeing the same old recycled forex indicators that tell you the exact same thing just in a different way. Read on to know exactly what forex indicator is one of my favourites and is a very unique forex indicator to use in your MetaTrader 4 trading platform.
How we are taught to trade forex
Dont get me wrong the above chart is an extreme example but how on earth can people trade with so many conflicting indicators is beyond me! Mt4 already includes many technical analysis forex indicators which are plenty in my opinion, to be honest e a simple trend indicator such as the moving average and a simple oscillator to help you to identify overbought and oversold prices is a good start.
In addition to the built in mt4 forex indicators we can use price action analysis in the form of candlestick patterns and support/resistance to help identify entry and exit points. Then there is fundamental analysis that can affect the forex market such as major news releases, just look at the impact the CHF peg and Brexit had for example!
You also have NFP (Non-Farm Payrolls) day every first Friday of the month which causes some erratic market movements. It is important to be aware of news releases so you can use a forex news calendar to keep track of the latest news. So we can combine these 3 elements and we have the following:
- Technical analysis using built in mt4 forex indicators
- Price action analysis using candlestick patterns & support/resistance
- Fundamental analysis in the form of news releases
Now we can combine these 3 primary elements for analysing forex currency pairs to help us find entry and exit opportunities. An example would be using a moving average indicator to filter the trend and a CCI indicator to look for a pullback in line with the trend. In a buy trade scenario we would look for price above the moving average and CCI extremely oversold so less than -100. This would be our technical analysis.
We could then look for bullish engulfing candlestick pattern to confirm the entry and finally ensure that there are no recent or pending major news releases. Now this is all well and good provided you use consistent money management with a good risk to reward ratio of 1:2, you could achieve a win rate of less than 50% and still do well!
However, we want to get a higher win rate right? We want our trades to be as accurate as possible and increase our edge each and every time right? We want to stop trading with a blindfold on right? Well, I feel one of the the key things missing from all of these analysis is… The Forex Market Sentiment!
The Forex Market Sentiment
The key missing ingredient here that is need often enough talked about or taught by the gurus or in the books is the Forex Market Sentiment.
This shows you how many traders are long on a currency pair (buyers) and how many traders are short on a currency pair (sellers). With this information you can trade AGAINST the crowd in what is known as contrarian trading and take advantage of the mistakes 95% of traders make.
Of course, statistically it is well know 95% of traders fail so logically if you trade AGAINST the crowd (sentiment) you could potentially increase your winning edge.
Why do forex broker trading platforms such as MetaTrader 4 not include forex market sentiment indicators or tools by default? Maybe beacause they use this very information to contrarian trade themselves!
The big players can get access to this information and use big orders to clean out a cluster of buyers/sellers hence why sometimes we see big spikes on our charts – of course news can cause this also.
Just another example of the crowd being wiped out, so a contrarian trader goes against the crowd and with the big dogs!
How do I know the Forex Market Sentiment?
You can use one of the best forex indicators in my opinion which is the forex market sentiment indicator. You start using it right away when you download it. It will display the forex market sentiment on your charts in a very easy to use way. You simply look at the currency pairs that it displays which have extreme buyers or extreme sellers.
So, if say 70%+ of traders on the EURUSD or buying a contrarian trader will look for the market to move against them (going down). They would then ride this wave against the sentiment like clockwork.
Once you see it happening for yourself you will see how contrarian trading works and you might be pleasantly surprised how often the sentiment extreme is on the wrong side of the market.
I have often seen the sentiment extreme hold onto losing positions as the market continues to go against them. Without using the forex market sentiment indicator you do not have this information.
Why should we be sheep and follow the heard? And you know what they say, “if you follow the heard, you step in s***”.
How does the Forex Market Sentiment Indicator work?
The Forex Market Sentiment indicator collects data from hundreds of thousands of real live account forex traders on all brokers from across the world and displays on your chart how many buying positions and how many are selling positions there are on a given currency pair.
It will also display the amount of volume of buyers and sellers as well as the average entry positions. I have found that when there is an extreme amount of positions and volume in one direction the market will often move against them.
After all, it has to or else the market would not exist. This is a great trading tool to have in your trading arsenal. If you load it up on your charts today, you may see that all this time we have not been trading with this forex indicator, we may as well have been trading with a blind fold on.
I could go on all day and night about how fantastic the forex market sentiment indicator is (my opinion!) but for more information you can read my forex market sentiment review or you can go and get your copy from the forex market sentiment website.