Let's be honest; as a forex trader, there are so many indicators out there that do so many things that it's difficult to keep track of all of them.

You think one is momentum-based and the other volatility-based, so which is best for me?

In this post, we'll highlight the trading indicators that stand out from the herd and can you help you become a better trader.

1. RSI

Probably the OG of indicators, the relative strength index is one of the best indicators you can use.

The RSI evaluates momentum in forex trading by indicating which direction trade prices are heading and if they are trading higher or lower than previous trading prices.

It comprises a single line ranging from 0 to 100 that indicates an overbought and oversold condition. If the number is greater than 70, the market is overbought; if it is less than 30, the market is oversold.

The RSI is also used to assess market trends. If the RSI is over 50, the market is in an uptrend. If the RSI is below 50, the market is in a downtrend.

2. MA

Moving Average or MA is the most common indicator in forex trading. Moving averages illustrate how a currency pair is moving to evaluate momentum.

It highlights periods when trading prices may be higher or lower, giving traders an idea of where to buy and sell.

Moving averages come in various shapes and sizes, and some traders combine them to corroborate their signals. Some examples are simple moving averages, exponential moving averages, and weighted moving averages.

3. MACD

Moving Average Convergence Divergence is one of the simplest and most effective momentum indicators available.

By finding the difference between the longer moving average from the shorter, the MACD converts moving averages into a momentum oscillator.

So, the MACD combines trend following and momentum trading. This is why there are many ways to trade with MACD. You can look for convergence, cross, and divergence; the MACD moves above and below the zero line.

Side note: MACD is pronounced as "Mac-Dee."

4. Bollinger Bands

Bollinger Bands are comprised of a middle band, upper and lower band. The middle band is a simple moving average.

The price oscillates between the upper and lower bands. When the market is moving, and volatility is high, the band widens, and when volatility is low, the bands narrow.

Bollinger bands assess volatility in a currency pair by displaying how far apart the trading prices are from the trading range.

As Bollinger Bands provide deeper insights into price and volatility, you can use them to determine overbought and oversold levels, as a trend-following indicator, and find breakouts.

5. Stochastics

The Stochastic Oscillator is a momentum indicator that tells about the trend's direction.

The indicator oscillates between 0 and 100. An area above 80 denotes an overbought zone, whereas an area below 20 suggests an oversold zone.

A sell signal is generated when the oscillator rises over 80 and then crosses back below 80. A buy signal is issued when the oscillator falls below 20 and returns above 20.

6. Parabolic SAR

The parabolic stop and reverse is a trend-following indicator. The Parabolic SAR is used to buy when the dots move below the price, indicating an uptrend.

Conversely, it's a sell signal when the dots move above the price.

7. MFI

The Money Flow Index is a momentum indicator that tracks the money flow in an asset. It works similarly to the RSI, but it also takes volume into account, whereas the RSI just takes price into account.

Like many oscillators, it oscillates between 0 and 100. Level 80 indicates an overbought region, while level 20 mentions the oversold zone.

8. CCI

The commodity channel index that you can use as a momentum indicator. Monitoring the value of the CCI line is essential for understanding market trends.

When the indicator is more than +100, it is considered a buy signal, whereas if the indicator shows values less than -100, it signifies a bearish momentum.

9. ADX

The average directional index tells about the strength of the trend. The indicator comprises three lines, DI, -DI, and the signal line.

If you want to use the ADX as part of a trading strategy, you can apply a crossover strategy. If the +DI crosses above the –DI, it's a buy signal. Conversely, if the –DI crosses above the +DI, it's a sell signal.

10. Ichimuko Cloud

The Ichimoku Cloud indicator is made up of four lines. The tenkan-sen (support level) is the initial line, followed by a kijun-sen that acts as a resistance.

Below are two other moving averages representing the Ichimoku's lagging and leading signals. They work together to form the Ichimoku Cloud.

Final thoughts

So, there you have it! These are some of the best indicators you can use. There are plenty of indicators, none of which is the holy grail. You have to test them properly before developing any strategy.