In today forex faq, we have a question from one of our fellow trader.
Why does some trader use moving average or channel instead of trend line? Thank you
In fact, what indicators to use depend on different traders. There are some traders who are better at interpreting MACD indicator while there are some that do not like to use MACD.
To choose the indicator to use, it also depends on your trading strategy. A scalper will definitely be using a different set of forex indicators as compared to a day trader.
One more thing I want to clarify is trend line serves as a level of support and resistance and not an indicator. Therefore it should not be confused with moving average or channel.
Although you are using indicators in your trading, you should also make use of trend line, Fibonacci or pivot points to help you identify areas of strong support and resistance as these are great area to entry as well as placing your stop loss.
One good way to use the trend line is to use it for entry. When you see the price making a valid breakout of the trend line, you can then enter a trade. As for the stop loss, you can then place it certain pips below or above the trend line depending on your direction of entry.
When selecting your forex indicators, you will need to understand the characteristics of the indicator before picking it to be part of your trading strategy. The best way to find out whether an indicator suits your strategy is to try it out on a demo account first and see how it reacts to your strategy.
I hope that this information is useful for you and do let me know if you have any other problem.