Best technical indicators for day traders

Whether you are looking for a forex trading indicator or a stock trading indicator, there are a handful that are very commonly used.

The best technical indicators that I have used and are popular with other traders are.

  •     RSI - Relative Strength Index is one of the best momentum indicators for intraday trading.
  •     Moving Averages - Can help a trader determine trend, overstretched markets and are often used as dynamic support and resistance
  •     Channels - From Donchian channels to trendline channels, these can help a trader identify a change in the rhythm of the market.

Let's take a look at 3 trading indicators and how they can be applied to your own trading.

forex trade

1. RSI

I want you to pay attention to when either the 70 level or the 30 level is broken. This is not a reversal of the trade-in in "overbought" or "oversold" territory. The markets have a way of staying in these conditions long after a trading indicator has called the condition.

I recommend setting the RSI with levels 30 and 70. The period can be adjusted. The smaller the period, the faster the RSI will indicate a signal. In my opinion, a value between 7 and 14 fits well for day trading.

2. moving average - period 20

The moving average is not used for trend direction, although you can use it for that purpose. I want you to note how far price moves away from the indicator, hugs the indicator or "bounces" off the indicator.


3. trading channels

If you are following an objective means of drawing trend lines, simply copy your first line and paste it on the other side of the price. Markets move in a rhythm and anything outside that rhythm will cause a trend line to break. This may indicate that "something new" is coming into the market and we could see a trading opportunity.

There are several indicators for trading with trading channels. In the picture above you can see the Donchian Channel. For example, there is also an autochartist for Exness mt4 (software) that can draw in trend lines and channels. Another possibility would be to draw in the trading channels yourself. Depending on your preferences, you can choose here.


How to use these indicators for day trading

I will first tell you how NOT to use these 3 trading indicators.

They will not be your ultimate guide in deciding whether to enter a trade or not. Let the price movements dictate you, and you may find this free PDF file Candlestick Reversal useful in putting together a trading plan.

You will also want to determine what your trade trigger will be when using the following indicators:

  •     RSI is used to show strong momentum. When price breaks through either the 70 or 30 line, we are alerted to a trade setup in the same direction as the breakout.
  •     The moving average is used for a general area-wide zone of opportunity where we look for prices to resume after a pullback.
  •     Channels can be used for trading direction, signify a change in trend and are used in the same way as the RSI indicator depending on the size of the channel.