Tools of a Tradesmen

                 "Knowledge is a tool, and like all tools, its impact is in the hand of the user"

Traders today understand how crucial tools can be used in order to improve and become more effective at what they do.

Previously we have explored 5 basic common tools that every beginner should know so let's study 3 more. 

1) Bollinger Band or Envelopes

Commonly known as Envelops, they are used to measure if the prices were high or low in relation to markets volatility. 

Many traders today have used it to determine whether trend reversals are about to occur in the market. The Bollinger bands are consist of 3 bands with the middle band being the 20-period simple moving average.

Values of the upper and lower bands come from the middle band. We recommend sticking to the default values of the Bollinger band. A key effect of this trading tool for strategic planning is the snapback to the middle band before heading in a specific direction.

2) MACD Indicator

Moving Average Convergence Divergence (MACD) indicator is used to measure momentum. Traders today use this to identify the direction of trends so as to determine its momentum and potential reversals. This indicator consists of MACD line, the signal line as well the histogram. 

The MACD line moves slightly faster than the signal line even though they both move together. For a trader, you can use this tool to generate trade signals or to confirm trade signals generated from other trading strategies.

3) ADX Indicator

Average Directional Index is commonly known as ADX indicator, allows traders to identify if a currency pair is trending or not. This tool can be used to measure the strength of a trend, identify its ranges as well as filter for other trading strategies.

The structure is made up of the ADX line, the positive directional indicator (+DI) line, and the negative directional indicator (-DI) line. This can be calibrated from 0-100 with values at least above 25 indicating a strong trend while values below 25 identify ranging markets.

As a trader, the tools you pick up along the way will help you become a more effective trader and gives you confidence when making trading decisions. We at AUSFOREX would like to highlight that no indicators work all the time and that to always use proper risk management. We will continue to provide you with knowledge and tools to help you achieve your dream.