At the very core of Forex trading is the ability to predict price movements.
Forex indicators provide tremendous assistance to the trader and are used to predict the direction the market will move. They are also called “technical indicators”; this is an essential part of technical analysis. The choice of an indicator depends on the market, what it will be used for and the principles for calculating its values.
Technical indicators - a tool that facilitates technical analysis of the market, an important element in drawing up a trading strategy, providing information about a possible market change based on price history.
Functions of the technical indicator:
Determines the presence of a trend and its movement.
Generates trading signals - entry and exit points in Forex.
Used as a dynamic line of support and resistance.
It is important to clarify that indicators only work if there is a current trend in the market. Traders themselves prefer to work with proven indicators, rather than try to use new ones. The choice of an indicator depends on the market, type of trend, and how its data is calculated.
Technical indicators are divided into several types.
Types of Technical Indicators
reflect the trend in price volatility and are displayed in the chart window.
Popular representatives: moving averages (SMA - simple moving average) - is determined by the sum of closing prices for a specific period of time, and parabolic stop - there are only two indicators for closing a deal: 100 EMA and a parabolic SAR indicator ( stop and reversal).
designed for intraday trading, used for short-term transactions.
Popular representatives: stachostic oscillator (shows the position of the current price relative to the price history for a certain period) and RSA (relative strength index).
Indicators of volume and market sentiment
help the trader understand the mood prevailing in the market. Usually in the ratio of buy and sell orders.
Popular representatives of indicators: SSI (determine the mood of price volatility in the market) and volume indicator (show the ratio of buy and sell orders).
A simple moving average is an important part of technical indicators and has several varieties.
Types of Moving Average:
WMA (weighted moving average)
weighted moving average. It uses the principle that the most important data is the latest.
EMA (exponential moving average)
exponential moving average. It is similar to WMA, but it works easier and more clearly. Quickly responds to price changes.
VMA (variable moving average)
volume-dependent moving average. Principle of work: not only the values of the indicators are important, but also their weight.
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