Feb 05
Author : Daniel Su
If you are new to forex trading, do you know which types of technical indicators are for what kinds of trades? And if you are already an experienced forex trader, are you using the correct combinations of technical indicators to help you profit consistently in the forex market? Let us discuss the following 4 different types of forex technical indicators below:
1 Trend Indicators - Also known as Directional Indicators I have always reminded my students that trend is your best friend and always trade in the direction of a trend' A forex trend may be quite subjective to different traders as they may have different views on trendiness Some trend indicators out there in the forex market can help traders detect the starting and ending of a trend The more popular trend following indicators includes MACD (Moving Average Convergence Divergence), MA (Moving Average), Parabolic SAR Depending just on trend indicators is not enough, you may need Momentum Indicators to enter and exit a trade
2 Momentum indicator - Also known as Strength Indicators It is described as the speed of a move in price over a period of time They are oscillators which are able to indicate whether the forex market is in the overbought or oversold regions If they have risen to the overbought zone, there is high possibility that the price will be going down Conversely, if they have fallen to oversold zone, there is high possibility price will be going up Some of the more popular oscillating indicators in forex trading include Stochastic, Momentum, Relative Strength Index or RSI, Commodity Channel Index or CCI
3 Volatility indicators - Also known as Bands Indicators Often, a change in volatility will lead to a change in price Therefore, we can see how active the forex market is just by looking at the price ranges You may want to trade when there is a dramatic change in price movements, which suggests that the market is actively trading forex Some of the more popular Volatility Indicator includes Bollinger Bands, Average True Range or ATR and Envelopes
4 Volume indicator - They are used to show the volume of forex trading and are useful to confirm the direction of a trend, a reversal or a breakout Price movements increase when the volume increases Low volume may warn of a reversal in a forex trade If a currency pair trades from a narrow range and then breaks out on high volume, this is a strong signal and may suggest a breakout Some of the more widely used Volume Indicator includes Demand Index, Chaikin Money Flow, Money Flow Index, Ease Of Movement, On Balance Volume or OBV
I'm sure that after the above discussions, you should have a better idea of the different types of forex technical indicators While they can greatly help you in technical analysis and make trading decisions, I want to stress that there is no holy grail when it comes to forex indicators The indicators are just a confirmation of history and a guide for the future
Most importantly, you need to know the right combination of the forex indicators to help you be profitable consistently in the long haul
To learn more proven forex trading tips to get started, click here to download my FREE 56-page ebook Forex Trading To Riches.
The author, Daniel Su, is the founder of ForexTradingPower.com where you can get free premium forex trading tips and resources.
If you are new to forex trading, do you know which types of technical indicators are for what kinds of trades? And if you are already an experienced forex trader, are you using the correct combinations of technical indicators to help you profit consistently in the forex market? Let us discuss the following 4 different types of forex technical indicators below:
1 Trend Indicators - Also known as Directional Indicators I have always reminded my students that trend is your best friend and always trade in the direction of a trend' A forex trend may be quite subjective to different traders as they may have different views on trendiness Some trend indicators out there in the forex market can help traders detect the starting and ending of a trend The more popular trend following indicators includes MACD (Moving Average Convergence Divergence), MA (Moving Average), Parabolic SAR Depending just on trend indicators is not enough, you may need Momentum Indicators to enter and exit a trade
2 Momentum indicator - Also known as Strength Indicators It is described as the speed of a move in price over a period of time They are oscillators which are able to indicate whether the forex market is in the overbought or oversold regions If they have risen to the overbought zone, there is high possibility that the price will be going down Conversely, if they have fallen to oversold zone, there is high possibility price will be going up Some of the more popular oscillating indicators in forex trading include Stochastic, Momentum, Relative Strength Index or RSI, Commodity Channel Index or CCI
3 Volatility indicators - Also known as Bands Indicators Often, a change in volatility will lead to a change in price Therefore, we can see how active the forex market is just by looking at the price ranges You may want to trade when there is a dramatic change in price movements, which suggests that the market is actively trading forex Some of the more popular Volatility Indicator includes Bollinger Bands, Average True Range or ATR and Envelopes
4 Volume indicator - They are used to show the volume of forex trading and are useful to confirm the direction of a trend, a reversal or a breakout Price movements increase when the volume increases Low volume may warn of a reversal in a forex trade If a currency pair trades from a narrow range and then breaks out on high volume, this is a strong signal and may suggest a breakout Some of the more widely used Volume Indicator includes Demand Index, Chaikin Money Flow, Money Flow Index, Ease Of Movement, On Balance Volume or OBV
I'm sure that after the above discussions, you should have a better idea of the different types of forex technical indicators While they can greatly help you in technical analysis and make trading decisions, I want to stress that there is no holy grail when it comes to forex indicators The indicators are just a confirmation of history and a guide for the future
Most importantly, you need to know the right combination of the forex indicators to help you be profitable consistently in the long haul
To learn more proven forex trading tips to get started, click here to download my FREE 56-page ebook Forex Trading To Riches.
The author, Daniel Su, is the founder of ForexTradingPower.com where you can get free premium forex trading tips and resources.
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