Understanding the most common technical indicators in the Forex market

Many beginner traders do not know the functions of technical indicators in Forex market. These are the tools that analyze and signal different market situations. Usage of such tools will provide you various analyses, usually through charts. At the same time, it will grow your confidence to trade foreign currencies. Before starting trading, you need to examine various types of analytical reports –

  • Current trend
  • The strength of the trend
  • Is the ‘trend’ is coming to an end
  • Volatility of price
  • Trade volume
  • Repetition of various trend pattern

Types of Indicators

Before using these, you must know which analytical reports you need and then select your preferred tools. So here we are compiling the essential ones that you will need to trade. If you examine these reports before trading, your chances of losses will be slim.

Trend Analyzer

There is three types of trends- Up, Down, and Sideway. A trend indicator or analyzer identifies the current price behavior. It also shows you if the trend is strong or weak or coming to an end. Some popular Trend analysis tools are –

  • Moving Average
  • MACD
  • Forecast Oscillator
  • Linear Regression
  • Parabolic SAR
  • ADL (Advance-Decline Line)
  • ADX (Average Directional Index)

Volatility identifier

This tool will show you the fluctuation of the price rate. If you need to know the number of trades happening within a certain period and its volatility rate, this indicator is a must. This tool is also called Volatility Analyzer. View page of Saxo and learn more about the volatility indicators so that you can make the right decision. Some of the most common types of volatility indicators are stated below.

  • Bollinger Bands
  • Projection Oscillator
  • Trading Bands (Envelope)
  • ATR (Average True Range)

Momentum 

The momentum marker measures the speed of changing prices in the market. Sometimes the price falls or rises fast, sometimes slowly. To trade, you need to know the speed of price changing of a certain period to predict the possible price shortly. The momentum analyzer shows this speed rate. Some popular momentum analysis tools are-

  • RSI (Relative Strength Index)
  • Commodity Channel Index (CCI)
  • Chande’s Momentum Oscillator (CMO)
  • Stochastic Oscillator

Volume identifier

Volume indicators measures the performance of the trading asset for specific time. It measures how many traders are trading, how many transactions are taking place. The aim of using these is to predict the trend shift. Some popular volume analysis tools are-

  • Acceleration Bands
  • On Balance Volume (OBV)
  • Volume Rate of Change (ROC)
  • Demand Index
  • Ease of Movement
  • Chaikin Money Flow (CMF)

Cycle indentifier

These indicators analyze the repetition of the movement pattern of the market. These help the traders to predict the impending price pattern. By examining its report, traders can take pre-plan according to the possibly coming market situation. Some popular tools are –

  • Elliott Waves
  • Fibonacci Time Zones
  • Cycle Lines

Bill Wiliams

Bill Williams is a famous author and trader trading in several markets for more than 50 years. He is renowned for his ideas and views on trading. Mr. bill divides the market into five dimensions to help the traders understand the market’s behavior. Based on his theories, estimation, and trading experiences, he develops some signifiers: –

  • Awesome Oscillator (AO)
  • Alligator
  • Market Facilitation Index
  • Balance Line
  • The driving force

Besides the above, many other similar measures will help you in trading. Like – Balance, Equity, Lot size, Leverage, Spread, etc. But never depend on any indicators because robots estimate the market by calculating some programmed theories. So sometimes it will show you the correct result, and sometimes it will not. So, nothing will be better than using your method.

In the Forex market, your analyzing power is all you need. Before starting to trade, you need to analyze the circumstances, market environment, weather, and everything. These analyzers can help you but never can give you decisions.

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