Lesson #9: Technical Analysis Indicators
One method of the forex technical analysis is using technical indicators. Technical indicators are graphical presentations of the prices actions, which is usually displays in the screen of your trading platform.
Moving Average Based Indicators
The Moving Average is the main basic forex technical indicator when it uses in technical analysis. Traders use MA to identify trend, as it displays the action of the price into a single line. The Moving Average provides basic forex trading signals when prices crosse it.
Moving Average Envelope
The Moving Average Envelope indicator makes special parallel lines to a moving average at concrete percentages. The line creates a band that can be helpful measure forex price volatility and extremes.
MACD (Moving Average Convergence Divergence)
The MACD Forex indicator shows the divergence and the convergence of short and long terms moving averages. MACD displays via graphic when the short term movement of currency price will rise or fall. This shows the latest trend.
Volume Based Indicators
Volume at the forex market is very important to technical analysis because it shows the quantity of traders who buy or sell behind forex market moves. If some currency pair has strong movements of the price, up or down, the perceived strength of this movement depend on the volume’s amount for this period of time.
On Balance Volume
On Balance Volume displays negative or positive flow of funds into forex currencies and acts as an indicator in lead, which may predict future changes of prices.
Accumulation/Distribution volume’s indicator tries to measure supply and demand for a forex currency pair through discovering if traders are basically “Distributing” – selling or “Accumulating” - buying the currency pair.
Chaikin Money Flow
This is an oscillating version of earlier indicator of Chaikin, Accumulation/Distribution. Both indicators show the level to which funds flow into or out of a Forex currency pair.
Volatility Based Indicators
This is a highly popular forex indicator which uses to measure and analyze times of consolidation, when a forex currency is overextended, and set up targets of price. This indicator uses the statistical idea of basic deviation to aquire its bands.
Ranging Indicators / Oscillators
Relative Strength Index
RSI is a forex trend following oscillator which has ranks: from 0 to 100. RSI provides an indication whether a Forex currency is now oversold or overbought. Practically it is a measure of moment. RSI is one of the most popular forex technical indicators which traders use in technical analysis.
Stochastics are based on the concept that during an up-trend, the prices tend to close at the high of the “candle” and during a down-trend at the low of the “candle”, these indicators shows the moment.
There are also another methods and principles for using in the trading technical analysis. Trader can use trend lines, or make a measure support and resistance.