Technical Indicators
Technical Indicators are mathematical calculations that are based on the historic price, volume, or open interest of a security to forecast the trajectory of the financial market or price behavior.
Technical Indicators are basic but essential parts of technical analysis. These indicators are used to predict future market movements and price behavior. These help the trader get into the flow of the market and to learn many basic concepts in trading.
The three general types of Forex technical indicators are:
Trend-following indicators – these types of indicators determine the overall trend of a currency pair. Trend indicators change the value on the basis of the strength of the underlying trend (either uptrend or downtrend). The following are trend-following indicators:
To trade with Parabolic SAR,
Momentum indicators – these indicators follow the speed of price behavior or change within a certain period of time. These indicators are efficient whenever a breakout happens as they aim to catch the primary price to move with high momentum. The following are momentum indicators:
To trade with Stochastic Oscillator,
Volatility indicators – these indicators evaluate the price volatility of the market. The faster the price rises or falls, the more volatile the market is. If the price moves relatively slowly, it means the market is non-volatile. The following are volatility indicators:
To trade with Bollinger Bands,
Using Forex Technical Indicators
There are two general groups of indicators that appear on the chart. The first one are indicators that are directly applied to the price chart while the second one are indicators that appear in a separate indicator window right below the price chart.