Many people have an interest in jumping into the currency trading market. Before you start, you should take a moment to familiarize yourself with the various forex indicators.
Are You Familiar With Technical Analysis?
Are you familiar with technical analysis? It's a term encompassing the charts, graphs, numbers, and statistical information used to analyze a security. Forex indicators are much the same thing.
Indicators give you the information you need to check historical performance. They plot that data to help you make an informed decision. There are various types of forex indicators. Many forex indicator solutions are a combination of various technical indicators.
Getting Started with Technical Indicators
Technical indicators are ubiquitous across financial markets. These are the calculations that show historical data. It's that data that defines the type of technical indicator. You can break them down into a few categories.
Volume Indicators – These show how much currency has been traded at any given time. These indicators will show you volume trends and averages.
Some of the most popular volume indicators include:
- Money Flow Index
- Volume Rate of Change
- On-Balance Volume (OBV)
Oscillating indicators – These indicators take two extremes in a currency's performance. Drilling down into the information between those two extremes can allow you to spot short-term trends you would not otherwise see.
Some of the most popular oscillating indicators include:
- Average Directional Index (ADX)
- Relative Strength Index (RSI)
- Stochastic Oscillator (STO)
Trend indicators - This represents a broad category of indicators that you can use for spotting specific trends. Trend spotting is one of the most important aspects of forex trading. These indicators help you to see uptrends, downtrends, and changes in trend, both in real-time and historically.
Some popular trend indicators include:
- Moving Averages
- Standard Deviation
- Accumulation Swing Index
- Bollinger Bands
Each of these indicator types represents a whole host of other finer-tuned indicators. Some of them even cross over each other.
For example, an oscillating indicator can show you a short-term trend. A trend indicator can confirm it, or give you more information on it. Another example is the Average Directional Index, which is both a trend indicator and an oscillating indicator.
There are more main categories of indicators that often fall into one of these categories as well. However, they are also sometimes listed as individual "types" of indicators. For example:
- Momentum indicators
- Volatility indicators
- Market strength indicators
It may seem like a lot, but once you start playing around with a few indicators, it will start to make sense. Once you see a few in action, you can formulate strategies around them. There are a few indicators that see more use than others, but it doesn't mean they're the only ones new traders should stick to.
Choosing the Best Forex Indicator to Use as a Part of Your Financial Strategy
Many forex platforms come with a lot of indicators for you to use. They will likely have some proprietary indicators as well. Sometimes these platforms will offer tools for building your own indicator based on existing ones.
The best indicator for you will make itself apparent after some practice. You may find quite a few forex indicators with a good performance record. But, it's your own trading habits and currency interests that will dictate which indicators will work best for you.
When you sign on with a Forex platform, take some time to play around with the indicators. Check out examples and research how other traders use them. See how they work and how you can use them to your advantage.
For more information, contact Winner's Edge Trading or a similar company.