How much do you know about forex indicators?

somrat4030

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Forex Forum is a best place for learn more about forex trading and forex indicators.
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Forex Indicators are considered to be an essential part when trading in the forex market.

How Do Forex Indicators Work?
A technical indicator is a tool that calculates previous price movements. It can use prior open, close, high and low prices for a specific period of time to predict the price's future direction. Traders don't have to do any calculations, and the indicator is applied automatically.

Still, to read the indicator's signals, you need to practise a lot. Some technical tools provide several signals, and you should keep them in mind.

For forecasting the market and for minimizing the risks professional traders and investors use various tools. Among the well-known tools widely used by Forex traders for forecasting the market are technical indicators. With the help of technical indicators traders can easily decide when the right time is for them to buy or sell the financial instrument. Below are presented the best currency trading indicators that are widely used by professional Forex traders and technical analysts.

1. Moving average (MA):
An essential and elementary indicator, moving average indicates the average price value over a specific period that has been chosen. If the price trades over the moving average, it means the price is being controlled by buyers. If price trades below MA, sellers are controlling the price.

2. Price Action:
We will start the obvious. Price is the single most important variable from which all other indicators trickle down. Therefore, understanding price action trends is perhaps the second on the list.

There are different ways to understand the trend in price charts. From higher highs and lower lows for an uptrend and vice versa, every FX trader should begin analyzing trends by looking at price first.

3. Swing Sequences:
Swing trading is used by forex traders who trade by profiting from price swings. Swing traders identify a possible trend and then hold the trade for some time, varying from two days to several weeks.

Swing Sequence is used best when combined with the Elliott Wave. The team of Elliott Wave Forecast regularly used both these indicators for Forex Trading Analysis.

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4. Oscillator:
An oscillator is an indicator that gravitates between two levels on a price chart. Oscillators are designed to show when a security is overbought or oversold. They are frequently used as a barometer to measure pricing momentum as it relates to trend extension, exhaustion and market reversal.

5. Relative strength index (RSI):
The RSI is a trading tool that belongs to the oscillator category. It is among the most commonly used forex indicators and indicates an oversold or overbought condition in the market that is temporary. The RSI value of more than 70 shows that an overbought market while a value lower than 30 shows an oversold market. Some traders use 80 as the reading for overbought conditions and 20 for the oversold market.

6. The MACD (Moving Average Convergence, Divergence):
Oscillators, in technical analysis usually measure variables such as momentum or volatility. But MACD is unique as it is also a versatile trend indicator (besides gauging momentum in price).

MACD comprises of a histogram which oscillates around the 0-level and the fast and slow lines also known as the MACD and the signal line. This oscillator derives its values from the exponential moving average indicator with a setting of 12 and 26 periods.

7. Bollinger Bands:
John Bollinger created the Bollinger Bands indicator which is one of the forex indicators. The main element of Bollinger bands is moving averages.

There are two standard deviations in upside and the downside and a classical moving average in the middle.

The upper and lower line in Bollinger bands indicator works as dynamic support and resistance levels.

Any rejection from these levels indicates a possible entry.

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