Forex indicators are designed to simplify the work of the trader in choosing the right strategy of behavior in the trading session. Especially useful is the use of the indicator for novice players in the foreign exchange market who do not have the necessary experience and intuition.
What is the Forex indicator for?
The indicator is a specific computer program that operates according to the principle of performing mathematical calculations based on the analysis of quotes from previous periods and the present time. By functionality, indicators are divided into:
- trend instruments – tracking trends in the exchange rate movement and signaling a change or a continuing horizontal (no change) trend;
- oscillatory indicators – show the price deviation from the weighted average indicator and can, with a high degree of probability, predict a rise or fall in quotes for the near future;
- behavioral (psychological) indicators – created on the basis of the actions of stock market players, the opinions of experts and analysts, signals from the press and advertising.
Indicators track the movement of currency prices in the main points: Open, Close, Low and High, for a selected period of time. Based on the analysis of quotations for a certain number of settlement periods, the technical indicator is able to signal a favorable moment for entering and exiting the auction.
Which indicators are effective for profitable trading on Forex
A variety of technical indicators can confuse a novice trader. However, no expert will give clear advice in favor of this or that tool – the indicator is selected individually by the player depending on his own trading strategy.
However, there are indicators that are used most often:
- Moving average (3rd generation) – an indicator that calculates the average price of a currency for a period of 20 to 200 days. Displaying a descending or ascending line on a chart indicates a change in trend;
- Stochastic is an oscillator that is able to catch a wave-like movement of the foreign exchange market and predicts entry and exit points.
Indicators can significantly help the trader in determining the behavior of the exchange. However, you should know that the indicator is only a computer program that is able to carry out an exact mathematical calculation and analyze the data obtained. No indicator is able to give an accurate forecast of future growth or price collapse.
For a more accurate determination of the market trend and a favorable moment of entry into the auction, it is desirable to combine several technical indicators and make a final decision when their signals coincide. However, one should not fall into fanaticism and set many indicators at the same time – such diversity can even confuse a professional trader.