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Forex Technical Indicators
What is Forex trading and how does it work; all this is well covered in the previous article with automation. Here I will try to identify the technical indicators that play an important role and depend on them a lot. In fact, it is only to say that the profit is based on the selection of the indicator. These are generally the ones that create market trends. If you think about it for a moment, a person who is just starting to trade can go randomly with signals without knowing how they can affect the overall trade, and can also make profits and losses. On the other hand, an expert or an experienced player knows the ins and outs of every indicator and uses them properly as per market demand.
The paragraphs below will explain the four basic technical indicators used by many traders in Forex trading.
Trend indicator — self-explanatory; they just point the way, which is the market. Since they lead or determine the market trends, for maximum profit the basic rule is to trade with them and not against them. These indicators are based on stock prices and mean basic statistical methods such as rates of change and averages. Moving averages, weighted averages, moving averages, Bollinger bands and momentum are examples of trend indicators.
Momentum or Oscillating Indicators – they act as strength indicators and indicate the strengthening of the price movement and indicate a new trend (direction) if there is one. Due to their oscillating nature, they also represent overbought and oversold positions. Examples of moving or oscillating indicators include CCI, RSI and stockchastic. The basis of the basic function is to compare the recent price with the previous closing price, so in other words it also determines the trend in a way. A price that rises above zero indicates an upward trend and a price that falls below zero indicates a bearish trend.
Volatility Indicators – because they are variable in nature, these indicators reflect the changes in price volatility without indicating the price trend. Bollinger bands are a representation of the volatility curve that represents the rise and fall of the price whenever it occurs. Bollinger bands describe market volatility. A market is said to be highly volatile if the bands on the chart are wider and less volatile if the bands are narrower.
Volume Index — this helps assess the health of any trend based on volume activity, ie the number of trade deals in any given period. A decrease in volume is a sign that there will be lower interest rates; this is the sign of time for a reversal or consolidation of the price. On the contrary, an increase in money indicates a higher interest rate; causing current trends to be supported or new trends to emerge.
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