Forex trading is not something like just investing money and collecting profit. It is far more than what it seems to the non-Forex people. Trading in this vast market requires many strategies, plans, skills, and, most importantly, analyses. Without analyses, it is very tough to fix your trading plans and strategies.
Experts say analyses are the most crucial factor that plays more than a half role in a successful trade. But it is time-consuming and very hassling for a trader to collect all the info and analyze the market’s past and present behavior all by himself. And so, for traders’ convenience, the technical indicators have extended their hands.
Here we have discussed some popular technical indicators their uses. If you are a newcomer to the FX world, do not skip the following lines. Let us learn about some Popular Indicators.
Moving Average (MA)
Moving Average is an essential Indicator for Forex traders. These indicators are called the lifeblood of Forex technical analysis. If you want to have an idea about the market’s future position, you should use MA indicators. And if you learn the proper use of the moving average, you should be able to improve your trading performance in the fx options trading industry. So, learn the use moving average in a smart way.
These indicators determine the average price value over a particular time by finding the average of High, Low, Mid, Close, Open, etc. In easy words, these indicators measure the area and speed of possible support and resistance.
There are about four types of MA traders use in the Forex market:
- SMA or Simple Moving Average
- EMA or Exponential Moving Average
- Smooth Moving Average (SMMA)
- Linear Weighted Moving Average (LWMA)
Relative Strength Index (RSI)
J. Welles Wilder Jr first introduced RSI (Relative Strength Index) in a book called “New Concepts in Technical Trading Systems” back in 1986. RSI is a momentum indicator that is very popular among thousands of Forex traders.
RSI indicates the strength of the pair by defining if the pair is over-bought or over-sold. The Indicator uses the numbers 30 and 70 to display overbought and oversold. If the line crosses down the level-30, it will be considered oversold, and if the line goes up and crosses 70, it will be considered overbought.
Overbought means the number of buyers is increasing, and the more the buyers are, the more the price will increase. So, the intelligent traders close the buy position and look for the price increase to open a sell position.
On the other hand, oversold means the number of sellers is increasing, and the more the sellers are, the more the price will decrease. So, it will be wise to close the sell position and wait for an excellent opportunity to open a buy position at the time the price goes to the lowest.
MACD
MACD stands for Moving Average Convergence Divergence.This Indicator helps to identify market trends. Many traders trade well, but only because of not trading in the right trend, many people fall into huge losses due to a trend change. In this respect, MACD will help you stay in the right trend.
MACD is the difference between the Exponential Moving Average of 12 days and 26 days periods. In this case, MACD subtracts from 12EMA to 26EMA, which is the main MACD line. MACD has one more signal line which gives buy and sell signals.
OBV
OBV stands for On-Balance volume. This Indicator deals with the volume. Here volume means the number of trades taking place at a particular time. This analyzer counts the number of trades; if the number increases, it will indicate that the price may decrease. But this Indicator is not that much popular as the previous ones.
Technical Indicator is like a friend of a trader. If you can properly use them, it will undoubtedly benefit you. But, indeed, indicators can never tell you to trade now or trade now; instead, it will give you merely an idea. The decision is all yours.