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Technical Analysis - Indicators

Technical Analysts believe that all the financial markets move by trends. They are of the opinion that Forex trading market is not that unpredictable as it seems to some. If the past movements and price trends of the market are thoroughly studied, then according to the technical analysts, current as well as future movements of the market prices can be easily estimated.

And for sighting these past trends and movements and representing them clearly and orderly, Technical indicators are used. These indicators are basically figures and data of past market records based on diverse statistical calculations. These indicators facilitate the traders using technical analysis, to predict if there are any continuations or turnarounds in the market trends.

There are many different types of technical indicators which are used in technical analysis, a few of which are given below:

Trend indicators

The continuances or reversals of a price movement in any particular direction over a period of time can be defined as a Trend or a Pattern. It is believed by the technical analysts that trends seem to move in three directions, either up, or down or sideways.

Trend indicators are used to even out inconsistent price records and stats to produce a combination of market trends. They also reflect the direction and the momentum of the current trend. The most common Trend indicator is Moving Averages.

Flux indicators

Flux or volatility indicators are used to reflect the degree, or magnitude, of everyday rate variations with or without describing its direction. These indicators are important as it is seen that variations in volatility can be liable to show traders a way to price changes. The most common Flux indicator is Bollinger Bands.

Support / resistance indicators

Support and resistance indicators are used to reflect orderly, the effect of the basic process of demand and supply on the price levels due to which the markets ascend or descend time and again. The most common Support / resistance indicator is Trend Lines

Oscillators/ Momentum indicators


Oscillators/ Momentum indicators are used to reflect systematically, the momentum at which rates or prices move about in a specified period of time. They help the analysts in establishing the advantage or disadvantage of a trend or pattern as it develops over a time period.
It is believed that strength of a trend or a pattern is maximum at the initiation of a trend and minimum at crossroads or transition phase of a trend. The most common Oscillators/ Momentum indicators are RSI, Stochastic and MACD.

Sequence indicators

Sequence indicators are those which are used to signify recurring trends in any market movements, related to repeated patterns or events such as specific time of the year, wars, elections etc.
Due to such events and happenings, many financial markets have a trend of moving in cyclic patterns. The most common Sequence indicator is Elliott Wave.

Strength indicators

These indicators are used to reflect market strength and the power of market opinions relating to an outlay by studying the market situations obtained by different market traders and investors.
Being the fundamental elements of this indicator, Volume or open interest generate signs that are immediate or driving the market. The most common Strength indicator is Volume.

These days, nearly all charting packages contain some of the above mentioned technical indicators. Traders while choosing a charting package can easily add their preferred technical indicators to their charts.

 

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