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:
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
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 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 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.
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