4 Kinds of Forex Indicators For Forex Trading

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A Forex Indicator or a Technical Indicator is a series of data points used to determine future trends in currencies. Technical indicators usually just show short-term trends which can be both a strength and a weakness when analyzed. The technical indicator is one of the most often cited as a great information tool in addition to analytical tools for brokers and traders within a bigger strategy for
trading Forex in the market today, and taking trading to a whole new level. Those that started trading Forex or foreign exchange (fx) became top Forex brokers by learning about indicators and how they influence this trading system and pricing.

There are more than 100 technical Forex indicators that Forex traders to choose from, from simple to the complex, when trading the Forex markets. Today Forex software programs include charting software programs and packages available that can provide all of these indicators for you, plus many trading platforms, as well, but you still you will be wanting to know all about the major Forex indicators and plus give you pretty much everything you need and more of this when it comes to trading Forex.

Although there are countless commercial and custom technical indicators, this article will help to review and narrow them down to only the four top Forex indicator groups, as follows:

1. Moving Averages

There are several different kinds of moving averages (MAs) that are used by forex traders. In fact, moving averages are the most common technical indicator that are found across all financial markets, besides Forex. They are called “moving” because each new chart period is included in the calculation, while the oldest period is discarded. This has the effect of the average moving along as time passes and the chart develops.

There are two types of Moving Averages, simple and exponential.

Simple moving average is calculated by adding the closing price of a currency pair so many time periods and dividing the total number by the number of time periods.

Exponential moving average is usually the same value, except that the information from the latest time data is given more weight, when looked at in smaller time patterns, providing a clearer view of the current market trend.

2. Moving Average Convergence Divergence (MACD)

So what Does Moving Average Convergence Divergence or (MACD) actually mean? A little history first, MACD is a technical analysis indicator created by Gerald Appel in the late 1970s. Gerald Appel is the president of Signalert Corporation, an investment advisory firm.

MACD is used to spot changes in the momentum, direction, and duration of a trend in a stock’s price. MACD is a trend-following indicator that provides a detailed method of using moving averages to find trading signals from price charts. The MACD is plots the difference between 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day moving average is usually used to determine a bearish or bullish signal, meaning that when the MACD crosses below this average it means a bearish signal, or time to sell, or if should happen to cross above this average, it’s a bullish signal or time to buy.

3. Relative strength index (RSI)

The RSI is a measure of the activity in the Forex markets to determine if it is over bought or over sold. It is a leading indicator that gives a trader or Forex broker an indication as to which way the Market is moving

The RSI ranges between 0 and 100 and it is also named as a price-following oscillator and is an indicator of speed of changing of price.

4. Chart patterns

Forex Chart patterns can give Forex traders an early indication of a trend reversal, trend continuation or breakout.
Many Forex traders will usually use chart patterns in combination with other indicators to ensure good Forex trading. This is a very good strategy especially in spot trading where price movements are sudden and short lived.

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