Forex Indicators Types of Forex market indicators
Forex Indicators Types of Forex market indicators and their description
Most traders use trading instruments called Forex indicators (different types of Forex market indicators) for successful trading in the Forex currency market. I would like to emphasize that Forex market indicators are the main assistants of traders in trade. We will present you a description of Forex indicators below.
Definition of Indicators:
Simply, Indicators are trade signals that a trader receives, which help him to make decisions about buying or selling a financial instrument.
In scientific language, the Indicator is a mathematically calculated transformation of the price and/or volume of the financial instrument in order to predict its further price movement in the near future.
Indicators help traders make the right purchase or sale decision, tell them the time to enter and exit the deal, show important levels of support and resistance, give general insights into the market, etc.
In Metatrader 's trading terminal, indicators are displayed as graphs (line curves, histograms, various icons, etc.) that help to understand the market situation (determine volatility, current price direction, trend life cycle, entry and exit points, etc.) depending on the tool used. At the same time, Metatraider trading terminal calculates and builds graphs of indicators itself (sometimes their settings can be changed at your discretion). Several main indicators are built into Metatrader by default. You can also create, download or buy additional indicators and add them to Metatrader.
General Rule for all indicators:
Any indicator gives only a recommendation signal for purchase/sale. And only you can decide how correct are are these recommendations.
Types of Forex market indicators
Forex market indicators are assistants in any market, whether it is upstream, downstream or fleeting. There is a wide variety of indicators currently. By functionality and application, they are all divided into three main groups:
- Trend indicators
- Psychological and Volume Indicators
Description of Forex indicators
Trend indicators, as you can see from the name, is a type of tools, used mainly in trend markets, to identify the formation, continuation or end of the trend. This type of indicator is referred to "late" indicators because it indicates the direction of price movement with a slight delay or simultaneously with it.
Trend indicators are very effective on long-term price trends. Trend indicator signals are late, i.e. they do not give false premature signals, but determine the dominant trend at the moment, and you can always work in its direction. That is, they do not signal future price changes, but report the direction of price movement at the moment.
In the sales terminal, trend indicators appear as graphs under the price graph or are superimposed on top of the price graph itself. It 's very convenient and evident.
There are also situations where trend indicators are applied in the ranging market. It all depends on the trader 's trading strategy and tactics.
Oscillators are Forex market indicators used mainly in a calm ranging market when prices move horizontally, within a price corridor. They kind of show fluctuations in the market price during the flute period.
Oscillators are referred to "ahead" indicators, as they indicate the direction of price movement with little or sometimes simultaneously with it. The oscillator determines the continuation or change of trend on the chart with a slight advance.
Since oscillators are used to predict future price changes, they can benefit more from greater risk. For example, by determining the level of "overbought/resale," one can open a position in the opposite direction a little earlier, anticipating a future reversal of the trend. In general, it should be underlined that oscillators show the moments of resale and overbought on the chart very effectively, thus determining the points of entry and exit from the market.
In the sales terminal, the oscillators appear as graphs under the price graph or are superimposed on top of the price graph itself. It 's also very convenient and evident.
Psychological and Volume Indicators
Psychological indicators are indicators of mood of the market participants. This type of Forex indicator determines what behavior market participants expect from prices mostly, and then do the opposite. The logic here is simple: if most market participants believe that prices will rise/fall, it is unlikely that someone will want to raise/lower it further. This logic has been repeatedly confirmed by practice.
The volume indicator refers to one of the types of psychological indicators. It shows the number of transactions made in a certain unit of time and is displayed in graphs as a histogram or as columns whose height is directly proportional to the volume.
Volume indicator means the real number of transactions and their total volume. But there are no volume indicators in the Forex market (they simply cannot be displayed). Therefore, the Volume indicator is conditional here (as opposed to other financial markets), as volume graphs come from a teak volume. And as we know the teak volume is the number of deals per unit of time, regardless of the volume and price of the contract, Doesn’t matter if one deal is concluded on 1 cent or 1000000 dollars - one deal will still be equal to one teak on the chart. Therefore, volume indicators do not always show real data, but they should not be underestimated. Using them can be very useful and profitable in your work.
Psychological and Volume indicators are used in different markets: ascending, descending and ranging.
It is necessary to use all three types of indicators for successful trading, as well as to carry out graphical analysis to identify different figures, important levels of support and resistance, trends and price channels, different combinations of Japanese candles, etc. Each trader needs to learn how to perform a comprehensive graph analysis at the Metatrader trading terminal.
Forex Indicators - Market Application
How to apply these indicators in the market?
All types of Forex market indicators have their own special properties, their own logic of construction and work process. Some parameters can be changed in the settings of the indicators themselves in the Metatrader, depending on your needs. Read the description of Forex indicators and study their properties on our website.
How many indicators do you want to use?
The answer depends on the trade tactics used (trade strategy). However, it is generally accepted that the average number of indicators used by traders at trading terminals should range from 3 to 6. After all, it is clear that one indicator will give too many false signals, and many indicators make it difficult to analyze the market. Also, I would like to emphasize that it is better to use different types of indicators for work: trend, oscillators and psychological (volume) and to make a decision. It is desirable that all indicators give the same signals.
To understand how Forex indicators work, you need to study them. There are currently a wide variety of Indicators. And depending on the trading terminal you use , different Brokers and Dilling Centers offer to use different indicators.
We will examine the most popular of these available at Metatrader Trading Terminal further. That amount is enough for beginning traders. In the future, when you gain experience, you can always find and apply another indicators in your trade. But remember that most indicators simply duplicate each other or are derived from each other while changing only their name.
Various types of Forex market indicators are the basic tools of technical analysis. The above description of Forex indicators is mandatory for each trader to study.