Welcome back!

Today, let introduce ourselves to a type of technical analysis called indicators that traders use as an essential tool in predicting market movement.

Technical Indicators are quantitative tools that can help traders better understand and act on price movement by forecasting where the price of a market could move next. While they don’t predict what will happen next they can give traders a much clearer understanding of the current market situation and any shifts within it.

Broadly, there are four major types of technical indicators and each of them have different examples. Firstly let us explore the main types of technical indicators:

  1. Trend Indicators
  2. Momentum Indicators
  3. Volume Indicators
  4. Volatility indicators

TREND INDICATORS

Forex trend indicators are used by traders to analyze the trend of the market. While technical analysts will focus on analyzing cycles to determine the trend, some of the best forex indicators for trending markets can give you the information you need much more quickly.  Determining the overall trend of the market is one of the most important first steps in knowing when and where to trade. This is because once a trend starts, it can continue for some time before it changes direction.

Types of Trend indicators

Naturally, there are many trend indicators that have been used by traders around the world, It should however be noted that these strategies using trend indicators only work in markets with trends (Uptrend or downtrend). The types of trend indicators widely used by traders are:

  • Bollinger bands
  • Moving Averages
  • Moving Average Convergence Divergence (MACD)
  • Average Directional Movement Index (ADX)
  • Parabolic SAR
  • Aroon Indicator
  • Donchian Channel

VOLATILITY INDICATORS

Volatility is the relative rate at which the price of a security moves (up and down). A high volatility means that the price moves up and down quickly over a short period. If the price moves slowly then we can consider that is has a low volatility.

Volatility indicators are a type of technical analysis tool used by forex traders to determine the overall market volatility, in order to predict potential exit and entry points into the markets. Volatility indicators can be excellent tools for identifying market transitions from high periods of volatility to low periods of volatility. When combined with other indicators such as momentum indicators, the volatility indicator can form the basis of a flexible trading system.

Types of Volatility indicators

  • Bollinger bands
  • Envelopes
  • Average true range
  • Volatility channels indicator
  • Volatility chaikin
  • Projection oscillator.

 

Categorized in:

Technical Indicators

Tagged in:

, , , , ,