Do you check technical indicators before opening or closing positions? Many novice traders ignore this tool just because they do not know how to use it. For such cases, we compiled a simple guide on Forex indicators. We will tell you about their key types and prompt which of them are the most effective.
So, in simple words, indicators are mathematical calculations, which predict the movements of the price of a certain currency in the future. They are usually based on an extensive range of criteria: volume, open interest, exchange rates, and others. Those traders, who use them, are sure that prices behave identically under identical market conditions. So, they make predictions taking into account past trends.
In general, there are three types of technical indicators:
- Trend indicators. They point out certain tendencies in price movements.
- Oscillators. Such indicators show when the tendency is going to reverse or get exhausted. They can be used to determine when it is time to open trades and close them.
- Volume indicators. Such signals are based on the number of trades per a certain time period. They inform traders about changes in demand. So, when it drops or skyrockets, one can predict whether a trend is growing or exhausting.
Also Read: A Beginner’s Guide on Stock Signals
The next question you are probably going to ask is: “What are the best Forex indicators?”. To find an exact answer, the Traders Union team has interviewed 2200 successful traders and asked them about their use of technical indicators. And it turned out that about 70% of them actively apply this tool. At the same time, most of them give preference to oscillators and trend indicators while volume indicators are less frequently used. Also, according to this research, oscillators are a versatile choice for anyone. Experienced traders claim that such indicators bring profits in most cases.
In sum, one can safely say that technical indicators are a must-use tool for every trader who wants to understand market trends better and make profits out of them.