Four Important Types of Forex Indicators for Successful Forex Trading

If you’re new to forex trading and want to make a profit, you should learn about different forex technical indicators and how they are used. Experienced traders also need to know what combination of indicators can help them earn consistently in the forex market. These indicators include momentum, trend, volume, and volatility indicators.

Momentum Indicators

Momentum indicators record how quickly the price changes over time. They are like oscillators that tell you if the market is being oversold or overbought. If an indicator shows that the market is overbought, there is a high chance that the price will drop. If it shows oversold, there is a higher probability of prices rising. Some commonly used momentum indicators are the Commodity Channel Index (CCI), Relative Strength Index (RSI), Momentum and Stochastic indicators.

Trend Indicators

Trend indicators tell you the direction of the market. Remember that the trend is your friend, and you should trade in the trend direction. The forex trend can vary depending on the traders’ views and has different meanings. Trend indicators help forex traders check when a market trend starts or ends. You can use trend indicators such as the parabolic SAR, Moving Average Indicator, and Moving Average Convergence-Divergence (MACD) to know when a trend begins or stops.

Volume Indicators

Volume indicators can help forex traders understand the trading volume and confirm the trend direction and breakout or reversal. As trading volume increases, the price movement will rise, and a low volume might suggest that there could be a reversal in forex trading. If a currency pair is traded within a narrow range and eventually reaches a high volume, it shows a breakout. Some common volume indicators include Money Flow Index, On-Balance Volume, Ease of Movement, and Demand Index.

Volatility Indicators

Volatility indicators are also called Bands indicators. A change in volatility can cause a price change, and the price ranges can show how active the forex market is at the time. If there is a good variation in price movements, you can enter into trade as it suggests the forex market is active. You can use volatility indicators such as Envelopes indicators, Average Truth Indicator, and Bollinger bands to monitor these changes.

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