Trading the Forex Market seems easy. Yeah, right. There is mass appeal in the forex market as it is the largest arena where business meets. Trading, predicting where the dollar will go for the uninformed, is no better than a crap shoot at the casino. It’s odds are like throwing dice. Up, down or sideways.
It is rather a study in mathematics and economics. You are required to know and analyze it’s behavior based on the different types of technical analysis calculations that basically shows where the dollar is headed, based on mathematics, and is the preferred method of successful traders. When combining two or more of them, that should increase the probability of the direction of the market, and the exact stage of where its at. Is it going to go up, down or stay sideways. Is the current market trend at the end of its cycle, or at the beginning.
Using Technical Indicators To Their Advantage
Many forex traders make use of and incorporate technical indicators in their trading. Most pros rely strictly on them and nothing else. So for novice traders in the forex market, it is a good place to start. To follow the market movement using technical trading indicators. What the various technical indicator tools do is predict the tendencies of the market.
As you opt to use the various indicators, it’s pertinent to remember that many of these calculations include different angles and formulas to predict the same thing, where the market is going. Using a few of the technical indicators at one time, and if they all show that the market is about to move in a certain direction, creates the perfect storm. That’s why it’s a good idea to consult several breeds of indicators, to be able to draw a clean, clear conclusion.
The 4 Basic Classifications Of Technical Indicators
Whether you prefer to trade any of the following markets: stocks, forex, or commodities, it’s a good idea to establish a firm trading strategy based on technical indicators, and stick to them by being disciplined. It’s also extremely critical that you pick and follow the indicators that have already proven to work by others in predicting where the markets moving next.
1.) The Trend Indicators
Parabolic SAR, Moving averages, and MACD are a few that make up the trend indicator group. They gauge the exact movement of the trends, and then you can decide whether the trend is beginning or ending, so you can enter the market and start trading.
2.) The Momentum Indicators
These set of indicators are known as the oscillating indicators. They effectively pinpoint if the market is overbought or oversold. Which will also indicate if a trend is coming to an end or beginning. Some of the most popular momentum indicators include: RSI, Stochastics, and CCI, just to name a few.
The Volume Indicators
The volume indicators tells you that the market price movement is dependent on the volume of the trades. Generally, price movement starts from extremely high volumes and gathers a stronger signal as compared to one which is inspired by a lower volume. Some popular volume indicators include: the money flow index, the force index, Chaikin money flow, ease of movement, along with a few others.
The Volatility Indicators
Volatility indicates the high and low ranges that will define the volume that lies underneath the movement of the market, and thus the price behavior. The most popular volatility indicators include: average true range (ATR), Bollinger bands, as well as the envelopes.
These four groups of technical indicators all indicate the movement of the market in different ways. Picking and using one indicator from each group, may give you a clearer indication of: if the market trend is beginning or ending, when to enter the market and at what volume, when you should exit the market once trading. If all four indicators converge, it may then be indicating the market has either topped or bottomed out, and it’s time to enter a ‘buy’ or ‘sell’ trade. So happy pipping.