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5 Minutes Education for Better Profit! 6 Super Basic Technical Analysis Indicators for Forex and CFD traders!
Combining Technical Analysis & Fundamental Analysis is a good strategy in Financial Market.
TA indicators are used to alert, confirm other technical analysis tools and forecast the direction of future price actions.
It is vital that Forex traders know how to read these indicators as they exhibit fluctuating patterns.
Careful study and analysis are, therefore, of utmost importance.
1. Trend
Trend indicators are those that show the persistence of price movement in a single direction for a certain period of time.
A trend line is one good way of identifying trends.
This trend line is drawn either below the price lows or above the price highs.
Trend lines may no longer be often used today but they still prove to be effective in the technical analysis of currency movements.
2. Support/Resistance
The price levels where markets show a repeated rise or fall and reverse movement are known as support and resistance indicators.
The basic law of supply and demand is reflected in this aspect.
Similar to the trend indicators, the trend line is still the most effective way of determining these price levels.
3. Momentum
Momentum refers to the speed of a price movement over a period of time.
It usually peaks at the beginning of a trend and at its lowest during turning points in the market. Momentum indicators then help identify a trend”s strength or weakness as time moves on.
Weakness is impending when directions in price and momentum vary.
However, if prices are flat and momentum is strong, a change in price direction could possibly occur.
The Stochastic, MACD and RSI are some examples of momentum indicators with the Stochastics considered to be the most effective.
4. Volatility
Volatility generally pertains to the size of price fluctuations on a day to day basis regardless of directions.
When changes in volatility occur, prices are also possible to follow suit.
The Bollinger Band is one volatility indicator effective in technical analysis of currency trading.
It is used in forecasting trend movements as well as in timing entry and exit levels and determining when to increase or lower position size.
5. Market Sentiment
Sentiments of investors are also considered in technical analysis.
The positions of net traders and bullish consensus are normally being monitored in an effort to determine the general attitude of the investment sector.
These indicators, though, are only used during extremes such as when the market is bullish or bearish.
They serve as strong warning signs of turning points in the currency market.
6. Cycle
When patterns of a market movement are repetitive, a cycle is formed.
These repeating patterns particularly refer to recurring events such as monetary repatriations at yearend and elections.
Cycle indicators show the timing of market patterns and one example is the Elliot Wave theory.
Forex trading experts strongly believe that trend lines combined with two other complementary indicators prove to be very effective in technical analysis.
After deciding what to use, traders need to learn the intricacies of each indicator.
A simple system based on trend lines, however, is more preferred than a complex one.
