Price trend is an essential component in Forex trading. it helps making major decisions about buying or selling any currency. The price trends can be detected by by following few technical indicators. Investors use technical indicators to predict a trend as well as to make future moves.
Forex Trading is dependent upon indicators which are made available to traders. It is however important to diagnose which indicator can work in what situation. What strategies are likely to be developed while dealing with currency trading?
Few common technical indicators are:
- Moving Averages: moving averages are used to detect short term fluctuations in the price curve. It helps developing a smooth clarified curve. It works by considering closing prices for a certain period of time. Over every period the average of closing prices are considered. The moving curve will indicate the change which is then overlapped to main currency price. In this way a rise and fall in trends can be identified. Moving average curves is a smart way to identify the trends and it will demonstrate which is low and which is high
- MACD, Moving Average Crossover Divergence: Emphasizes upon lower period average and also observes the one which is slow. The lower period is fast moving average. An authentic formula to calculate MACD is to subtract the previous moving averages and by acquiring the result of average moving. MACD is actually the difference which is calculated by last moving averages. If it appears to be zero it indicates a crossover and a price trend. In cases of negative MACD the currency pair is likely to go down or actually decrease.
- Stochastic and RSI: these indicators show how the prices of currency is changing over a certain time period. RSI deals with the changes for certain period. The total change which appears to be in uptrend direction to changes in downtrend direction are calculated as percentage. When it reaches to above 50% the change is referred to as uptrend and when it drops below 50% it is called as downtrend. Similarly, Stochastic indicates the changes by using different set of calculation. It calculates current closing price relative to a large change in a certain or given time span. This indicator will indicate price curve for oversold and overbought arenas. It also indicates the average in percentage. If it remains above 80% for a long time then it is said to be overbought. And when it stays at 20% it is called oversold. Overbought will refer to price down and oversold refers to high price
An important fact is that a technical indicator cannot be used alone, it has to be accumulated with other technical analysis indicators. Investors and traders can establish a combination to predict price trend and analyses. Each trader can use separate combination which suits him best.
The technical indicators are helpful in making technical analysis. Technical indicators help avoiding risks dealing with Forex trading. It is an effective technique which can predict the possible trends.What are Currency Technical Indicators,