Forex indicators

Forex indicators are auxiliary tools necessary for decision-making in difficult moments, when the behavior of a currency pair is ambiguous. This section provides classification and reviews of new and proven indicators, describes how they work and the settings, gives examples of use. Beginners will be interested in the guide for choosing indicators.

Professional analytical and trading terminal with innovative functionality from AmeriTrade Holding Corp., except for the expanded information, offers all types of standard indicators for Thinkorswim, as well as the possibility to create and enable the individual variants.

 

Analysis of the price patterns is included into the set of technical means of any successful trader. The proposed Zup indicator and its various options allow to find reversal harmonic models on the trading chart based on Fibonacci ratios and provide accurate signals to open positions.

 

Most of us in one form or another use representatives of the moving average family in our trading. But the main problem of all indicators built on the mathematics of averages is lagging. Effective solution to this problem was found by many experiments and named Hull Moving Average indicator or Hull moving average.

Since candlestick charts were included in the active arsenal of traders, they were constantly searching for their efficient interpretation. Technical Heiken Ashi indicator, based on the optimal logic of candlesticks, visually averages and smoothes out the market fluctuations, simplifies the market analysis and shows the best time to enter the market. Flexible, intuitive indicator has been successfully used in a variety of profitable trading strategies.

The first ideas of the indicator were published back in 2004 by the financial journalist Dan Valcu in the “Technical Analysis of STOCKS&COMMODITIES” journal. In 2003, he accidentally discovered stock charts with a unique technique that reverses the traditional view on the price chart and facilitates the perception of market trends, the so-called HeikenAshi charts or modified candles. The first attempt to apply this method adapted for the price bars has been so successful that the program code of the indicator for use in the trading terminal was developed by the author before the print publication.

 

Today we will review another indicator for scalping, known in the traders community as Scalper Dream. In order to prevent confusion, we remind you that this algorithm was originally called PremiumFXScalper by the developers, and its former name became its nickname after a series of successful tests that stuck to it in the future.

When the abovementioned indicator became available to the general public, the idea emerged that it is just another siphon off like most of its peers, because scalping is rightly considered the most difficult style of trading in terms of the use of indicators. But after the first test, one feature stroke the eye – the reaction of the Scalper Dream to the price changes is faster than the many well-known algorithms, including the well-known classics. Before proceeding to the description, we will note a number of organizational issues.

 

In search of optimal signals, the traders, together with analysts and mathematicians, came to the idea of creating combined, or so-called hybrid Forex indicators.

The standard set of indicators typically includes RSI dynamic oscillator (or Relative Strength Indicator) by Welles Wilder (compares the growth/decline of the price over the period), and Stochastic RSI created by George S.Lane in the 50s, the formula of which, except the Close prices, takes into account max/min of the price over the period.

Due to the fact that the RSI most of the trading time remains between 80-20 levels, the traders may be waiting too long for the signal to enter. Therefore, to increase the sensitivity of the oscillator, T. Chande and S. Kroll in their book “The New Technical Trader” proposed such hybrid Forex indicators as StochRSI, which operates on the basis of the RSI and the formula for the standard stochastic is applied to its data.

 

Trader's main task is to determine the point of entry and exit from the market. Actually, all indicators are meant to help them cope with this task. But not all indicators can be used for direct entry into the market, and some of them are only intended for general market analysis.

In the conventional classification of indicators, they are divided into 3 categories (trend indicators, oscillators, and psychological ones). An alternative option can be offered, dividing all the analytical tools into 2 groups: indicators of entry into the Forex market and the category of auxiliary instruments.

Any indicator shows acceptable results at backtesting. An inexperienced trader may even get the impression that they had stumbled upon the Holy Grail. But in real trading, the enthusiasm quickly gives way to disappointment – a seemingly perfect indicator inadequately reacts to the price chart behavior.

The reason for such discrepancy in real trading and indicators backtesting lies in the redraw of a number of indicators. In other words, they simply adapt to the historical data, which confuses the traders.

Profitable Forex indicators without redraw are, first and foremost, arrow indicators. The advantages of such analytical tools include their simplicity and ease of use – the price chart is not encumbered by an abundance of constructions, but displays only the minimum information necessary for the transaction.

Typically, volume indicators (or psychological indicators) are rarely used in trading. The main reason for this is that the tools don’t allow to identify exact points of entry/exit, but are most commonly used to receive general information about the market. Better volume Forex Indicator is no exception to this rule.

Actually, any volume indicator provides the trader with the same information: the amount of money brought to the market at a particular point of time. This is the first sign that the big players entered the market and the situation may soon change dramatically.

A person unfamiliar with the world of currency speculation can’t imagine trading without the use of complex indicators. He or she believes that the complex analytical tools ensure profitability of trading. In fact, the situation is somewhat different.

Many professional traders either don’t use indicators in trading at all, relying mainly on the technical or wave analysis, or use them as an auxiliary tool. But in this case simple Forex indicators are normally used.

Opponents and supporters of the indicator trading bring forward strong arguments for their position, but the only thing is for sure: indicators can actually bring many benefits to trading. However, this has nothing to do with the complexity of its algorithm, as the right choice of indicators and their settings plays the crucial role.

Binary option trading allows traders to profit from price changes not only in currency pairs, but also in the stock of the well-known companies, stock market indexes, and so on. The principle of transactions is similar to the currency speculation: the trader sells the stock of some company in the hope that its price will fall or opens a long position in the hope that the stock value will rise.

The main difference in trading binary options is that the deals are short-term. When trading currency, the transactions are usually kept open for several hours to several days or even weeks (this is true for most of the traders). In the case of binary options, the lifetime of a profitable deal may be 15-20 minutes; Forex indicators for binary options will help determine the direction of instrument movement.

Speculation in the currency market is not the only way for traders to earn money. Many of them prefer precious metals trading, especially gold, believing that it would ensure greater profits. There is a widespread belief among traders that precious metals trading requires a special Forex indicator for gold.

In fact, this statement is not entirely true. The gold price chart is subject to the same laws as the currency pairs charts. Therefore you can use the same techniques in gold trading as in the currency trading. The set of indicators used for trading remains the same.

Even the beginners in the Forex market know that Forex indicators can bring a lot of benefits. But not every trader is able to efficiently use them in daily trading; creating the working indicator strategy is also too much for many traders.

Some the traders believe that Forex strategy on indicators is a waste of time, because sooner or later indicators settings cease to bring profit, and you will have to spend a lot of time on choosing new parameters. The skeptics say that the indicators should be considered only as a supplement to technical analysis, for example. However, there are many working indicator strategies that are consistently profitable.

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