There are a lot of forex trading indicators you can use. The key is to know how these indicators are appropriately used in order to make your trading most profitable.
Forex trading indicators can help you attain a good understanding about the forex market. Furthermore, these indicators also help you in grasping the behavior of the financial market. Knowing the trends lets you come up with appropriate decisions in trading. Technical indicators in forex trading are known for using math formulas and calculated current data. Momentum Or StrengthThis is a major group of technical indicators that generally describe how fast or how slow the price is moving in a particular time period. Traders need to add these indicators in their technical analysis in order to know how the market or the currency went up to an overbought condition or fell to an oversold zone. A deviation on these indicators happens when the price and the momentum corresponding to it are moving towards opposite direction. Price will usually go along the direction where the indicator is going. Ideal momentum indicators are commodity channel index or CCI, relative strength index or RSI, stochastic oscillator and chande's momentum oscillator. RSI is said to measure the relation between up moves and down moves. This index ranges from zero to 100. 70 and up means the currency is overbought; 30 or less means it may be oversold. Volatility Or BandSuch are indicators referring to how enormous the fluctuations in currency prices are on day-to-day trading. Volatility or bands indicators, if applied to price charts, usually provide a technical trader with the ability to see the extent of a market's activities. It is reflected on how big the price ranges are, without the specified direction of the price. Price changes are normally where volatility changes are lead. The best volatility indicators in the market are average true range or ATR, Volatility Chaikins, Trading bands or envelope, Projection Oscillator and Bollinger Bands. Trend Or DirectionalThese indicators are geared towards giving traders an opportunity to objectively measure a trend's direction. Nonetheless, these indicators are still subjective and this will usually be based on how a trader perceives it. Standard and statistical methods are used by these indicators. Examples of methods used are linear regression indicator or moving averages that can serve as quantifying tool for smoothing fluctuations in the market and in the price of currencies. They also give a general view of the direction of prices. Ideal trend indicators include forecast oscillator, moving average convergence/divergence or MACD and parabolic SAR. In MACD, two momentum lines are plotted. The line is indicative of the difference between trigger line and exponential moving averages. When the trigger lines and MACD line cross each other, it will be viewed as a sign of a possible change in trend. Volume IndicatorsThese are utilized in confirming the trend; as well as the pressure in buying and in selling in the same direction. When volume increases, there is also an increase in price. Therefore, if there is no indicator confirming the volume, a trader may take this as a proof of reversal. Your ideal volume indicators to use are demand index, chaikin money flow, ease of movement and volume ROC or rate of exchange.