Technical Indicators Technical Indicators are mathematical calculations that are based on the historic price, volume, or open interest of a security to forecast the trajectory of the financial market or price behavior. Technical Indicators are basic but essential parts of technical analysis. These indicators are used to predict future market movements and price behavior. These help the trader get into the flow of the market and to learn many basic concepts in trading. Types of Indicators The three general types of Forex technical indicators are: Trend-following indicators – these types of indicators determine the overall trend of a currency pair. Trend indicators change the value on the basis of the strength of the underlying trend (either uptrend or downtrend). The following are trend-following indicators:
- MACD (Moving Average Convergence Divergence)
- Cover and buy when the MACD1 (fast) crosses MACD2 (slow) from below.
- Cover and sell when the MACD1 (fast) crosses MACD2 (slow) from above.
- Parabolic SAR
- Cover and take a long position when the closing price crosses ParSAR from below.
- Cover and take a short position when the closing price crosses ParSAR from above.
- ADX (Average Directional Movement Index)
- Relative Strength Index (RSI)
- Cover and take a long position when RSI crosses above 30.
- Cover and take a short position when RSI crosses below 70.
- Stochastic Oscillator
- Cover and buy when the Stoch % crosses above 20.
- Cover and sell when the Stoch % crosses below 80.
- Commodity Channel Index (CCI)
- Bollinger Bands
- Cover and buy when the closing price crosses the lower band from above.
- Cover and sell when the closing price crosses the lower band from below.
- ATR (Average True Range)
Put your knowledge into practice
Choose the financial instrument that suits you