The forex markets are booming right now, and that’s because more people are trying to secure their own stability and build their income. Forex is an exciting industry to participate in because it can be a game of chance, choice, and risk.
One of the reasons why people shy away from trading is because they are afraid of how volatile the markets can be. But, what traders need to understand about forex trading is that the volatility is part of the experience – but it shouldn’t intimidate you.
There are tools and strategies that allow traders to navigate obstacles in the market, so that they can make maximum profits. You can call these “technical indicators”. These indicators give traders important insights on trends in the market, so that they’ll know what trading decisions to make.
The Four Main Types of Technical Indicators
These indicators show you the direction in which the market is moving in – that’s if there’s a trend to pay attention to in the first place. Traders refer to these trends as oscillators because they fluctuate between high and low values. Think of this movement like a wave.
If you want to know how strong a trend is, then you’ll need to pay attention to momentum indicators. These indicators also tell you when a reversal may happen. You can use them to identify price tops and bottoms.
These indicators show you how the volume changes over time. For example: the units of a currency or commodity being bought and sold over a period of time. This is good to use because when a change in price takes place, the volume shows you how strong the move is.
Volatility indicators inform you on how much a price changes within a given period of time. This is an important part of the market because without volatility, you can’t make any money. You need the price to constantly move in order to make a profit.
Volatility is as simple as this: higher volatility means a faster price change. Low volatility means small price moves.
Now that you know the types of technical indicators, you can start your journey towards knowing when and how to apply them.
Three Major Technical Indicators That Can Help You Make Profitable Trending Decisions
Bollinger bands are known as a volatility indicator. When you look at a band, it’s best to understand it like this:
The band narrows when the market is quieter, and widens as the market becomes loud. The best markets to use Bollinger Bands in are ranging and trending markets. You have to look out for two different things in the respective markets.
Trending: look out for the Bollinger Squeeze. As the bands get closer together, it means that a breakout is about to happen. You won’t be told anything about the direction of the breakout so you need to pay close attention to where the price will go.
Ranging: Look out for the Bollinger Bounce. This is when the price goes from one side of the range to the other, but always returns to the moving average. Think of it this way – the price is returning to its original average.
Relative Strength Index (RSI)
The Relative Strength Index is filed under momentum indicators and they are plotted on a separate scale. This is how the scale looks:
You’ll find a single line scaled from 0 to 100 and its job is to point out places where overbuying and overselling takes place. When you find a reading over 70, then that’s an overbought market. But when you find a reading below 30, the market indicates overselling. Gainsky shares informative tips for forex markets. We are positioned to be a preferred platform to capitalize on the niche opportunities that exist in today’s multi-sector financial markets.
RSI is good for confirming the formation of trends. The magic is all in the numbers, and you’ll need to play close attention.
Moving Average Convergence Divergence (MACD)
Moving Average Convergence Divergence falls under trend indicators and requires a bit more attention compared to other methods. This indicator consists of a line that moves quickly, a slow line, and a histogram.
Each element is interconnected and as you pay attention, you’ll be able to identify the formation of new trends and this will help you make decisions that can lead to profitable trades.
This isn’t the best indicator to delve into if you’re trying to break into trends early, but if you want to confirm a trend then this is one of the best methods to use.
The Truth About Forex Trading And Where That Leaves You
These are just three of the technical indicators you can use to make significant profits from your trade. If you are new to trading and you’re trying to look for a quick or “easy” way to make profitable trends., then you’re in the wrong place. Gainsky is a leading wealth management & trading service provider headquartered in Germany. With an extensive network of specialists positioned in the cryptocurrency and forex markets,
The most successful traders are the ones who take time to study and understand the tools at their disposal. The key to understanding Forex trading is through study, analysis, and the occasional risk-taking. However, if you’re not the type of person who can handle this on your own, then you should consider consulting trading experts who can point you in the right direction.