If you have any caress in using any kind of charting packages to support you with your forex trading, you will know that there are endless distinct technical indicators you can use. In this article I'm going to be asking what are all these indicators and which ones do you for real need?
As you can guess from the title of this article, there are essentially four distinct types of technical indicator and they are as follows:
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1.Trend indicators.
Macd, Parabolic Sar and the assorted engaging averages are a few examples of trend indicators and they can all be used to identify a trend. It's widely argued that you should only trade with the trend so all of these indicators will help you to take the decision out of your hands, and therefore dictate which way you should be trading. Your only decision now is at what level to enter the trade.
2.Momentum indicators.
These types of indicators are essentially oscillating indicators and are most beneficial for determining overbought and oversold positions and can be very beneficial in signalling the start of a new trend. Examples include Rsi, Stochastics and Cci.
3.Volume indicators.
As the name suggests, these types of indicators show the volume of trades behind a particualr price movement which can be highly beneficial because a price movement backed up by high volume is a much stronger signal than a price movement based on low volume. Examples here include Chaikin Money Flow, Force Index, Money Flow Index and Ease Of Movement.
4.Volatility indicators.
Volatility indicators ordinarily use ranges to show the behaviour of the price and the volume behind any movements. This is beneficial because any dramatic change in behaviour can supply a good entry signal. Tasteless examples include Bollinger Bands, median True Range and Envelopes.
So there you have the four distinct types of technical indicators available to you. Which ones you use is entirely up to you, but it's ordinarily advised that you have at least one type of each in order to supply additional confirmation for entering a trade.
Trading forex using technical analysis is all about probabilities in that when you enter a long position, for example, you want all of your chosen signals to be signalling an upwards movement, therefore indicating a high probability of an upwards movement taking place.
If you use a definite stop loss procedure and use these distinct types of indicators to confirm positions, then over time this high probability trading method should supply you with more winners than losers in the long run.
4 Types Of Technical Indicator You Need When Trading Forex
