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What are forex indicators?

by , 04 August 2015

If you trade forex, you want to use analysis that can help you make the most profitable trades.

One way you can do this when trading forex is to use technical analysis by using a number of different indicators.

So what exactly are forex indicators? And why do traders use them?

Read on to find out…

What are forex indicators?

Forex indicators are technical indicators you can use on price charts. There are a huge number of different forex indicators.

Examples of forex indicators include:

  • Bollinger bands;
  • Relative strength indicator (RSI); and
  • Moving average convergence divergence (MACD).

You’ll find that different forex indicators perform different jobs. For example, using forex indicators to identify trends, using forex indicators to show support and resistance levels, and using forex indicators to show entry and exit points for trades.

Why forex indicators tend to work

Technical analysis involves trying to predict future price movements and trends by using charts to analyse what’s happened in the past.

Forex markets and currencies tend to be very trend driven. This makes technical analysis a very useful tool to help predict what lies ahead.

There are three main reasons why forex indicators can work well…

  1. The forex market discounts all available information into currency prices.
  2. The forex market tends to follow strong trends. These trends will continue until a trend reverses.
  3. Past trends and price movements tend to repeat in the future.

Once you start using indicators as part of your forex trading strategy, it’s important to keep an eye on how they’re performing.

Keeping a trading diary will help you to pinpoint the forex indicators that work best for you. For example, you may find a couple of indicators work best with certain currency pairs over a specific time frame.

So there you have it. What forex indicators are.

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What are forex indicators?
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