Having the largest market around the world, the foreign exchange market has 3 main technical indicators in forex that traders should know. It is not mandatory, but knowing this thing will help traders to maintain and analyze the movement.
As people already know, price movements can be hard to predict. It doesn’t mean that the movements change randomly, it is just can be so unpredictable sometimes. If you learn more, there is logic to see the currency pairs movement, whether when it rises or falls.
It has been identified as a technical indicator that comes in various sizes and shapes. It takes decades to reveal and learn how to predict the movements. The more traders try and practices, the more they will solve the logic behind the movements. It also helps to arrange it with their trading strategy.
Lagging
The main thing in lagging indicators is the currency pairs’ price data in the past. Of course, to make sure everything goes well, you should choose the best forex broker like Didimax. It has been known for its applause service among all. There, you can see and identify the patterns of common lagging indicators below;
1. Bollinger Bands, it is all based on SMA (Simple Moving Average) offering value. It represents 2 bands from both sides of the SMA line. You can use it to identify any overbought or oversold conditions.
2. MACD (Moving Average Convergence Divergence), it illustrates the correlation between exponential and simple moving average. Taking crossovers can bullish or bearish the momentum.
3. RSI (Relative Strength Index), it shows both bullish and bearish momentum with a scale around 0-100. It is the most important technical indicators in forex where you can indicate overbought if the RSI is more than 70, and oversold if the RSI is under 30.
Leading
When lagging can help identify trends in Didimax forex broker or other platforms, leading indicator attempts to examine and predict how the price can change. It assists to maximize potential profit by predicting forecast price movements even before happening.
1. Fibonacci level, it involves theory and mathematical ratios to predict price movements. It is quite reliable due to so many traders' time entries and exits using this.
2. Line of support and resistance, it can be one of the most reliable technical indicators in forex, especially if the pairs are in a range. It helps traders to generate profits or capitalize on the lines.
3. Ichimoku cloud, it requires experiences to calculate and analyze data-driven leading indicator through graphic illustration.
Confirming
As one of the main technical indicators in forex, confirming offers weak information but can be used to confirm the other indicators. It is important to double-check everything, in a case to evaluate your trading with lagging or leading.
For instance, traders may use the ADX (Average Directional Index) to be a confirming indicator to see the trade opportunities of currency pairs. It offers limitations due to the reflection of the relative trend but doesn’t indicate it will rise or fall.
Though, it provides essential context to evaluate the strength of trend price movements. Likewise, the volume represents the relative trade activities of a currency pair. It can be a helpful confirming indicator to combine with lagging and leading.
These three indicators are connected one to another. Furthermore, without any other indicators, traders impossibly can understand what volume actually matters. It will be meaningless without any clear scenario. However, it may be a helpful confirming indicator to identify price breakout.
When doubting everything and you have no idea about it, just open many types of these indicators to see the opportunity you have. As gaining experiment and familiarity with which of these 3 main technical indicators in forex that work the best, narrow down the
strategy to maximize your potential profit.