What are indicators?
Indicators are standardised, mathematical measures or metrics that are used to analyse and predict market performance based on patterns detected from tracking the market over time. They’re portrayed through chart pattern graphics. Some of the most popular indicators in trading are moving averages, Bollinger Bands, the relative strength index (RSI), and the moving average convergence/divergence (MACD).
Indicators are plotted on the chosen market’s chart; and they can point towards potential price reversals, direction and strength of price trends, and momentum of price movements. What is tracked by an indicator is underpinned by what type of indicator is used, eg trend-following, momentum, volatility, or volume indicator.
While indicators provide likely price movement based on analysing relevant market data – such as price and trading volume – there’s no guarantee that it’ll transpire as expected. For this reason, many traders prefer to base their decisions on a combination of parallels across multiple indicators, weeding out contradictions. Even then, it’s still important to take other relevant factors into consideration and manage your risk efficiently.
What’s a forex indicator?
Forex indicators are FX pair chart overlays that can help you identify signals and trends in the market based on patterns that have been tracked over time and calculated mathematically. In this context, this technical analysis tool is applied specifically in the market of buying and selling foreign exchange.
