Using Forex Indicators To Gain Profit

In Forex Market a trader come across various different buyers and sellers who are dealing with the different currencies. Trading is done from various parts of the world where different currencies are traded. Forex market is the largest market where different individuals are trading from various countries for the different currencies. The simple concept is to buy the currency on one hand and sell it from other to make higher profit in return.

Now a trader must think what these indicators are and why these indicators are essential for trading?

There are numerous indicators present in the market for Forex trading where trader will gain extreme profit. There are various traders in the market who are new in the market and are unaware of the general trends of the market along with the technical analysis which are the cornerstone to show the profit and loss to an individual trader. And a single mistake by such traders who have a very little knowledge about the market may lead towards a big loss. Due to these factors it becomes very crucial for the customers that they should follow the Forex chart which will help them in each stage. As there are different indicators in the market which will guide a trader in each field but technical analysis is one of the best indicator as it advise the traders about the assertive prices on recent basis. 

Why these technical indicators are finest for profit?

These help traders to look upon different indicators which further combine to form strategy to take decision of selling or buying the currency.

Current market trend, short trend and intermediate market trends should be focused by an individual trader so that a trader can judge when to enter a trade to gain higher profit.

There are basically four indicators in the market which will help an individual trader about the trend of the market. If the trend is moving upward signifies profit and the trend moving downwards signifies loss, so these indicators shows the recent market conditions rampant in the market which ease down the job of trading for traders. It is advised for a trader to take more time in analysis part on the basis of which a trader is able to make crucial decisions in forex market in terms of buying or selling of currency.  A trader can also take help of a well experienced analysis which can deliver the current status regarding the market trend. However, a trader should recheck on the report delivered by the team and than only take its decision.

Hence we can say that not only the indicators but along with it knowledge is also very crucial in trading because if a trader does not have enough knowledge about the market it will not be able to trade properly. There are various mode available by which an individual trader learns about the indicators or the online/offline brokers will indicate the person about the right time to enter a trade. Therefore these indicators are the best source by which a trader with its adequate knowledge do investment at the correct time.

How to use technical analysis in forex trading

Technical analysis is nothing but using the past record of currency to predict its future course with the help of some technical indicators. Of course the currencies so not always follow the same path as they did in past and thus technical analysis is not a 100% correct prediction tool but a good understanding of technical analysis always gives the trader an edge. Technical analysis is a very common tool in stock market and finds very much relevance in forex market as well.

Primarily technical analysis is performed by using some of the various technical indicators available. A technical indicator is displayed at the bottom of the screen and depicts the price action with graphical representation. Some very popular technical indicators in forex market are Fibonacci retracement, Bollinger bands, moving averages, moving average convergence divergence (MACD) and stochastic. Technical indicators like support and resistance, trend lines, etc can be helpful to observe if the currency movement. The trend lines help us to observe if currency is following any pattern, what is the nature of movement, upwards, downwards, or sideways or no movement at all. Support and resistance lines come handy when the currency is oscillating, using them the direction of the currency movement can be predicted. All this observation and prediction is done after reviewing recent history by looking in the chart.

Technical analysis has many advantages like being quick and easy to use. Most of the times the broker provides technical indicators for free or for very minimal charges so the cost is also not a concern. With so much money at stake every trader should find logic in his investment by looking at the trends in these technical indicators. Technical analysis also plays a major role in making trade strategy. It is easy to identify the currency pairs that are more volatile and the ones that are more stable. It also helps the trader to set targets by looking at the past performance of the currency.

Identifying trends and patterns becomes easy by using technical analysis and one peculiar thing about patterns in forex market is they keep repeating most of the times. So traders can strategize accordingly. For instance if the technical indicators show that a currency is about to gain value or lose value he can buy the currency pair and make profits.

Technical analysis is just a tool; the trader discretion is what plays the main role. Patience and holding your nerves are the main characteristics that a successful trader has. Technical indicators remain same for all the traders around the world. What differentiates their wining or losing money is there interpretation of the same. The trader should also be aware of the happenings around the world as they put major affect on exchange rates. A well read trader in conjunction with technical analysis is set to make profits and if not huge profits, he will at least not make trading blunders.

Technical Analysis in Forex Trading

Forex is basically nothing but the online market where currencies are the objects which are traded. As currencies are the most important commodity in the world its trading is by default creates the biggest and most liquid market by volume in the world, even bigger than any stock exchange market. central banks, hedge funds, large financial institutions, corporations and an average investor , all these groups or people trade in Forex and to make maximum profits they often rely on their instincts or use technical analysis which factors in all the aspects like historical patterns, current economic situation , political sentiment etc. 

The technical analysis is basically using the past performances of currencies to predict their future along with some other important parameters. The technical analysis of the market in Forex plays a crucial role as it is a 24 hour market and there is huge amount of data that can be processed to come towards a reliable decision. This output can often help in making great gains from the market.

The presence of many large players in the forex market makes any inconsistency in the market very short lived. The large players like hedge funds and big banks use advanced computers to continuously monitor the market to find any consistency between various currency pairs . The forex technical analysis helps average traders in this regard by giving them a fair ground to play hands and maximize there profits with their acuity.

Technical indicators like graphical representation of a currency pair can give a fair amount of idea about weather the currency is moving upwards, sideways or remains in range. Trend lines can be useful to be analyzed at a moment when the price is moving in a pattern to make an intelligent prediction. Support and resistance lines can also be noted to understand the movement of a currency. These indicators helps the traders to predict whether a given trend or lack of trend will continue..

It is generally observed that some of the currency pairs are historically show great characteristics of trend while some other pairs (usually not involving U.S dollars) have been range-bound. Accordingly traders can see their technical indicators and make a strategy. Some of the most popular technical indicators are Fibonacci retracement, moving averages, Bollinger Bands, stochastics etc. these indicators either on themselves or in conjunction with some other indicators and chart patterns are very useful.

Technical analysis of the Forex can only play a role in the decision making process of a trader, the ultimate decision is completely based on his/her own discretion. As so many traders around the world are using similar tools and interpreting them accordingly technical analysis can become self fulfilling prophecy. For every trader the conditions will be same but the discretion of individual traders actually determines their earnings and market stability.

An understanding of technical analysis is always beneficial as it gives more data to substantiate the decisions of the traders and they don’t have to rely just on their instincts.

What are technical Indicators and commonly used technical indicators

The Foreign exchange trading is a market where the currencies of different countries are traded. Traders, investors, individuals, corporate all purchase and sell the currencies and thus earn profits.

Although the Foreign exchange market is open 24 hours in a day and 5 days a week, and is closed only over the weekends, it is still not practically possible for you to sit in front of your desktop and keep a check whether a particular currency is in profit or running into a loss. Generally traders keep a check on the perfect moment for entering the market or look out for obvious signs which say Buy or sell. For anyone to trade successfully you need to use a variety of indicators which will help you analyze and understand the market trends. These indicators always come in handy as they can help you figure out the best time to buy or sell a currency. 

There are economic as well as technical indicators. The economic indicators relate to the political, socio economic, gross domestic product, Industrial production Retail sales, along with many other factors.

The technical indicators include a few mathematical calculations which are completely based on the indicators provided by volume as well as price. These values obtained are used for forecasting the probable changes in price. These days there are many technical indicators available in the market which can be used, and some of these have proved out to be very useful too. Let us have a look at some of the commonly used technical indicators.

Accumulation/Distribution Technical Indicator: This is a technical indicator which is largely determined by the changes which take place in the volume and price. The volume of the currency is a major factor which affects the price of the currency.  The higher the volume, the greater will be the price change, atleast for that particular period. Thus the higher coefficient will be the value of the indicator.  This technical indicator is another deviation of the On Balance volume technical indicator.  Both of these are used for confirming the changes in the price which is done by means of measuring the volume of the sales. The increase of the accumulation/distribution indicator results in buying of a security and while the drop in the indicator refers to the selling of the security.

The Trend-Following Tool: One can certainly make money by following a counter trend approach towards trading. Mostly what traders do is they tend to recognize the direction of the major trend and then try to make profits by trading in a similar manner. This is how the trend following tool comes into action. While this might not be a good process at all times, as many a time people misunderstand the purpose of the trend following tools and even separate these trading systems. It is recommended to use these tools on for long term or a short term period.

Technical Analysis - Price And Spread

For any investor trading in any market price is the crucial and important point. For the buyer it is always a job where he would like to get the best deal without enough loosing up his pocket. While for the seller it would be just an opposite case where he would be keen to get as much as he can on his stuff. The only time a deal is fixed when both the buyer and the seller are ready on a particular price. When we talk about Forex here money is in the form of goods, but the principle of trading is just like any other trading. The only difference is that here one currency is considered against the other.

The only query an investor is considerate about is “how the price will fluctuate”? If he thinks that the currency is about to boost against the other one he would buy it else if he thinks that it will be depreciated then he will sell it.

For an investor to judge about the fluctuations of the currency he should know how it is formed and on what factors it depends on. A very basic proposed theory is that the present value of currency replicates about all the factors which can influence the price, such as economic, technical, political, natural and other. Sometimes it is very difficult for an investor to keep in mind all the factors at a same time.

Let us take an example to understand the concept (on just technical analysis and regardless fundamental knowledge). In the above taken situation and an absolutely free market the price depends on demand and supply. Demand as the name suggests it is the total volume of the financial instrument that traders in the market will want to get in the future. It is determined on the basis of claims for purchase set at the market. Supply, on the other hand, is a total volume of this financial instrument that is set for selling by traders.

The demand and supply can be explained as:-

·      The increment in demand will lead to increase in the prices.

·      The increment in supply signifies decrease in prices.

Whereas Spread can be defined as the difference between the minimum prices and to sell at the peak price of demand. This difference will always be fluctuating as the market tends to counterfeit ahead. Let us take an example, suppose the price of EUR/USD is equal to 1.35513/1.35550. It means that during this period it is possible to but euro at the price of 1.35550(lowest price at which it can be buyed) and it is possible to sell it at the price of 1.35513(highest price at which it can be sold by an investor).

But in case an investor is not interested in buying at a price of 1.35550 he can set an order for purchase at the level of 1.35500 and wait until the price is reached at this level. This situation will arise only when demand it constant, and the supply is increased. In such cases the sellers will not have any option other than lowering the price to 1.35500