When you hear the term like Stochastic Oscillators, Fibonacci Retracements, Bollinger Bands or Relative Strength Index, the feeling of dreadfulness filling up in your veins is absolutely normal. Although these names may sound diabolical, forex technical indicators are extremely sensible and easy to use by any level-headed, experienced traders for their day to day trade decision process.
Many traders turn to forex technical analysis because they get a clear idea of the factors which influences their currency exchange rate like social, political, economic and economic factors. When you have money in your hands and the wish to invest, you get many exchanging which helps in the flow of capital rather than trying to identify a mispriced rate. When you get a clear concept regarding these terms, you can easily determine the changing trend of your selected pair of currency and make your investment accordingly.
5 Forex Technical Factors
- Stochastic Oscillator:
A popular momentum indicator, Stochastic Oscillator is used for technical analysis in forex. When you get a basic concept of this forex term, you can easily distinguish between the upward trend and the downward trend.
During an upward trend, the price closes near the highs of the trading range, whereas during the downward trend, the price closes near the lows of the trading range. On its occurrence, it indicates a signal of continued strength and momentum towards its prevailing trend. Within a range of 0 to 100 this Stochastic Oscillator is plotted indicating oversold conditions below 20 and overbought conditions over 80.
- Relative Strength Index (RSI):
It is used for signalling oversold and overbought conditions in security. You can understand it clearly by seeing the indicator which is plotted in between 0 to 100. The zero shows the highest oversold condition and 100 show the highest overbought condition. It helps to measure the security strength of recent up moves and down moves.
MACD (moving average convergence divergence) is used for signalling the two aspects of security which are momentum and trend. This indicator has two exponential moving averages (EMA) which cover two entirely different time periods helping to measure momentum in the security. You can use this for determining the future direction of your asset.
- Fibonacci retracement:
Fibonacci retracement lines are the most predictive technical indicator which provides a feedback future exchange rate. If you search about this forex technical factor, you can see traders swearing by its accuracy rather than arguing its technicalities over arts and science. As it is a very popular indicator, you can seek additional factors to support your primal analysis before you start trading with a large trading amount.
- Moving Averages:
Moving averages are the oldest as well as the most commonly used indicators used for forex technical analysis. Its primary benefit is to reduce the rate of fluctuation thereby interpreting the real-time exchange rate data. This indicator smoothens out the fluctuations by helping you identify the genuine potential market rate trends from the normal up and down fluctuation rates which you can commonly see in all currency pairs.