What are indicators? Simply put, technical indicators are tools that we can use in order to better understand and analyze the technical aspect of a currency pair’s price activity, without taking any fundamental influence into consideration (since today’s indicators can’t read the news just yet). Looking at past price action and patterns, we may be able to predict the general direction of the price. For example, by using indicators such as simple moving averages (SMA), we discover that previously very rough and sometimes extremely volatile price action is being transformed into smoother moves that hint at the current underlying trend. Below, I will explain the most common technical indicators, in alphabetical order, and also share some of the ways in which they can help us decide when to enter or exit a trade.
- Bollinger Bands
- Ichimoku Kinko Hyo (Ichimoku Cloud)
- Moving Averages (SMA, EMA, DMA)
- Parabolic SAR
- RSI (Relative Strength Index)
- Stochastic Oscillator