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4 Types Of Indicators That Are Used For Forex Analytics

March 27, 2018 No Comments

Featured article by Chris Cote, Independent Technology Author

Forex indicators make market analytics so much easier. These programs provide useful information that has been processed from raw market data. The many different indicators that provide insights can be used on any common operating system. MT4 mac users have several different options available for download. When it comes to the specific indicator that a user prefers, a number of things can influence the choice of the program. The common indicators use different kinds of input to make data charts. The output data is also different from different kinds of charts. In general, the are 4 main types of indicators used for analytics that forex traders should be aware of. Here is an overview of them.

graph_1Image Source: http://businessdailymedia.com/images/money_trading.png

Buying and Selling Indicators

Stochastic Indicator is one of the most common indicators that fall into this category. Buying and selling indicators show when a certain asset is overbought or oversold. This is crucial in information a trader the best positions in the market for making investing or withdrawing their assets. Buying and selling indicators use relatively long-term market trends to give information. It is thus common for these indicators to work on weekly or bi-weekly data. Other indicators on the MT4 platform that are classified in this category include the Relative Strength Index.

Market Trend Indicators

The second type of indicator commonly used is the trend indicator. An example of a tool that falls into this category is the Moving Average indicator. Market trend indicators are capable of showing the prices of assets at the end of a specified period. These indicators have a simple working mechanism where they simply track the overall market progression without missing out on any changes. Trend indicators are great for showing the momentum that the assets in the market are moving in. This, in turn, can help traders to place their stakes well.

Graph_2Image Source: https://www.europeanceo.com/wp-content/uploads/2015/12/Forex.jpg

Market Trend Confirmation Indicators

The other type of indicator commonly used is the trend confirmation indicator. This tool is an improvement of the moving average. A common example used by most traders is the Moving Average Convergence Divergence (MACD) indicator. With this tool, it is possible to make insights on the market trends. The MACD uses market data to show the exact positions when the market is bearish or bullish. This is done by clearly marking out the up-trends and down-trends in the market. For traders who are interested in knowing the specific trends and signals prevailing in the market, trend confirmation indicators are the best.

Take-profit Indicators

The final category of indicators used is the profit-taking kind. The Relative Strength Index (RSI) is one of the best examples of such tools. Profit-taking indicators signal the best time to exit the market after a trader has gained profit. By having several bars on the chart that show the deviation trends, a take-profit indicator is able to identify the market levels that each asset enjoys. Two currency pairs in the indicator can thus be analyzed side by side to observe the deviations between them. The difference observed serves as a signal for when it is time to exit the trade.

Many other examples of the different types of indicators exist. For any forex trader, though, the four main categories listed above resonate to trading activities of any given day.

About the Author

Chris Cote is a real-world marketing and sales pro who offers services to businesses all over the world, ultimately improving their bottom line by crafting creative solutions to their business problems.

 

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