The core of forex business is trading activity that is the activity of buy or sell repeatedly and consistently to get profit. To be able to gain profit, market direction should be in accordance with our prediction. So it is necessary to ensure that any decision taken either buy or sell should always be based on the analysis. This is where the importance of a forex indicator.
An indicator is a trading tool which, if used, can provide traders with information about current market conditions and future market forecasts so that traders can make decisions to make transactions.
There are currently hundreds of different types of indicators that can be used in technical analysis. But we do not need to know and use all of those indicators. You just know a few, and use some that fit your trading strategy.
In order for the selection of this indicator exactly with your trading style, here are the classification of indicators that you should know:
Based on his time
Judging from the era, the indicator is divided into 2, namely classical indicators and modern indicators.
The classical indicator is a simple indicator that has been used since before the known sophisticated computerized system but until now still used. The principle of the classical indicator is the simplicity, the value displayed by this classic indicator is the result of a simple formula.
The advantages of this classic indicator are easy to read and use.
Examples of classic indicators are: Moving average and trend line,
The modern indicator is an indicator that is present since the existence of advanced computerization as a form of development of classical indicators. The data displayed by modern indicators is the result of the development of classical indicator formulas so that often the calculations are too complicated if done by humans.
The advantage of modern indicators is to provide more data that we want.
Examples of moderators: ADX, Bollingerband, etc.
Based on the response
Viewed from the way this indicator mereposn trend, the indicator is divided into 2 leading indicators and lagging indicators.
Leading indicator is an indicator that can detect the beginning of the formation of trend. By using this leading indicator we can get the best price, so the potential to generate a lot of profit is wide open. The disadvantage is often to generate false signals that are misleading.
Examples of leading indicators: stochastic, parabolic Sar etc.
While lagging indicator is an indicator to give a signal when the trend really has started to form. So as if always late to give information coming trend. But the advantages are rarely a false signal so it is more secure, and can be used to confirm long-term trend.
Examples of lagging indicators: Moving average and MACD
Based on the look and movement
Display indicator on technical analysis there are only two that appear together with the graph and appear on a separate window. See from the looks on the trading platform, the indicator is divided into indicators oscilator and indicator line
Indicator oscilator is an indicator that looks like a graph back and forth up and down in a certain range of values so that this indicator has a value upper limit and lower limit. Most of this type of oscilator functioned for counter trend strategy.
The advantage is how to read it easy. Because the direction is back and forth, then when this indicator touches the lower limit we can guess that the next will bounce upwards.
While the indicator line is an indicator that appears to accompany the graph that is being analyzed and has no upper limit value and lower limit.
The advantages are perfect for long term trading. Examples: Moving average, envelove and Bollingerband
Based on its function
The core function of the indicator is to give an estimate of the direction of the next market. However there are 3 kinds of special functions of each indicator, namely:
Trend indicator indicators, ie indicators that focus on trend detection and confirm that the trend has been formed. For example stochastic oscilator and parabolic sar
Indicator indicator of market saturation, ie indicators that can tell the condition where the market is overbought or oversold. So traders can be prepared to open open buy when oversold, and open open sell when the market is saturated.
Indicator indicator of volatility, the indicator that presents data quietly crowded market. In a market that is very quiet market movement, while at the market crowded market moves very long. So we can take care whether to enter the market or wait.
That's the type and the classification of indicators. Each indicator has its own uniqueness and function, so be wise to use it. Use the easiest, the most useful for you. All weapons are just as good, its depe