Forex Indicators, put simply, are used to tell traders how to follow the trend and when to take profits in forex market. Forex indicators try to pinpoint price data and market trend. Using an indicator together with various other market analysis simultaneously is a good way to get profits from forex market as much as possible and avoid unnecessary losses caused by the market volatility. Today, I will list 4 types of forex indicators for reference.
Forex indicator type No.3: overbought/oversold forex indicators
Now that forex traders have confirmed market trend, the next thing they need to decide is if they will trade as soon as they get the market trend or trade after a pullback appears. If they want to trade as quickly as possible, they can enter a trade once the uptrend or downtrend is confirmed; if they want to trade with lower risk, they can try to wait for a pullback. Thus, forex traders need overbought/oversold forex indicators such as 14-day RSI for help. This type of indicator calculates the number of uptrend and downtrend days and also calculates a value that ranges from 0 to 100. If the entire price moves upward, forex indicator will approach 100 and if the entire price moves downwards, forex indicator will approach 0.
Forex indicator type No.4: profit taking forex indicators
forex traders need to decide whento exit trade because the best exit time brings potential of making biggest profits. Thus they need the help of profit taking forex indicators. The above mentioned 14-day RSI is also a profit taking forex indicator, I have mentioned that the indicator calculates a value that ranges from 0 to 100. A trader who holds a long position might consider taking some profit if the 14-day RSI rises to a high level of over 80; a trader who holds a short position might consider taking profit if the three-day RSI falls below 20. A profit taking forex indicator helps traders to decide the proper profit taking time in forex trading.
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