Indicators Related To Forex Rates
It is important that you learn which indicators affect forex rates. When you learn forex trading this is one of the aspects that should be covered in your training. There are three main technical indicators that you should know about when you learn forex trading.
Technical Indicators and Forex Rates
Most new traders who learn forex trading think that technical analysis is about learning how to read forex charts. While charts are the main source of data they are not the only part of technical analysis. Technical analysis looks at the price movement shown on charts and combines this with interpretations of the movement. Once you learn forex trading technical analysis you will be able to predict what the market will be doing to a certain extent. There are a lot of technical indicators out there that you can use. However, there are three that most traders will use.
The first technical indicator you should know about is moving average lines. These are perhaps the easiest to understand for new traders. These indicators are used to determine if the trend of a currency pair is bearish, bullish or not there at all. Moving average lines will also show you the resistance and support levels of a currency pair trend.
All of this information will be seen with a single glance at these indicators. There are a number of different moving average lines out there based on the timeframe being used. The most commonly used is the 20 period moving average lines. This average uses data on the currency pair from the last 20 hours of trading.
To use Bollinger bands you will have to be using 20 point moving average lines. The reason for this is that these bands are trading bands placed around the moving average line and the price of the currency. These indictors will tell you about the trend of the currency pair and when the trend might reverse.
Bollinger bands are used to should the resistance and support levels of a currency pair as well as the level of volatility of the pair. The lower Bollinger band is where you will find the support level and the higher band is where you will find the resistance level.
Average Directional Index
When you are using the average directional index it is recommended that you use it along with the Bollinger bands and the moving average lines. The average directional index will show the strength of a currency trend. This is very important for trader because the stronger the trend the more likely it is to continue and this means that you can ride the trend.
Each trader will have a different figure to show strength with the average directional index. The rule of thumb is that a level below 10 means that the trend is tight or the currency pair is not trending at all. If the level is around 30 then the trend is considered moderate. This means the trend may continue but for a limited period of time. Levels of 40 and above are strong trends and you should consider taking advantage of this.
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