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The Most Important Forex Indicators Any Trader Needs to Know

The Most Important Forex Indicators Any Trader Needs to Know

If you're a novice Forex trader, you may be unsure as to how best to follow the market. There seems to be a large range of options, and a hodgepodge of information to sort through.

But there are straightforward ways to carve your through the morass. Forex indicators prepare you to make the right decisions to grow your money.

What are Forex indicators?

Forex trading indicators are tools used to analyse the market - they use mathematical equations to quantify the past behaviour of the price of an asset, and thereafter to forecast future movement. In doing so, they give you the information you need to decide whether to buy or sell.

Forex trading indicators you need to to know


Ideally, you should be aware of each Forex indicator and how it works. Maybe one day you will. But most traders don’t, and it’s not entirely necessary. However, there are certain indicators you absolutely need to know in order to increase your understanding of the markets.

■ Simple moving average

Although the simple moving average (SMA) is not the most useful indicator, it serves as an excellent introduction to Forex trading. The SMA graphs and compares the different average ranges over a course of 2 or more time spans, thus providing a visual representation of the most and least profitable activity.

■ Exponential moving average

The EMA uses a set price, set period, and a smoothing factor, to graphically represent reactivity to quick changes in the market. The single, smooth line that results is easy for beginners to understand, and makes the EMA one of the most effective Forex indicators.

■ MACD indicator

MACD stands for moving average convergence divergence. It takes 2 EMAs and uses the difference between them to chart the positive vs negative differences. It depicts momentum very clearly, and allows traders to make effective decisions on that basis.

■ Fibonacci Retracement

Many traders use the Fibonacci Sequence to analyse the market and make decisions. As such, the market will move according to Fibonacci analysis. This means that a full understanding of what makes Fibonacci analysis work is unnecessary in using Fibonacci retracements. It’s one of the most effective and thus important Forex indicators.

■ Fractals

Using Fractals, one can easily identify the underlying fluctuations in price waves. Fractal bar charts portray 5 bars, which give a clear representation of the patterns of a price. It is very effective and reliable, making it a vital Forex indicator to know.

■ Bollinger Bands

Bollinger bands are used by traders to determine big moves in the market. The upper and lower bands can determine the volatility of the markets, and are vital to effective Forex trading.

If you want to be an expert trader, you need to become adept at using Forex trading indicators. While they can seem overwhelming at first, by studying the above indicators and learning how to use them, you'll get the head start you need, and soon understand how best to grow your money.

■ DigitalContentZone (2015)

The Nasdaq’s Latest Movements

The Nasdaq’s Latest Movements And What’s Behind Them


The Nasdaq Composite recently entered into negative territory for the year, due to China’s economic crisis. Towards the end of September, the Nasdaq stood at 4734.48, about a point and a half below its 2014 close of 4736.05.

In addition to China’s economic slowdown, investors have been concerned about the slump of the stock market and Volkswagen’s energy emissions crisis. As the charts indicate, the Nasdaq Composite has been in danger of falling back into corrections mode.

Analysts have been pessimistic about any signs of an upturn, with stocks across the board on a negative trend.

Bearish market

Since the Nasdaq Composite is a technology-weighted market, Apple and Microsoft - its 2 biggest constituents - play a major role in its momentum. The Nasdaq, with the current movements, has been showing a bearish bias.

Slow global PC shipments, and another possible retrenchment in capital expenditure spendings, have made it difficult for the technology market, despite it having weathered the previous crisis relatively easily.

Strong 3 weeks

But since September, the Nasdaq has been seeing gains, and has just closed its 3rd consecutive week of gains (the first since February). Since data has pushed out expectations for the timing of rates hikes, investors have been cautiously optimistic.

The Nasdaq closed up 16.59 points, or 0.34 percent, at 4,886.69. For the week, the index outperformed the other major averages with a gain of 1.16 percent.

Katie Stockton, chief technical strategist at BTIG, said in a note, "We think short-term overbought conditions can be sustained for a few days, potentially allowing for a test of the 200-day moving average before a significant pullback unfolds."

However, it’s not all good, as Stockton believes technical indicators on Friday suggested a lower bias, and gains may be temporary.

Long-term concerns

In the long term, the Composite’s recent negative movements present a bleak outlook from a technical perspective. Should it begin and continue to fall again, as is likely, it could be facing a long reversal downwards.

No matter the movements of the next few weeks, the Nasdaq faces a difficult road ahead. WIth China’s economy logging its weakest growth since 2009, the signs are not looking positive. While the Nasdaq has been on the up for the last three weeks, it is necessary to view it in the broader context, and trade accordingly.

Conclusion

The Nasdaq Composite’s recent movements are mainly due to the economic situation in China. With China’s economic slowdown on track to continue, the Nasdaq is likely to face further difficult times, despite displaying growth in the past three weeks.

October, 19th 2015

Article written by anyoption.

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