INTRODUCTION TO TECHNICAL INDICATORS

Technical Analysis

Technical analysis is an analysis methodology for forecasting the direction of prices by relying on the historical price data, primarily price and volume.


Technical Indicators

Forex Technical Analysis Indicators are usually used to forecast price changes on the currency market, they are useful tools to assist in the prediction of market movement.

Forex indicators are effective technology tools that could help traders to improve their trading results.

They can be used to eliminate bad trades and improve trade entry points. However, since most technical indicators are lagging, using them alone to generate trade signals is probably not the best idea. Thus, they must be used in conjunction with other indicators or strategies to improve the overall trading result.

Stock Market Data

A lagging indicator is one that follows price movements and has less predictive qualities, especially when the market is consolidating, moving sideways, and is not trending.

The lagging indicators are useful to determine a trend in the market. The most famous lagging indicator is the Moving Average (MA)

 

On the other hand, leading indicators are those created to precede and give signals ahead of the price movements. The leading indicators use a shorter period in their calculation, thereby leading to the price movement. The most famous leading indicator is the Relative Strength Index (RSI)

 

We will cover the famous leading and lagging indicators in the next following topics