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Hallo Trader, wie geht’s euch?
Didn’t understand?
Did you?
That’s what we wanted to tell you. You can’t read and understand a language without learning it.
See where it’s going?
This happens with most of us in the trading world – mouths open and minds boggled when we see the trading charts. We don’t know what it’s trying to communicate.
So, here we are, helping you learn the language of trading indicators so that you know what charts are saying.
Types of Indicators
Before diving into implementation, let’s look at different indicators.
- Volatility Indicator
A volatility indicator measures how much the market is fluctuating. Volatility refers to rapid and unpredictable changes, and a volatility indicator helps traders understand whether the market is stable or uncertain at any given time.
High Volatility
This means the market is changing quickly, which increases the risk. For example, suppose there’s a sudden price drop or spike in the Forex market. In that case, the volatility indicator will show a high value, signaling that trading could be risky.
Low Volatility
This indicates a more stable market with less risk, making it a better time to trade for those looking for safer opportunities.
- Momentum Indicator
A momentum indicator shows the rate at which the price of an asset is changing. It measures how quickly the price is moving up or down. The indicator compares the latest closing price with the previous closing price to calculate the momentum.
Increasing Momentum
This means the asset’s price changes quickly, indicating strong market movement.
Decreasing Momentum
If momentum is falling, it can suggest that the market is slowing down or heading towards a correction.
- Trend Indicators
Trend indicators help identify the direction of price movement in the Forex market over a certain period. They show whether the price is generally going up or down.
For example, suppose the price of a currency pair has been steadily rising. In that case, it indicates an uptrend, while a steady decline shows a downtrend.
Uptrend
When the price of an asset has been rising for an extended period.
Downtrend
When the price of an asset has been falling for an extended period.
How to Implement and Read Different Indicators?
Let’s learn how to implement different indicators and how to read them.
- Parabolic Stop and Reverse (PSAR)
Parabolic Stop and Reverse (PSAR) is an indicator traders use to spot upcoming trends and potential price reversals in the Forex market. It shows this by placing dots on the trading chart.
How to read it:
Parabolic Stop and Reverse
- If the dots move below the price and keep lowering, the price will likely continue increasing.
- The price may drop if the dots move above the price and keep increasing.
- Bollinger Bands
Bollinger Bands are a popular indicator for measuring an asset’s volatility and price levels in the Forex market. It consists of three lines: a middle line, an upper band, and a lower band. How to read it:
Bollinger Bands
- When the price moves closer to the upper band, it indicates the asset might be overbought and could reverse or pull back.
- When the price moves closer to the lower band, it suggests the asset might be oversold and could rise or reverse.
- If the price moves within the bands, it indicates normal market conditions.
- Relative Strength Index (RSI)
The Relative Strength Index (RSI) measures the strength and speed of an asset’s price movement in the Forex market. It ranges from 0 to 100 and helps identify whether an asset is overbought or oversold. How to read it:
Relative Strength Index
- If the RSI is above 70, the asset is overbought, suggesting the price could soon reverse or pull back.
- If the RSI is below 30, it suggests the asset is oversold, meaning the price might rise or reverse.
- RSI values between 30 and 70 indicate that the asset trades in a normal range, with no clear overbought or oversold conditions.
- On-Balance Volume (OBV)
The on-balance volume (OBV) measures the flow of volume and its relation to price movements in the Forex market. It helps traders confirm trends by tracking whether volume is increasing or decreasing. How to read it:
- If the OBV is rising, it suggests that buying pressure is increasing, indicating the price may continue to move up.
- If the OBV is falling, it signals that selling pressure is increasing, and the price may start to fall.
- If the OBV is flat, it suggests there is neutral market activity, with no clear trend in price or volume.
- Moving Averages
Moving Averages are indicators used to smooth out price data and help traders identify the market’s overall direction in the Forex world. They show the average price of an asset over a specific period. How to read it:
Moving Averages
- If the price is above the moving average, it signals an uptrend, meaning the market is likely moving higher.
- If the price is below the moving average, it signals a downtrend, suggesting the market may continue to fall.
- When a short-term moving average crosses above a long-term one, it indicates a possible buy signal. If it crosses below, it may suggest a sell signal.
Which Platform Supports Them?
Knowing all these indicators is great, but it won’t mean much if you can’t implement them on your trading platform. That’s where a powerful broker like Fyntura comes in.
Fyntura provides access to the MetaTrader4 platform, one of the most trusted and user-friendly tools in the trading world. With MetaTrader4 in your hands, using indicators like RSI, Bollinger Bands, PSAR, OBV, and Moving Averages is just a tap away.
You don’t have to dive in with real money immediately; Fyntura offers a demo account to test all these indicators and practice your strategies risk-free. And you can grab a 100% deposit bonus on your first $100 deposit, so don’t miss out, act fast!
Start your trading journey with Fyntura today!
Conclusion
Now that you understand the language of indicators, you won’t have to wonder how great traders make their moves. Instead, you’ll be one of them.
The learning part is done, and the knowledge is in your hands. All that’s left is to put it into action.
With Fyntura by your side, you’ve got the perfect platform to turn what you’ve learned into real trading experience.
