Technical analysis is based on studying price performance of a certain asset. It is a mathematical calculation not based on economic and political factors. Past performance of the assets show the possible price changes in future and traders use this to make accurate trading decisions.
The Usage of Currency Trading Indicators
Technical analysis is a versatile tool, since it can be used not only for Foreign Exchange market, but for CFD market too. Currency trading indicators, in fact do not in any way differ from indicators that can be used for other instruments. Indicators are universal and their application depends on trader`s skills and preferences. That is why it is not appropriate to allocate the “currency trading indicators” term and refer to it as a special set of indicators initiated for analyzing currencies.
Generally, technical indicators can be successfully used for analyzing currencies, indices, commodities and stocks. It can assuredly be mentioned that any chart that shows any kind of trends, can be analyzed through technical indicators that result in more accurate and rational trading.
Types of Technical Indicators
There are four types of technical indicators: impulse, trend, volatility and volume. Impulse indicators measure the speed or strength of price fluctuation and change of the direction. Trend indicators show the directions of trends and since trading in the direction of a trend is always advisable, these indicators are very important. Volatility indicators, as it can be implied from the name, show the changes of the market volatility. Volume indicators generally are not used for currencies, since traders cannot see the volumes of transactions in the quotations. That is why this type of indicators is used for CFDs and futures and they show the volume of trades of the given financial instrument.
It is worthy to mention that technical analysis can be used with fundamental analysis, since they complement each other. However, it is a matter of preference and the way to use any technical analysis tools may differ among traders.
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