Oscillators and indicators are tools of technical analysis in forex trading, which help you to forecast the upcoming movements of the market.
There is truly overwhelming amount of indicators and oscillators today, which actually leads to more damage than any good. The whole idea behind indicators is to aid you in the analysis of the price action and the prediction of the future moves.
In order not to get lost with all the available indicators and all the presented information, we suggest focusing on only the important indicators for smart and successful analysis.
Below are the suggested indicators and oscillators:
Trend lines are indicators which connect the tops and the bottoms of prices.
A trend line which is drawn when the prices are moving up should be drawn so that at least two or more of the highest price bottoms are touching the line.
For the upward trend, the line represents support and if the price goes over the line, it is the indication of the change in the trend direction.
For the downward trend, the line represents resistance and if the price goes over the line, it is the indication of the reverse trend.
This is a great indicator to spot bullish or bearish trends in the forex market. It is advised to use the indicator for long term analysis, since it gives false information when used with short time frames.
This is one of the most used indicators among traders. Moving average shows whether the trend is bearish or bullish. In order to indicate the trend, in most cases 200 period movie average is used.
Commodity Channel Index
Here is another popular oscillator which suggests overbought and oversold conditions in the market. The levels on the oscillator are from 0 to + 300 above the center line or 0 to -300 below the center line. A level above 200 is seen as the overbought area and the level below -200 is seen as the oversold area.
Relative Strength Index
This is one of the most popular oscillators. It helps to recognize the change in the trend direction. when the market is going to change the trend direction. The oscillator outlines overbought or oversold situations when the oscillator line is beyond 70 (overbought) or beneath 30 (oversold).
This oscillator is used for short-term trading in order to identify the peak of the currency price ( above 75) or at the lowest point (below 25).