What are technical indicators? Why do we need technical indicators and what are they?
Technical indicators is a trading tool that is used to find out in which direction, up or down, the market movement will go, that is, market prices. They are always used during the analytical forecast.
Every trader starts his working day with analytics. He finds out what will happen in the market in the near future, conducts a technical analysis in order to find out in which direction the market will go.
For beginners, it is enough to study the most basic indicators that will be used in his trading strategy or during market price forecasting. Below we briefly review the most popular indicators.
Moving average indicator
This is the easiest and most recommended technical indicator for beginners. Based on it, many trading techniques have been developed; it is used in various trading strategies.
Moving averages (MA) show the direction of the market movement over a certain period of time. For example, a beginner works with a chart, the timeframe (i.e. the time set for the chart) is 15 minutes.
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The trader has set the Moving Average MA13 on his chart. This means that the Moving Average has a period of 13, that is, the indicator uses 13 candles for its analysis. If MA200, then the indicator will use 200 candles.
Represented as dots, it also shows the direction of the trend and is considered a trend indicator. It is used in many trading strategies.
If the indicator dots are above the candlesticks, then the market is moving downwards. If they are below the candles, the market is in an uptrend.
This technical indicator shows the "demand" and "supply" that occur in the financial market. It consists of three parts:
- the overbought zone, has indicators from 75 and above;
- neutral zone, from 25 - 75;
- oversold zone, from 25 and below.
Now we will analyze everything in order.
This technical stochastic indicator is installed in a separate chart window, at the bottom. It has 3 divided zones and a line that shows which zone the market movement is in.
When the stochastic is 75 or higher, it means that the market has already entered the overbought zone. That is, there have already been purchases and trading assets in excess on the financial market, which means that you need to sell.
Therefore, it is necessary to open transactions for sale. If the stochastic value is 25 or lower, this means that the trading assets were all oversold and you need to open buy deals, that is, buy.
Also one of the most popular indicators. It is installed in a separate window below the chart. MASD has the form of a histogram.
Its columns are located above/below the zero mark.
If the price has crossed the zero mark and has one or two bars at the top of the histogram, then you need to open buy deals.
If it has crossed the zero mark, and columns below it have appeared, in this case, you need to open deals for sale.