Welcome to our Forex 101 Technical Indicators post. In this post, we will endeavour to teach you the basics of technical indicators and how they can be used in Forex trading. There will be several posts that lead on from this one, links and details can be found on our Forex 101 Indicator Basics page.
What are indicators?
Technical indicators formulate price data and display the results as overlays on price charts (i.e fancy lines, waves, arrows and other drawings). There are countless indicators available when trading Forex, our website will share some of the popular indicators and how you can use them in your Forex trading analysis.
Below is a screenshot of a 1 hour EURUSD price chart with some popular indicators...
Why use indicators?
Analysing charts using price action is the foundation of chart analysis (if you need a refresher, take our Forex Price Action Course). Technical indicators can be used to support and/or confirm your price action analysis and can help identify potential price behaviour that you may have missed. Technical indicators can be used to spot price trends, ranges, market momentum and price reversals.
What types of indicators are there?
Leading indicators can signal potential market movement before it happens.
Lagging indicators signal a market movement that has already happened.
You may be thinking, 'I am only going to use leading indicators. This way I can get on every trend early and make lot's of money'. The truth is, indicators are not that reliable. They should be used as a confirmation of price action analysis or as part of a trading strategy - not as the strategy.
Do I have to use technical indicators in Forex trading?
No. Some technical analysts and traders focus on price action only. It is purely a personal preference whether to use indicators or not but we suggest that you at least learn the basics of indicator analysis before making-up your mind. Some traders believe that technical indicators can distract from price action.
Go to our Forex Indicator Basics page and click on the relevant links.