iCharts Discussions

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Forex is the biggest market when it comes to average investment. This market rises over the other financial markets with the average investment of $4trillion on a daily basis. It is quite obvious that traders want to jump into the universe of profit making opportunities that currency market offers. Forex market operates 24 hours a day being affected by a wide range of factors. The dynamism that prevails in the market is beyond explanation. Traders who can use proper trading skills and analyse the market well can benefit from the market that appears risky in the first look.

For online forex investment, you need indicators. They are used under the technical analysis. Indicators help in calculating trends, volatility in the market, money flow and momentum using price and volume data. When a trader is analysing the market for particular asset, indicators can act as a secondary means to measure actual price movement. They help in two ways- they confirm price movement and the quality of patterns that are appearing on charts. The buying and selling signals become more evident with the use of indicators.

Types of indicators
Indicators can be broadly specified into two categories- leading and lagging. What are these? Let’s discuss.

Leading indicator
A leading indicator is an indicator that helps in calculating economic factors. This indicator shows a change before a trend or pattern is being followed by an economy. Economical changes are predicted through leading indicators. Some indicators help the investors to anticipate and speculate on economical trends. Although they are not always accurate, traders can gain insight about the way towards which the economy is headed.

Lagging indicators
Indicator that is lagging, becomes indicative only after the economy has started following any pattern or trend. Traders use this technical indicator to identify transaction signals. The lagging indicator is also a useful tool to confirm the strength of a trend. This indicator is evident only after a shift economy takes place.

While lagging indicators is used by traders as a confirmation tool, leading indicators provide them predictive quality. Leading indicators perform stronger when the market is not trending. The lagging indicators are very useful during trending period.

There is another way of categorising indicator types, and that is based on range. Some indicators are range bound while others are not. The range bound indicators are called oscillators. Oscillators are one of the most common and widely used indicators.

Indicators are useful in many ways. There are two ways in which indicators are used to form buying and selling signal. Crossover and divergence help in creating these signals.