What is a Forex Indicator?
A forex indicator is a technical analysis tool that uses mathematical calculations based on price, volume, or open interest data to forecast future price movements. Indicators are displayed as overlays on price charts or in separate windows and help traders identify trends, momentum, volatility, and potential entry/exit points.
Types of Forex Indicators
Main categories include: Trend indicators (Moving Averages, MACD, ADX), Oscillators (RSI, Stochastic, CCI), Volume indicators (OBV, Volume Profile), Volatility indicators (Bollinger Bands, ATR), and Support/Resistance indicators (Pivot Points, Fibonacci). Custom indicators combine multiple calculations for unique analysis.
How to Use Indicators Effectively
Best practices include: never rely on a single indicator, combine indicators from different categories for confirmation, understand the logic behind each indicator, avoid indicator overload (2-3 is usually sufficient), and always backtest indicator combinations before live trading.
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