Technical indicators are plugins programmed based on statistics from trading platforms that mathematically analyze the relationships between various elements to try to predict the price.
Both beginners and more experienced traders can use technical analysis. Technical analysis uses Forex charts to make predictions and take trading positions.
To do this, just study the simplest indicators, which will help us:
In general terms, there are four groups of technical indicators. The most popular are:
Source: EURUSD, Chart H1, MT5 Admiral Markets. Data range: December 18, 2019 to January 14, 2020. Performed on January 14, 2020. Note that past performance is not a reliable indicator of future results.
In this example, you can see how the direction of the moving averages indicates where the market can go. In addition, the rising or falling cross from the shortest to the longest moving average can act as a confirmation of the buy or sell signals.
Other very popular trend indicators are:
The moment indicators in the technical analysis are used to indicate whether an instrument is overbought or over-sold. This measures the speed and magnitude of price movements.
Source: Demo Account – MetaTrader 5 Supreme Edition – EURUSD – Graph H1 – Data range: January 2, 2020 to January 14, 2020. Performed on January 15, 2020 – Please note that past performance is not a reliable indicator of future results.
The latter group should be highlighted, since trading volumes are its main source of information. There is no doubt that the technical analysis of the total traded volume is useful for stock, futures or commodity traders .
Source: Demo Account – MetaTrader 5 Supreme Edition – EURUSD – Chart M30 – Data range: 10 January 2020 to 16 January 2020. Performed on 29 January 2020 – Please note that past performance is not a reliable indicator of future results.
They monitor changes in market prices and compare them with historical values.
Among the volatility indicators, we find:
Source: Demo Account – MetaTrader 5 Supreme Edition – IBEX35 – Chart D1 – Data range: May 10, 2019 to January 23, 2020. Performed on January 23, 2020 – Note that past performance is not a reliable Indicator of future results.
In the next section, we will explain how you can identify chart patterns on a trading chart. But, for that, it is necessary to know the different tools that we can use for this purpose.
The MetaTrader technical analysis platform, which you can find freely available through Admiral Markets, includes a wide variety of chart tools by default that can be used to identify chart patterns. Among these graphical tools, we find:
You can easily find these graphical tools in the “Insert” tab, at the top left of your trading platform, and selecting “Objects”. For example, let’s choose the popular graphics tool called “equidistant channel”.
With this tool, traders can draw upward, downward or side channels:
Source: Demo account – MetaTrader 5 Supreme Edition – EURUSD – Graph H1 – Data range: 21 January 2020 to 29 January 2020. Performed on 29 January 2020 – Note that past performance is not a reliable Indicator future results.