Currency Trading Online
Currency Trading Indicators: There are
hundreds available, and it is impossible to cover them all. To
be honest, I only use one or two, and would suggest that if you
are a novice trader, that you do not try to understand them all
- it will take you too long and you will end up totally confused
with a screen so full of lines, the candlesticks will be
buried underneath. Personally, I only use support and resistance
and simple moving averages - nothing else.
Currency Trading Online : Leading or Lagging
As I'm sure you know by now, we have no volume in currency trading (although there is something called tick volume ) from which to analyse any move we may see on the candlestick charts, so we have to use other indicators which sadly do not give us the same level of insight into future price movements. So where do we start, and how do we keep it as simple as possible? Firstly, there are two principle types of indicator, leading and lagging, but to me virtually all of them are lagging. The simple reason is that they are all based on mathematical analysis of past history, and attempt to use this information to forecast future movements. Using past history therefore means as indicators they lag behind the market. There is no indicator that I know of, other then volume spread analysis, which will forecast future price movements by a common sense analysis of the price volume time relationship. All the 'black box' systems, red and blue signals etc are all based on historic analysis of past data, so you will always be trading after the event. I'm sure some people reading this will disagree, but let's just assume they are all lagging. If they were leading, and any good, the inventors would have taken over the world by now!!!!
Currency Trading Online : Fibonacci
Any charting system will provide you with the opportunity to try this indicator. In simple terms it is based on a number sequence discovered by Leonardo Fibonacci. If we take the sequence : 1, 1 , 2 , 3 , 5 , 8 , 13, 21 , 34, 55, where each number is added to its predecessor in the sequence, and then divide this number by the result i.e. : 21 + 34 = 55 and 34/55 = 0.618, the number that we reach is 0.618 in every case. This ratio is called the golden mean. It is a ratio that occurs in many places in nature. Currency traders use it to identify support and resistance levels and is based on the premise that as this is a naturally occurring phenomenon it should apply to the markets. Try it and see - I'm sure you will find it works some of the time, and not others. If everyone else is buying when you buy and sell when they sell, then it must be right some of the time!
Currency Trading Online : Elliot Wave
Elliot
wave theory is another number sequence indicator based on a 5 -
3 'wave' effect. In essence Elliot believed the markets moved in
ordered patterns rather than being chaotic. The indicator
assumes that following a period of 5 'up moves' ( in purple )
then this will be followed by 3 down moves ( in red). The up
move is constructed of higher highs and higher lows, which is a
typical up trend. The one thing that all these indicators have
in common is that they will have been back tested to prove that
they work all the time. If this were the case, it seems logical
that everyone would be using them all the time and no traders
would ever lose any money. Of course this is not the case. These
indicators work some of the time - the problem of course is you
never know when they will work and for how long. Again, all good
charting packages will have these indicators - please give them
a
try.
Currency Trading Online : Bollinger Bands
Bollinger bands were developed by John Bollinger in the early 1980's. The bands consist of three lines drawn in relation to the financial instrument. The middle line is a measure of the intermediate term trend, an average if you like. The two other bands form an 'envelope' above and below the prices. The distance between the upper and lower bands is a measure of volatility as the bands are calculated using standard deviation - you see - historical again! Quite what they are supposed to tell you that isn't immediately obvious is beyond me. You can see when prices are moving up or moving down, you don't need three pretty lines on the screen to show you this happening. By the time they suggest a change in direction the move has already happened - not much help really, but try them anyway and if you have any long term success - please let me know and I will revise my opinion.
So which indicators do I use for my currency trading - see the next page but they are all very simple so you have been warned!!