Forex indicators are the technical analysis instruments used for selecting the right point of entry into the market and the appropriate forex trade strategy. There are two types of Forex indicators: ‘Trend’ indicators showing tendency (up or down) and ‘Oscillators’ forecasting a market movement (without a marked trend).
Depending on the operational algorithms used, automated forex trade advisors, or automated forex trading robots, are capable of using several indicative forex trading instruments simultaneously. You can download our automated Forex trading indicators free of charge.
A ‘Moving Average’ (MA) is a classic example of one of the best Forex trend indicators. The line is built based on data from previous periods (candles) on which the average is calculated. The line will gradually move from one candle to another. The longer the selected period, the more ‘smooth’ the line of the Moving Average. When the line of the Moving Average crosses the price, it signals ‘buy’ (the price crosses MA bottom-up) or to sell (the price crosses MA up-bottom).
Some Forex trading indicators use a combination of signals. For example, a Stochastic oscillator or a ‘Stochastic’ is designed to determine ‘over-sell’ and ‘over-buy’. The Stochastic consists of two lines: fast (%K) and slow (%D). These lines indicate the position of the current price of bar closing for a definite period of time. A fast line is usually calculated based on the five previous candles. A slow line is a version of a fast line smoothed for three periods.
Automated forex trading indicators can sometimes give inaccurate signals, i.e. they generate much ‘noise’. To avoid it, filters are often used. For example, many traders use MACD indicator to detect the third (largest) wave when trading based on Elliot’s ‘wave’ theory.