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Category Archives: Technical Indicators Tutorial

What are Technical Indicators?

Technical indicators provide traders with precise measurements of price action by performing a wide variety of mathematical analysis on price. In this chapter, we will focus on several popular technical indicators used in the currency market to gauge both trend and counter-trend conditions. The indicators examined will include Bollinger Bands, RSI, Stochastics, Moving Averages and MACD. Indicators can be divided ... Read More »

What Are Moving Averages?

What are moving averages? Moving averages calculate the average price of a currency pair in a given period of time. They smooth out price action and are typically used as a tool to determine trend direction. The period of time can be measured in days, hours or minutes. For instance, a moving average that measures the average price over the ... Read More »

What is the RSI or Relative Strength Index?

The Relative Strength Index (RSI) identifies whether a specific currency pair is overbought or oversold. A currency pair that is overbought means traders have theoretically pushed the price to very elevated levels and therefore the rally may soon lose momentum. Currency pairs with the RSI in oversold territory suggests that traders have pushed the price to very low levels and ... Read More »

What is a MACD or Moving Average Convergence / Divergence

What is MACD? MACD stands for Moving Average Convergence Divergence. The indicator determines whether the trend of a given currency is bullish or bearish. There are 3 components to the MACD indicator: a faster moving average, a slower moving average, and a histogram that calculates the difference between the faster and slower moving averages. The default settings for the MACD ... Read More »

What are Stochastics?

What are Stochastics? Stochastics provides possible points of reversal in price by attempting to determine when a market is overbought or oversold. An overbought level suggests traders have pushed the price to extremely elevated levels and therefore the rally may lose momentum. A currency pair with Stochastics in the oversold territory suggests that traders have pushed the price to very ... Read More »

What is ADX or Average Directional Index?

What is ADX? Average Directional Index (ADX) determines the magnitude and strength of a particular trend. ADX does not indicate direction of the trend, it merely states the strength of the trend. ADX is scaled from 0 to 100, 100 being the highest trend possible and 0 being no trend whatsoever. Generally, a reading above 60 is considered rare. Therefore, ... Read More »

What are Bollinger Bands?

What are Bollinger Bands? Bollinger Bands plot standard deviations above and below a moving average. Typically, Bollinger Bands use a 20-day simple moving average. On a chart, the middle line represents the moving average and the two outer lines represent the Bollinger Bands. The upper Bollinger Band is typically calculated two standard deviations above the 20 SMA. The lower Bollinger ... Read More »
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