What are technical indicators?

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Technical indicators are used in forex to give possible buy and sell signals or to just to use as confluence before entering a trade. Each indicator interpret the price in its own unique way to increase the probability of a profitable trade. Indictors are usually divided into three categories, momentum, volatility and trend.

Momentum indicators

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RSI momentum indicator

Momentum indicators include RSI and stochastics, these indicators measure the speed of which the value is either increasing or decreasing, they are also oscillator type indicators which means they move between two points usually 0-100 and indicate overbought and oversold conditions.

Volatility indicators

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Bollingerband volatility indicator

Volatility indicators include Bollinger bands and average true range, theses indicators measure the amount a currency is moving up and down. A currency moving up and down at a high is rate seen as having high volatility and a currency with a low rate of movement has low volatility.

Trend indicators

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Moving average trend indicator

Trend indicators include moving averages and parabolic SAR, these indicators show the current trend and possible signals for a trend reversal. Trend indicators are a useful tool when trading, knowing the overall trend of the market is important for consistent profits.

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