Forex Trading Indicators: Do They Actually Work?

Dec - 17

Forex Trading Indicators: Do They Actually Work?

The reason why we trade is to get a positive result or, in other terms, profit. Many beginner traders are keen to know whether technical indicators will offer them good trading signals. According to the forex reversal website, the fact is that technical indicators do not always translate to profits, but they will create a good pathway for you. There are no doubts that a professional and skillful trader can achieve the positive result without indicators, but they can be of great benefit to you.

In fact, technical indicators can perform several tasks:

•  show something that is not clear or obvious;

•  help to generate a trade idea;

•  save time for the market survey.

Every technical indicator is dependent on a mathematical formula. These formulas provide the exact calculations of several price parameters and then view the result on the chart.You don’t need to carry out any calculation on your own: just proceed to MetaTrader file, click on “Insert” and then select an indicator you would like to incorporate into the chart.

In the same vein, technical indicators carry out their calculations based on the price value – the currency quotes, which can be viewed on the trading software. As a result, indicator shave their own weak spots: they can provide signals which fall behind the price(for instance, the price falls down rapidly after getting alert from the indicator).

The exciting news is that there are ways of gaining something from technical indicators. We will explain the processes on how to carry out this task in this article.

Bollinger Bands – indicator to measure volatility

These Bands helps to evaluate and determine the market volatility (i.e. the level of discrepancy of a trading price).

Technical principle: Bollinger Bands is made up of 3 lines. Each line (band) has an MA feature. The middle band is generally a 20-period SMA. It recognizes trend direction – as applicable to the MAS highlighted above. Lower and upper bands (or “volatility”bands) are altered by two standard deviations below and above the middle band.

In simple terms: Bollinger Bands indicator sets the price in a kind of box sandwiched between the two outside lines. The price often revolves around the middle line. It can go beyond the outside lines, but that only happens for a short period of time and it won’t go beyond that. After such variation from the center, the price will go back to the middle. You will also discover that the Bollinger lines come closer together during some periods of time, while at another time, they spread and the range enlarges. Note that narrow range translates to low market volatility and, vice versa, the bands enlarge when the market becomes more volatile.

Advantages of Bollinger Bands:

The indicator offers a great benefit in a sideways market (where a currency pair is performing its trading activity in a range). For such a scenario, the lines of the indicator are often used as resistance and support levels, where traders can access their positions.