Technical Analysis – Other Technical Indicators to Consider
Like the previous two articles suggested, the most popular indicators are trend ones and oscillators. These are not all the categories that exist, though. The MetaTrader, and not only, is offering volume indicators as well, custom indicators too, that cannot fit in either the trend indicators category nor in the oscillators one. These indicators are still technical ones (everything that is not related to economic news or data is technical) but are not that common like the ones mentioned earlier in the Trading Academy. It doesn’t mean they are not offering valuable information, only that they are if you want, second tier ones, when it comes to their popularity. Below you can find some categories of other technical indicators, but keep in mind that there are others too.
Different Technical Analysis Indicators
Some of the indicators that fall into these categories are well-known ones as they are used in popular trading strategies, like the VSA (Volume Spread Analysis) strategy is. Others are simply showing the same thing like normal trend indicators or oscillators.
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Volume based analysis have the tendency of being quite accurate. If one can know precisely the supply and demand level for a product, prices can be easily anticipated based on disruptions that occur with this balance. Unfortunately, with a financial product, is not that easy to do that. And this becomes impossible in the Forex market. While Forex brokers offer the possibility to see the volume of a specific currency pair, please note that this is only the volume traded on that broker. While it does offer a glimpse or an idea about the overall volume, it is not relevant to use it with volume based theories. Imagine that on the Forex market, retail traders are representing around five percent of the parties that are exchanging currencies every day. Other parties are commercial and central banks, other Forex brokers, liquidity providers, money managers, etc. The volume traded by these parties is not shown with the volume indicators to be seen at any retail Forex broker. This tells much about their usefulness.
The Volumes indicator is the most famous in this category. It shows vertical bars at the bottom of a candlestick chart and these bars correspond to each candle. If the chart is a monthly chart, one bar will show the traded volume in a month. Again, for that respective broker, not for the entire market. The Money Flow Index is an indicator that repaints hence is not much of a useful one for a proper analysis. Repainting means that previous values the indicator shows are changing based on current ones. Consequently, there cannot be made a proper analysis using these types of indicators. The other two that can be seen in the chart above are showing the same thing.
Bill Williams Indicators
Bill Williams had a vast contribution to the technical analysis field. All the indicators listed below are of his own making and mark a cornerstone for the technical trader. Moreover, William’s Percentage Range is one of the most famous oscillators, and it belongs to the same guy. These indicators are both trend and oscillators, and, used together, are supposed to offer a general view of the current stance of the market.
The Alligator indicator is a trend indicator based on three different moving averages. Actually, it is resembling the classical moving averages indicator, but the formula behind is a bit different. Nevertheless, the display on the chart is formed out of three lines that intersect and keep a clear order when the market is in a strong trending phase, either bullish or bearish. The moment that the fastest line is crossing the next one, the market is about to change as the trend is weakening. Fractals are tricky as they disappear if the price that follows a fractal is making a new high or low when compared with the period the fractal is set to show. For that reason, while it may seem that they are offering a valuable information, fractals are not to be trusted. The Market Facilitation index is one that repaints, and this makes it difficult to use and interpret current prices. Moving forward through that list above, the Accelerator Oscillator is, like the name suggests, looking like a classical oscillator. It is not repainting, overbought and oversold levels can be identified, and divergences work like a charm. That is unless the market is not trending!
The Custom Indicators list is different from broker to broker and from trader to trader. Such a list contains the indicators set as default by the Forex broker, as well as the indicators that are imported in the trading platform. To import an indicator, one must have it saved on the PC, and then to upload it to the MetaTrader platform. This can be easily done via a pasting it in the right folder. Once imported, that new indicator will be part of the Custom Indicators tab. Therefore, the list componence is one that is random from trader to trader and from MetaTrader to MetaTrader.
Some of the indicators listed above are already on other indicators categories we’ve already mentioned, like the Alligator, Ichimoku, MACD, Momentum or the Accumulation indicators. Just that they are listed here as well. The Awesome indicator you’re seeing in that list is an oscillator. It is more accurate even than the RSI, even though this is subject to interpretation. Both divergences trading and overbought and oversold trading can be accomplished with it. It is truly a wonderful oscillator. The Heiken Ashi is a Japanese indicator that allows seeing candles in one single color that defines the overall trend. If specific conditions or price levels are not met with future candles, even though a classical candlestick will be red in a bullish trend, the Heiken Ashi will interpret it merely as a correction and the underlying trend will be still bullish. The opposite is true in the case of a bearish trend, as well. From this point of view, Heiken Ashi keeps traders with the eyes of the overall trend, and the temptation to close a trade at any small pullback is overrun. Besides the categories mentioned here, there are other technical analysis indicators, like math indicators, statistical ones, logarithmical ones, and the list can go on. The idea is that for every type of trader, for every personality, there is an indicator that can help the trading process. There is no indicator, though, that can win trades for you on its own. Trading is not an easy task and to be good in the art of speculation involves more than just setting an indicator on a chart and buying the oversold or selling the overbought levels. Fundamental analysis and macroeconomics are playing an important role in correctly identifying what a currency pair is going to do, as well. After all, what is Forex trading if not comparing two currencies against each other and trading based on the outcome?
Recommended Further Readings
- Forex Trading – Explaining the Concept
– What is forex trading, generalities about trading the currency market.
- Why Trading Forex?
– Advantages and disadvantages of trading the currency market, what are trader’s expectations and what is a realistic approach to follow
- What is a Forex Broker and Types of Brokerage houses
– Explaining what a Forex broker is and does, how the business should be organized, and how many types of Forex brokers exist.
- Financial Products to Trade
– Different categories of financial products that a Forex Broker is offering for the retail clients, starting with the classical currency pairs, and continuing with commodities, CFD’s, indexes, etc.
- Forex Trading Sessions and Their Importance
– Explaining the differences between the three Forex trading sessions, what are their importance, ranking, etc.
- Forex Brokers Types – ECN or STP?
– What is ECN, STP, how d- brokers deal with client’s orders, advantages, and disadvantages of the tw- types.
Other Educational Materials
- Computational learning techniques for intraday FX trading using popular technical indicators. Dempster, M. A., Payne, T. W., Romahi, Y., & Thompson, G. W. (2001). IEEE Transactions on neural networks, 12(4), 744-754.
- Foreign exchange trading rules using a single technical indicator from multiple timeframes. Deng, S., & Sakurai, A. (2013, March). In Advanced Information Networking and Applications Workshops (WAINA), 2013 27th International Conference on (pp. 207-212). IEEE.