The guy sitting next to you at work making all that money trading currency does not have a special Forex crystal ball. What he is doing to ensure continued profits in his trades is reading indicators and then basing his currency trading moves on them. Once you adopt this practice, how to increase your Forex trading account will no longer seem like such a mystery.
What are Indicators?
Trading currency requires knowing when to buy and when to sell and the sooner the better. This requires studying charts to see how the pair you are trading moves under current circumstances. These movements are known as indicators, and once you master them you will become that same Forex fortune teller as the guy in the next cubicle.
Identifying the Type of Market
When looking at a chart, the first thing you are going to want to pick out is the type of market you are dealing with. This will help you in determining the type of indicator you are going to use. A trending market is when the price of the currency is moving steadily, either higher or lower. These can be seen by long lines heading in one direction. Ranging markets are noted by strong resistance and support levels, where even with sharp fluctuations the currency is not breaking through.
MarketClub is known for our "Trade Triangle" technology. However, if you have used other technical analysis indicators previously, you can use a combination of the studies and other techniques in conjunction with the "Trade Triangles" to further confirm trends.
Williams' %R oscillator, attributed to Larry Williams, is a variation of the stochastics indicator previously discussed. Because the two oscillators are essentially the same, only minor modifications to the formula are required. The formula for calculating %R is: %R = Hn – C / Hn – Ln where Hn = highest high of the period, C = Close of the current period and Ln = lowest low of the period.
The %R oscillator differs from the %K formula in the stochastics indicator because the outcome of each formula is inverse to the other. In other words, %K compares the close with the lowest low, whereas %R compares the close with the highest high. Similar to other oscillators, %R is plotted with horizontal zones of 20% and 80%. When the indicator has a reading of -80% or below it signifies an oversold condition. Similarly, a reading of -20% or above signals an overbought condition.