In training to trade in the Forex market, especially at the initial stage of such study, few of the traders turning their attention to the used indicators.
The importance of indicators
The vast number of not only beginners but also of experienced traders see in indicators just lines, and waiting then this lines will cross, to start buy or sell. However, this approach to the Forex trading is extremely improvident and sooner or later leads to a complete loss of the investor capital placed on deposit account.
Why? Because the indicators are perceived only as a graphical image which appears for some unknown reason. In the best case, the intersection of their lines or change of its normal state is perceived as a signal for the relevant transactions start. But such actions are more intuitive than analytical.
Meanwhile, each of the applied indicators in the Forex performs its own natural function. Knowing what kind of information each of them displays is especially important when designing a stock trading strategy, without which the trade is senseless. It is not enough to decide what strategy will be aggressive or stable, it is also necessary to decide how this aggressiveness or stability will be specifically expressed. For this you should to know is there a difference between the indicators and oscillators, how the oscillators can be used in the chosen strategy application in practice, what groups used Forex indicators are divided, for what purposes each of such group is used. Any chosen investment strategy implemented through a range of the standard tools provided by the Forex, but their combinations of each player are really unique. It’s like LEGO, parts are the same, and the finished products are different. Used in Forex indicators arranged in groups, are one of such tools.
The difference between the indicators and oscillators
As a rule, for trading on the foreign exchange market the MT4 terminals are used. Their preferred indicators are divided into three groups: the volumes, oscillators, trend indicators, and the functions of each of them is specific.
Such group of the indicators as volume can be used to identify the individuals who play in the big leagues. The decline or growth of the asset happened not on their own – they are caused by a throwing to the market a certain amount of money. A variation of the volume indicator precisely indicates that during the trade a capital release was happened.
The indicator group the oscillators are used by the experienced players as a kind of auto forecaster, predicting in advance that a sharp reversal of the market is possible, or there is a rolled back. Must to say, the most traders think the oscillators can predict the sharp turns of a global nature. It is wrong. Noticing by these indicators a rollback signs, the most seasoned players at this moment enter the market.
The trend indicators give to the traders an operational information about the situation in the market, reveal it global trends (the main game is going on rise or fall), and in what directions the trends are moving. For beginners in the Forex market is particularly important exactly this indicators group.
Thus, there is a difference between the indicators and oscillators. The indicators of the both groups informed about the current market operating environment and give a command to the understand people to wait with the entrance into the market. The oscillators predict the points at which this situation can dramatically change.
In the Forex market the stochastic oscillator is used. The changes of such market parameters as the resale and repurchase are analyzed by this indicator, and on this basis the possible state changes of trends are predicted.
However, should not be considered a group of oscillators with a sort of magic wand which allows to the traders, who recognizes the importance of it, to enter the Forex market ahead of most of their rivals. let’s not forget that this forecasting tool, which by its definition is of stochastic nature, and therefore the percentage of the false alarms supplied by the oscillators is quite high. Only a comprehensive combination of the all indicators groups advantages will allow to a trader to develop a trading strategy which will bring him a profit.