Translated from Russian by Google Translate
24 Сентябрь 2008

School trader. Lecture “Indicators”

Modern technical analysis is replete with a variety of elements. There are many all kinds of analytical tools, resorting to the use of which a trader increases their chances of multiplying the capital. One of those elements of technical analysis are indicators whom there is now a great variety. So how, with such a diversity pick something that is inherent good that it will reflect your features inherent again, your trade? In this article we try to figure out what are the advantages and disadvantages of the indicators look at the differences that exist among the laggards indicators and faster.


If you are reading this article, then you will not be a new word oscillator. These concepts are similar but not identical. The fundamental similarity between the oscillator and an indicator is that the indicators often work in exactly the same as oscillators. And so it is important to know and be able to understand the signals that are fed oscillator.

Technical indicators are divided into several groups. Elements that are designed to indicate the trend, helped him identify. Oscillators are designed to help locate the area of rotation. Other indicators, such as the index of new maximum-minimum, provide an opportunity to understand the general mood of the market. Purpose oscillators - to determine the emotional peaks of the market mood. Generally, when trading in the Forex market, emotions are often overwhelmed the market contingent that could bring the market out of balance and make absolutely unpredictable kulbity. Therefore, professional traders, trying not to emotions and play as opposed to investor panic, they try to return the market in natural condition. And often the assistance of experienced traders are exactly oscillators, which give an important signal for the timely opening position.

Now let’s try to figure out what is a indicator.

Indeed the need to apply to trade in the Forex market indicators is acutely debated and discussed more than one generation of traders. One group of traders’ claims that the use of indicators can save time investors to analyze the market situation. Others have spoken in favor of a more thorough analysis of the market. Which category include himself, every trader decides.

So, the indicator - this point the data were obtained using a specified formula. The formula works on the basis of price. These figures include the price of opening and closing (high and low), as well as price extremes. Formulas for calculating the indicators can be quite varied. Therefore, there is only a standard installation, which is the starting point for the calculation. In fact, part of the formula can be quite diverse. It may be recorded as the closing price in one case, and other components, such as volume and so on.

For example, the three most recent closing price, form a single point of data ((56 +57 +57) / 3 = 39.66). Perhaps trader confronted for the first time this element of technical analysis, might decide that one such point of data sufficient to obtain complete information on the indicator, but it’s not the case. Many techniques Forex trading value attached to it reaffirming the elements. Similarly, here. To build a situation that will be subjected to comprehensive analysis is necessary to build a number of points within a certain time interval. By creating a group of these points, we have an opportunity to compare the figures for the last time interval and the present. To simplify understanding of the indicators are presented in graphical form. This is done to ensure that using such an indicator trader can compare data for the indicator to the price schedule.

Regarding again formulas, many indicators are based on different components. The simplest indicators are moving averages. This reliable, but at the same time, a simple element of technical analysis. Accordingly, and a formula for moving averages is quite simple. There are many other elements that are sufficiently complex to understand. Requires a certain amount of time to understand the essence of such items. What is the indicator to select for your trade is your business, but it turned out that the simpler part, so it is effective. Therefore, selecting an indicator for your trade, do not forget these simple rules.

As you have already understand the simplest, but at the same time, enjoy the most popular indicator is a simple moving average. The purpose of moving average - to follow the trend. Using the moving average, you can most likely determine the start or completion of the trends. The angle will allow you to draw conclusions about trends in force. At the same time, moving averages can be used as support and resistance levels (all depends on the values that are set moving averages). Moving averages are a kind of filter that cleans data from market noise and allows you to see a clearer picture. This element of technical analysis is included in most trading systems as components. Some call the trend line moving averages. Indeed, the essence of this does not change.

volatile

Fig. 1

Figure 1 clearly represented a situation where we can see quite high volatility of the currency pair. Without the need for specialized elements of technical analysis, it is quite difficult to determine whether the trend. In this case, the graphic image shows a situation where a moving average with a period of 10. As we see, when you use a moving average, the identification of trends is becoming much easier. But please keep in mind that in order to work moving average is necessary to set the correct value. Moving averages with great value will reflect the longer term, but at the same time, they will be delayed if the alarms when the turnaround trend. In turn, moving averages of less value to be more sensitive to fluctuations, but will often create redundant noise.

Now let’s define some, indeed, for what purpose are used indicators. If you are using to analyze the market situation in the Forex market indicators perform the following functions:

• advanced feature
• warning (the trader makes it clear that further movement in a direction more inappropriate and should reconsider its strategy regarding the direction of movement
• Confirm (gives a trader the information that its decision is justified)

To understand the indicators - thus able to correctly dispose of their investments, make informed decisions. And this is directly reflected in the financial portfolio investor. And even if you’re in their work using a reliable trading system would not be superfluous to obtain confirmation of trade signals performance indicators. The use of indicators allows for a more sober look at the prevailing financial market situation. But often use one indicator is not enough, because the vision of a coherent picture of a market requires a comprehensive analysis based on several performance indicators. Therefore, depending on the complexity of your analysis is conducted to differentiate the number of indicators.

When using indicators should be remembered that too uvlekshis their testimony, the trader is also in danger of losing their investments. This refers to the use of the indicator should not make you completely rely on its data. The indicator is pegged to the schedule, but trading Forex is why, and diverse and unpredictable that many seemingly simple things can behave in the same situation in different ways. Therefore, in reviewing the market situation is to pay attention to the schedule of prices and indicators balanced, to avoid mistakes. Keep in mind that indicators - are the same robots put some value formulas. Here there is no human factor, which in some cases played a crucial role. That is why very often one can observe the behavior of prices, which are not amenable to explain in terms of technical analysis. In such moments you can only help your intuition and the ability to make an informed decision in extreme situations. Indicators same, which is the argument in question, not a direct reflection of prices, they are only derivatives of it. This tells us that the indicator should be analyzed through the prism of price change.

Summing up the topic is worth repeating that the indicators there are many, but to correct their work, they must necessarily be in his place, that is used where they can get the most return. Most indicators are in themselves not effective, they can only work in conjunction with other elements of technical analysis. But the application for the analysis of a large number of indicators could significantly complicate the work. As we see, for the effective work best to pick two or three indicators that you are sympathetic and hard to study them, compare their testimony with the testimony of other indicators. Thus, through analysis and comparison of the various indicators you come to the conclusion that the appropriateness of your trading style of an indicator. The biggest impact may be obtained from the use of similar indicators together. Using the testimony of two complementary indicators of the most desirable than the use of one. It is understood that the use of two indicators to determine the trend does not seem appropriate. And to be using two indicators, which provide different information. For example, one - determines the availability of trend (say, moving average), second - shows the volume of trade over a period of time (indicator Volume). Also keep in mind that most deserve the confidence of those indicators, which passed the test of time.