Technical Indicators in Forex Trading

A technical indicator offers an objective and calculation-based method to analyze a currency pair and its price. Since technical analysis involves analyzing and understanding the historical price and/or movement of currency pairs, technical indicators are also known as delayed indicators. The two basic and most significant indicators for technical analysis are:

Support: defined as the lowest price level at which people have an interest in buying a currency pair, which prevents it from any further decline. In other words, this is the floor price of a pair.

Resistance: defined as the highest price level at which people have an interest in selling a currency pair that prevents it from any further rise. In other words, resistance is the ceiling price of a pair.

The main aim of using Support & Resistance is to be able to understand the perceptions of the general investing community and to have reliable indicators of future currency movements. In order to profit from technical analysis, we need to issue stop orders before a currency pair reaches the support or resistance level.

Levels of Support & Resistance can be illustrated as Price Channels that are represented by a pair of trend lines plotting the price of a currency pair.

To know more about the other two important groups of technical indicators, click here.

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