Using technical indicators 1

Once you tap into the use of technical indicators, and you master them, then you are on the beginning to making good profits from forex trading. In the use of technical analysis, the main tool is the price chart. But you also have to know that this is not the only importnt thing. You can just look at a price chart, and expect to drive your way into making profit.

Technicians have emplyed the use of candlesticks, bar charts, Xs and Os, and all these have helped them get into the basic of understanding the price direction, and knowing everything about it. In this section we will be talking moving averages. The moving averages indicator exist in 3 types.

We have the simple, weighted, and exponential. All these functions in different ways. Lets see them.


1. Simple moving average
With this indicator, you can give an equal weight to each price point over a period of time. Here the user will determine if the high,low, or close is used, then he adds the price points together and averages it. Then this individual price points are added to the previous string and a line is drawn. As new price points are added, the sample set will continue to drop off the oldest points.

This is actually the most commonly used moving average among all of them.


2. Weighted moving average
With this type, there is more emphasis on the latest data. There is always a weighting factor which varies from day to day. You will then multiply each data point by the weighting factor. When you use this, you will be able to smooth out a curve, and have the average to be very responsive to current price changes.


3. Exponential moving average
This also works like the weighted moving average. The exponential moving average multiplies a percentage of the most recent price by the former average price of that period. This is a more complex method, but once you master the logic, then you are on the go.

You can be sure that all 3 types of moving work different and you need ample time to study, draw, and plot as many lines as possible to be able to determine the market trend.

In short, being a technician is not a day's work, it is about devotion, and setling for the best and right indicator that works for you.