Why use indicators? The general purpose goes without saying: “to be a successful trader and make money”.
I hope, in general, your purpose is similar. 🙂
How do indicators help do this though?
The purpose is to bring in the cash but there are three main functions of indicators that can help us do this.
Function #1 – Alert
For example, an indicator can alert us when there is a break out signal or a pair is overbought or oversold.
Function #2 – Confirm
They can confirm other methods of analysis. If we see a daily pin bar on a bearish candle, it’s hitting resistance, and we see through an indicator that it is overbought. That confirms a
possible sell opportunity.
Function #3 – Prediction
People sometimes use indicators to also predict future market directions.
Well, what are they?
Indicators are dervied from multiple calculations and points on the present chart. For example an indicator may take into consideration the close of the last bar. A simple moving average takes the closing prices over a specific period of time then divides them by the duration of that period.
Some of the calculations used for indicators are much more complicated than that but what is important is… how do we use them?
How they are used
Each indicator has it’s specific rules and roles.
This is why we have multiple articles on indicators available at Winner’s Edge.
Here is a list, enjoy!
More Indicator Articles
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