Trend Indicators in Forex
As a result they help to interpret the price movement of a currency indicating whether the price movement is strong or is likely to reverse.
Due to the trend indicators the price movement analyze the studying how its moving averages are trending. Either a simple moving average or an exponential moving average you can use and you can study any period of time.
Hence these characteristic features and the way of calculation of the following trend indicators can present.
Average Directional Index (ADI), Indicator Moving Average (MA), Indicator Moving Average of Oscillator (OsMa) and Parabolic Indicator.
Average Directional Index(ADX)
Also welles wilder develop a technical indicator which also designed to determine trend strength and further possible price movements.
it is comparing the difference between two consecutive highs and the difference between lows.
Actually the direction of indicator which is marked by bold line is believed to reflect the strength of current trend:
Hence the ADX rises (usually surging above 25) this implies strengthening market trend.
While the ADX falls this implies that trend development is doubtful. If the value is below 20 it is a sign of neutral trend.
There exist additional confirmation signals:
• Buy signal is generated if +DI (green line) climbs above -DI (red line).
• Sell signal is generated if -DI climbs above +DI.
How to calculate[share-to-unlock]
- ADX = MA [((+DI) – (-DI)) / ((+DI) + (-DI))] x 100;
+DI Plus Directional Indicator.
-DI Minus Directional Indicator.[/share-to-unlock]
Moving Average Indicator
first of all you must know that moving average is an instrument of technical analysis which displays the average price during a certain period of time.
That is also show smoother price fluctuations and determine the strength and direction of trend.
Therefore such method of averaging prices by which you know currency average so it is possible to distinguish between three types of moving averages.
simple moving average (SMA), smoothed moving average (SMMA) and exponential moving average (EMA). Furthermore traders use SMA for support and resistance.
Moving average and price movements:
And If price crosses its rising (falling) moving average curve from below (above) a strong buy (sell) signal arises.
Furthermore If price crosses its falling (rising) moving average curve from below (above) a weak buy (sell) signal arises.
Moving average curves of different periods:
While If a rising (falling) lower-period curve crosses another rising (falling) longer-period curve from below (above) a strong buy (sell) signal arises.
And If a rising (falling) lower-period curve crosses another falling (rising) longer-period curve from below (above) a weak buy (sell) signal arises.
finally it show currency pairs average to move further trend.
How to calculate
SMA = Sum (Close (i), N) / N,
Close (i) – current close price;
N – period of averaging.
EMA(t) = EMA(t-1) + (K x [Close(t) – EMA(t-1)]),
t – current period;
K = 2 / (N + 1), N – period of averaging.
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