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Forex Indicators :

Forex indicators are secondary to trend analysis, which means their signals should be used to trade in the direction of the prevailing trend. There are around 99 different indicators available to traders, which are divided into two main types, namely leading and lagging. It is virtually impossible for all of the indicators to agree with one another all the time, so you need to learn which ones are the most important

Leading Indicators

Leading indicators are those which are believed to change in advance of changes in the economy, giving you a preview of what is going to happen before the change actually occurs. Regardless of their accuracy, leading indicators are helpful because they give an early warning of impending trouble. These leading indicators are used to find a breakout into an upward or downward trend and are often meant to identify reversals. Although the leading indicators are useful for forecasting turns, advance warning may be short. Two of the most well-known leading indicators are the relative strength index (RSI) and the stochastic oscillator. When leading indicators are understood, they can often be used to predict and affect outcomes.

Lagging Indicators

Lagging indicators are economic indicators which don’t usually move until after the economy has moved in a certain direction. Regarded as more useful during trending periods, the most well-known lagging indicators are the moving averages and bollinger bands. Governments produce certain lagging indicators such as the unemployment rate, business expenditures, labour cost per unit, loans outstanding, bank interest rates, and book value of manufacturing and trade inventories. Also known as momentum oscillators, these lagging indicators are observed as a way of confirming trends. Because they react rather slowly to economic change, they have no predictive value. They are things that have already happened so represent the current state of affairs and can confirm and verify long term trends. The downside of lagging indicators is that they are generally quite late and have been described as being like looking in the rear-view mirror.
One of the best indicators used within forex trading are Bollinger Bands, which were invented by John Bollinger in the 1980s as a technical analysis tool. They are widely used by Forex traders as an indicator which compares volatility and relative price levels over a given period of time. Most charting systems incorporate the use of Bollinger bands and are useful when used in conjunction with other types of indicator. Based upon a simple moving average, they can capture the vast majority of price movements and are one of the most recommended indicators to utilize for forex trading. For a more in depth look at Bollinger bands, John Bollinger has written a book “Bollinger on Bollinger Bands”, which has been translated into seven languages.

Forex indicators are usually included as part of any charting software that might be available from your broker. This type of service is normally subscription based so you should establish what is included in your package before shelling out. Most brokers offer a demo account and/or trial period for the charting software so you can try out the service to see if it is for you. There are free forex indicators available on the internet, however these are often of dubious quality and are often linked with websites that want to bombard you with lots of not very useful information.