Technical indicators of the Forex market do not take information out of thin air; they are all based on some market parameters and the appropriate calculation methods. Each indicator is calculated according to its own rules and there is no need to describe them all. In this article, I will try to describe only those Forex market parameters that can fully describe the technical side of the trading process.
- Trend — a direction of the price movement. The Forex market can be in some kind of trend or go sideways. The trend itself can be measured by its direction, starting/ending point, ranges, and the inner volatility.
- Volatility — a statistical measure of the number of the price changes over a certain period of time.
- Momentum — a measure of price movement strength in terms of pips per tick.
- Cyclicity — it is difficult to measure but it still exists in the financial markets (and in Forex too). The measure describes the cyclical nature of the price movement.
- Volume — a number and size of transactions in a given amount of time. In Forex, the lack of real volume information is often compensated by the so called tick volume — a number price ticks during a period.
- Support and resistance levels — they can be hard to spot, but the Forex market generally bounces off of them or breaks them with significant price action.
- Trader expectations — they can rarely be seen directly on charts, but they are the part of the technical picture of the market. Stop and limit orders are the important parameters of the market that should be taken seriously. They are part of the market sentiment analysis.
Some technical indicators use only one or two of these parameters; very few of the standard MetaTrader 4 indicators incorporate more than two technical parameters. And I do not know any indicators that are based on the market cyclicity or traders' positions.
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