SOME TECHNICAL TERMS ABOUT FOREX TRADING AND THEIR DEFINITION
Different Terms in Forex and Definitions
1. OSCILLATOR
Oscillators are designed to show when a security is overbought or oversold. They are frequently used as a barometer to measure pricing momentum as it relates to trend extension, exhaustion and market reversal. Oscillators are strategically valuable as they aid the trader in determining market state, as well as market entry/exit.
2. Technical analysis
By definition, technical analysis is the study of past and present price action for the accurate prediction of future market behaviour. The premier tools for the practice of technical analysis are known as indicators.
3. ATR (Average True Range)
It is an easy to read technical indicator designed to read market volatility. When a Forex trader knows how to read ATR, they can use current volatility to gauge the placement of stop and limit orders on existing positions. ATR is considered a volatility indicator as it measure the distance between a series of previous highs and lows, for a specific number or periods. ATR is displayed with a decimal to indicate the number of pips between the period highs and lows.
4. BEARS POWER
Bears Power is used to estimate power of the Bears (Sellers). Bears Power estimates the balance of power between the bulls and bears. This indicator aims at identifying if a bearish trend will continue or if the price has reached a point where it might reverse.
5. COMMODITY CHANNEL INDEX
Commodity Channel Index (CCI) indicator measures the deviation of the commodity price from its average statistical price.
There are two basic techniques of using Commodity Channel Index:
Finding the divergences
The divergence appears when the price reaches a new maximum, and Commodity Channel Index can not grow above the previous maximums. This classical divergence is normally followed by the price correction.
As an indicator of overbuying/overselling
Commodity Channel Index usually varies in the range of ±100. Values above +100 inform about overbuying state (and about a probability of correcting decay), and the values below 100 inform about the overselling state (and about a probability of correcting increase).
6. DEMARKER
The DeMarker indicator is an oscillator designed by Tom Demarker which attempts to identify new buying and selling opportunities. The DeMarker Indicator is similar to the Directional Movement Indicators developed by Welles Wilder.
Demarker produced his indicator to try an overcome the problems associated with other technical tools used in the market to identify overbought and oversold trading conditions of a stock or commodity.
The DeMarker indicator tracks the market sentiment of a stock or commodity by comparing the asset’s present price to that of the previous period. The main concept behind the DI is that it can be used to detect changing market interest in a stock and by doing so identify market tops and bottoms.
The DeMarker indicator oscillates with a range between -100 to 100 and makes no attempt to filter its raw data.
The DI is useful in identifying trade exit and entry points.
There are, in fact, two variants of the DeMarker indicator with one operating between -100 and 100 whilst the second has a range between 0 and 1. Both operate using the same formula.
Reviewed by Mgbara Zion Barisuka
on
September 23, 2020
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