Forex Indicators Role In Trading

Forex Indicators help you a lot In the Forex Trading, indicators play a vital role in prediction. With the help of indicators, traders can guess if there is a trend reversal or not. There are endless technical indicators that you can use to get help in the Forex Trading. Though there are endless technical indicators but these can be categorized for better understanding. The two main categories of indicators include Leading Indicators and Lagging Indicators.

Leading Forex Indicators

These indicators give buying or selling signals to the traders and investors before the market takes turn. Leading indicators tell the top or bottom of the Forex Trading market but do not include any specific price levels in their prediction. These indicators also do not tell about the duration of move. There are too many technical indicators known but not a single that is correct in prediction every time. Leading Indicators are good for the beginner traders because prediction can be done using these indicators much before the market turns and so the traders get enough time to plan and prepare for the trades.

There are some drawbacks of the Leading Indicators. One major problem with these indicators is that these indicators advice the traders to open a position much before the market is expected to turn so if the trader opens a position at the time when predicted by the technical indicators then there are possibilities that market may move in the direction opposite to predicted. If the traders are opening position with high risk, then they may lose all their money in the expectation to earn quick profit. So the traders should not open a position including high risk if he is using predictions made by the leading indicators.

Lagging Forex Indicators

These indicators are also known as the trend-following indicators because these indicators do not predict market movement before it really happens. These indicators follow trend and if the market moves then these indicators also moves after the market movement. The disadvantage with these indicators is that the traders are not able to make maximum profit from the market movement. Traders will only be able to grab a significant portion of profit before the indicator changes its direction again.

Lagging Indicators may give less profit than the Leading Indicators but frequency of earning profit using Lagging Indicators is more than the Leading Indicators.

So if a trader is using Leading Indicators then he should trade with low risk but if he is using Lagging Indicators then he can trade with comparatively higher risk.