Forex trading can be divided into two ways. Fundamental analyis and technical analysis. Fundamental Analysis is mainly based on economical news. Traders observe the news around the world for different currencies and take action accordingly in the trading. Technical analyis is predicting the price movements based on the past price movements. Technical analyis helps investors to predict what is likely to happen in the future, whether the prices go up or down. Technical analyis uses a variety of charts to predict the price movements.

So, what are technical indicators? Technical indicators are tools that help you to do the technical analysis. There are many technical indicators available for doing this. For example Bollinger bands is one of the technical indicator which is used by many forex traders. Relative Strength Index is another technical indicator used by many forex traders to know the over bought and over sold markets.

Technical indicators can be divided into different categories.

1) Leading Indicatos: A leading indicator is the one which gives you indications prior to the actual price movements. For example if there is a price reversal going to occur a leading indicator will give you indication about this possible price reversal before the actual price reversal occurs. That means the indicators lead the price movements so these are called leading indicators.

2) Lagging indicators: A lagging indicator is the one which gives you indications after the actual price movements occur. For example if there is a price reversal going to occur a lagging indicator will give you indication about this price reversal after the actual price reversal. That means the indicatos lag the price movements so these are called lagging indicators.

3) Trend Indicators: Trend indicators are used to indicate the direction of a trend. The basic rule that many forex traders say and follow is “Trade with the trend”. So these indicators are very useful to know the direction of the trend.

4) Volume indicators: Volume indicators show the amount of trades in a particular time frame. The higher the volume means there are more traders in the market that means more liquidity and less volatility. Traders look for increase in volume slowly in the direction of trend to enter the market. If there is any decrease in the volume that means that is a possible ending of trend.

5) Momentum indicators: Momentum indicators are oscillators. These can be used to find the overbought and oversold markets. If the price reaches the overbought region that means the buying of the currency pair is saturated and there is a possible reversal or a range market for sometime until a new trend starts. The same thing is also with the oversold region.

6) Volatility Indicators: Volatility means no trend. The prices won’t go in a particular direction. Volatility indicators can be used to find if the currency pair is going through any volatility or not.