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Technical Indicators and Trends

Technical Indicators are an integral part of technical analysis. Until recently, technical indicators were only available to professional traders and brokers but now with the advent of the Internet and the explosion in popularity of online Forex trading, technical indicators are built into many platforms and available to all online traders. Here at ECMarkets, it is possible to use a wide array of technical indicators to aid your trading strategy.

Reasons to Use Indicators

Technical Indicators primarily serve three purposes:

To Alert – A Technical Indicator can be used as an alert for traders, telling when there is a break of support and when there is a resistance breakout.
To Confirm – Using Technical indicators are great ways to confirm the accuracy of other technical analytic tools.
To Predict – It is possible to use Technical Indicators to make predictions regarding future price movements.

Trends

A Technical Indicator displays the price action of an asset by way of graphical representation. By applying a mathematical formula to the price information of an asset, a series of data points are formed and a Trend can be identified. This trend highlights the direction the market is heading and is crucial for traders to recognize trends in order that they can trade with the trends as opposed to trade against them.

Trend Lines provide one of the most basic yet influential indicators to the majority of traders – both short term and long term. The three different types of trend are:

Upward Trend - Often referred to as a ‘Rally’; when the market trends rise – RISING TRENDLINE
Downward Trend – Otherwise known as a ‘Downtrend’; when the market trends decline – DECLINING TRENDLINE
Sideways Trend – Often referred as ‘flat market’ or ‘trendless’; when the market doesn’t trend – SIDEWAYS TRENDLINE

Regardless of the direction, a trend can be categorized by its length:

Short-Term Trend - This is a trend that normally continues for a maximum of 3 weeks
Intermediate Trend – Normally continues between 3 weeks to 2 or 3 months
Long-Term Trend – Sometimes called ‘Major Trend’. Made up of a few intermediate trends; often moving against the direction of the long term trend. These are normally considered to continue for at least a year or more.

HIGH RISK INVESTMENT WARNING: Trading Foreign Exchange (Forex) and Contracts for Differences (CFD's) is highly speculative, carries a high level of risk and may not be suitable for all investors. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin. Please click here to read full risk warning. ECMarkets.com is a trading name of Safecap Investments Ltd, a Financial Services Company authorized and regulated by the Cyprus Securities Exchange Commission (CySEC) under license no. 092/08. Safecap Investments Ltd Is located at Treppides Tower, 6th Floor Kafkasou 9, Aglantzia P.O.Box 26522 CY2112, Nicosia, Cyprus.