Technical Parameters of the Forex Market

Monday, August 18, 2008
The technical indicators of the Forex market don’t take information from the air; they are all based on some of the market’s 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’ll try to describe only the actual Forex market parameters that can fully describe the technical side of the Forex trading.
  1. Trend — a direction of the price movement. 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.
  2. Volatility — a statistical measure of the number of the price changes over a certain period of time.
  3. Momentum — a measure of price movement strength in a term of pips per tick.
  4. Cyclicality — it’s hard to be measured, but it still exists on the financial markets (and on Forex too) and describes the cyclical nature of some price movement.
  5. Volume — the number of the transactions (price changes for Forex) in a given amount of time.
  6. Support and resistance levels — they can be hard to spot, but Forex market generally bounces off of them or breaks them with a significant price action.
  7. Traders’ expectations — they can’t be seen from 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.
Some technical indicators use only one or two of these parameters; very few of the standard MetaTrader 4 indicators use more than two technical parameters. And I don’t know any indicators that are based on cyclicality or trader’s positions.