What do Indicators Indicate?

Just as the title suggests, what do they tell us?

I am a total newbie to forex, I have read babypips, but still cant get a handle on what the indicators are actually telling me..

for example. make a trade when the 34 crosses into the 170, what is the 34 indicator telling us, as well as the 170.

I read that the 200ma is true trend? is this what 200ma tells us?

They tell you metrics about historical price movement. They do not predict the future.

You can come to the same conclusions just looking at the price with on indicators on the chart.

The trend is up. Duuuuh. I don't need an MA to tell me that.

ok, they tell you the metrics about historical price movement.... and thanx so much for the Homer response. I too can tell a trend. how can i find out what each indicator is telling me.? I just did a search for "metrics of historical price movement" and came up blank,, well within FF anyways.. is there anywhere that has a list of what each indicator is telling me..
ie moving average:

A simple moving average (SMA) is the unweighted mean of the previous n data points. For example, a 10-day simple moving average of closing price is the mean of the previous 10 days' closing prices. If those prices are http://upload.wikimedia.org/math/3/d...af3829ff09.png then the formula is


http://upload.wikimedia.org/math/3/7...ed7d0201dd.png. this I understand..

[IMG]file:///C:/DOCUME%7E1/Dave/LOCALS%7E1/Temp/moz-screenshot-10.jpg[/IMG][IMG]file:///C:/DOCUME%7E1/Dave/LOCALS%7E1/Temp/moz-screenshot-11.jpg[/IMG]

An indicator is just that. Most of them lag behind price action because they need the data from closed time periods to produce the "math" result. They cannot predict the future any more than you or I can. But indicators allow us to do something more valuable.

By using indicators and oscillators, we are able to "reorganize" the price information into readilly recognizable patterns. Take a moving average for instance. Look back, as far as you like, and see how many times the price continued up after closing above a given moving average. From this we can draw a statistical probability that if the price closes above (long) or below (short) a particular moving average, then the probability is that the price will continue in this direction for a while longer.

This presents us with an opportunity to exploit that probability to our advantage.

You can say the same of an oscillator. For example if the price closes above a particular moving average, and the RSI reading is also above 50, there is a greater probability that the price will continue to move up than to move down. Thus we see an opportunity to exploit this probability and place a long position.

This doesn't mean that the price will ALWAYS move the direction "indicated" by these tools, only that it will PROBABLY move that way. The margin for success must be tested and an accuracy rating applied. For instance, a certain combination of "indicators" produces a 65-70% accuracy. This means that 7 times out of 10 the price will move the way we want and we can exploit that.

The other half of this is to prevent the price from slipping away from you during that other 30% of the time. So we place a stop according to how much we're willing to risk to see if the probability goes in our favor. By cutting those losers off quickly, we are free to exploit the remaining winning trades and make money.

Does that help?

you could take a look at

http://www.incrediblecharts.com

usually a good description of various indicators, how theyre constructed, and how they might be used.

thank you ! i can see clearly now, well, not so clouded anyways! Thanks again

it's really great that there are people who want to help newbies...because in the other way it's almost impossible understanding all it!
thank you

I was reading the thread “EUR/GBP scalping strategy?” and it sounds interesting but what does mean scalping? Is it reselling currencies with a higher price? Thanks

Q: What do Indicators Indicate?
A: Past!

Right, it's like reading the newspaper from two weeks ago.
And suddenly you don't know why everyone is is cheering OBAMA on the streets.

To answer myself scalping is to make many little trades trying to get little profits with small changes of price.

Now I found this:
“For example if your broker charges you 5 pips spread for opening EURUSD position and your target is 10 pips and 10 pips stop loss; the price have to move 15 pips (5 pips of spread + 10 pips your target) to take the profit while it have to move only 5 pips ( 10 pips your stop loss - 5 pips of spread) and stop loss level will be reached.”
And this:
“The most common increment of currencies is the Pip. If the EUR/USD moves from 1.2250 to 1.2251, that is ONE PIP. A pip is the last decimal place of a quotation.”

Some brokers have 4 decimals in pair price like Oanda but others have 5 like Tradeview. If I want to be a scalping trader, does it mean with a 5 decimals I can have less spread then less risk?

Thank you if you can answer

I investigated what scalping is. The risk depends on you. Usually they (scalping traders) try to put the SL 10 pips down your trade, but whit 5 decimals maybe you need to put 10 times more, I mean, 50 pips down, so you save in spread but the risk is the same. Remember who manage it is you.
See this http://forex.eazel.com/2006/06/15/scalping-strategy/
I hope this can help.