Alpha is one of the best technical indicator used by most traders in forex technical analysis. This indicator is quite useful and handy to use.

Alpha indicator measures the residual risk of an investor then used as a result of investment in a fund, rather than in a market index. The Fund is an alpha of zero, if a fund produced the expected return on the amount of the alleged threat.

Alpha = [ (sum of y) - {b * (sum of x)} / n ]:

n – number of observations
b – Beta of the fund
x – rate of return for the benchmark index (often, but not always, the S&P 500)
y – rate of return for the fund

Related Articles

From ForexRealm
Alpha indicator represents the distinction between a mutual fund’s actual performance and the expected performance based on the risk level taken by the fund’s manager. (full article)

From Linnsoft
Alpha is a measure of residual risk of an investment relative to some market index. Alpha is expected to be equal to risk-free rate times (1 – beta). (full article)