Technical Analysis (7) chart indicators

chart indicators

There is a variety of indicators, the number of which is estimated in the hundreds. Despite that, he only has the fame of them. These indicators provide help to know: Momentum changes, overbought and oversold, and repercussions or help you define your own risk metrics and place orders.

It should be mentioned that many indicators can be translated differently. We will next deal with the common methods; we like To read those means and look at the other means used by traders, to know how to use them in your favor.

Bollinger Bands Indicator

The Bollinger Bands indicator normally includes a 20-day simple moving average (which can be hidden) surrounding it. Two lines (or bars) deviate by 1 standard from the moving average price (1, +1) (the bars tend to pick up a lower A movement of the price between them, and they also appear when a buying or selling price saturation occurred when prices touched or It extends through one of the two lines.

We use Bollinger Bands to measure volatility in the market. These lines indicate whether the market is calm or not. vibrate. They contract if the market is calm, and expand if the market is volatile. Looking at the graph below, you can see that the two lines They are close to each other when the volatility of prices decreases, and they expand when the volatility increases.

Bollinger Bands Return (Bollinger Pence)

In view of For the charts below, you can clearly see that the price will fall back to the sector located in the middle of the two lines. The game is in Know when the price will return to that area. This is the Bollinger Bounce. This happens because the Bollinger Bands act as mini resistance and support levels. The strength of the line or tape depends on the time range used. The longer the time period, the stronger the lines of The strips. This technical indicator is useful for the markets that move in ranges, and do not have a clear trend.

squeezing Bollinger

Lines or strips are squeezed out of each other, and this happens during times of decline. Its name indicates it, as it refers to the situation of volatility in the market. In normal conditions, this indicates an imminent penetration. During those times, if I break through The price is the higher line, the price will continue to the upside naturally. On the other hand, if the price breaks through the lower line, it will continue Prices are in a downtrend.

Looking at the following price, we will see that prices have continued their upward trend. This was a modern way of working with Bollinger. These lines or stripes allow you to identify a possible movement, as quickly as possible, so you can get in and out. According to the information you have.

Average Convergence Divergence (MACD)

MACD shows the asset's momentum, and it consists of various moving averages in the time range (so they are For example, on 12 time periods, or on 26 time periods), and there is a signal line (Example: a moving average over a period of 9 time periods).

The MACD line (colored in blue) represents the difference between the fast-moving average (over 12 periods) and the average slow-moving average (over 26 periods). The signal line (highlighted in red) is actually a moving average of a 9-period timeframe, that average is for the MACD line. So, if the MACD line starts below the signal line, and intersects with the signal is above, this will mean that the upward momentum continues. And of course, if the MACD line is above the signal line, and the intersection With the signal line downwards, this will mean that the price is headed down.

You can also see the slow (26 periods) and fast (12 days) moving average in the graphs, and you can use it to get intersection signals. While you can see that the graph shows the difference between the MACD line And the signal line. The two lines skew and the graph expands, and when the two lines converge, the momentum returns to the neutral levels.

MACD transmission indicator

Since we have two moving averages of different momentum, we are expected to see the fast-moving average reacting. Faster price fluctuations, compared to the slow average. The importance of these lines lies in determining the income trend of the currencies. new. When the faster line intersects the slower line, the faster will start to move away from the slower line. when this happened, There is a new trend under development.

From the above diagram, you will notice that the green (fastest) line has passed below the violet (slower) line, which shows Clearly a downtrend. At the crossing point, the graph disappears. This is due to the fact that the difference between the two lines equals zero, and they converge. When the lines begin to diverge, the graphic expands.

Here is one thing to be careful of, which is that when using MACD it should be remembered that the average of these averages is based on Lots of old data, which delays the current market. Therefore, MACD is not suitable for finding entry points, but it is useful in confirming trends.

Parabolic SAR Indicator

So far we have focused on the technical indicators used to separate trends, and confirm those that already exist. but that That's important, we still need a way to know when the trend will end. In short, knowing when to enter the market is as important as Knowing when to get out of it.

One of the technical indicators is used to predict when the trend will end, and this indicator is the Parabolic SAR (SAR for short). The words stop and reverse). The parabolic SAR is formed from a set of points on the graph, indicating These points to the places where a reversal in the trend can occur. Looking at the graph above, we will see that the points change their positions from the bottom of the candle during the uptrend, to the top of the candle during the downtrend.

Parabolic is pleasing to use

Parabolic SAR is characterized by its ease of use. Basically, when the dots are below the candle, this means that the A buy signal, and vice versa, if the points are above the candle, this means a sell signal. This indicator is the easiest Using it, there are only two outcomes, either buying (the bullish trend) or selling (the bearish trend). Easily directional reversal areas.

Note: You should not use this tool when markets are volatile, and prices are moving in a range (i.e. no ascend or descend), because in that case, it will give you a false signal.

Stochastic indicator

Stochastic is one of the indicators used to determine when the trend will end, and it is called the oscillator stochastic. specializes In following up on the cases of oversold and overbought in the market. This indicator is similar to MACD in that there are two lines, one of which is faster. From the other.

Stochastics have a scale that ranges from 0 to 100. When the lines reach 70 or 80 or above, this indicates that The market is overbought. Conversely, when the lines are less than 30 to 20, this indicates that the market is in a Saturated condition of sale.

Looking at the above chart, we see that stochastics indicated the overbought state of the market, continuing for a period of time. Based on that observation, we can build a reasonable assumption that the market will be heading down soon.

Here, we see that the market has already headed to the downside after staying in the oversold state for a long time.

Relative Strength Index (RSI)

This oscillator was developed by J. Wells Wilder. The relative strength index is concerned with comparing the prices of the rising trend and the prices of the rising trend. The downward trend during a specific time period. It also helps in separating between the buying and selling saturation cases in the market. There is a scale from 0 to 100, and any reading below 20 to 30 indicates an oversold state. while indicating any A reading above 70 to 80 is overbought.

Use the relative strength index

The relative strength index is used in a number of ways, but some do not use it only to determine cases of overbuying. It is also used to enhance trend confirmation if it crosses the middle line (read 50 as you can see below). For example, you can see one thing if the asset extends up or down. But you also testify if the original in the low range (below 50) for a period of time, and finally broke through to the upper range (above 50) confirming the emergence of a trend ascending (and vice versa).

Note: There is no perfect technical indicator. For this, traders use a variety of indicators, to cover any defect that may exist. In one of the indicators.

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