Author Topic: Popular Indicators  (Read 92 times)

Caesar

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Popular Indicators
« on: October 29, 2019, 05:14:21 PM »
There are a whole bunch of indicators out there, but what do each of them do? Below is a list of some of the most popular, the ones you are most likely to consider at some point or other. We are not recommending any of these, this is just an explanation of what they are.

MACD Moving Average Convergence Divergence.
This assesses the strength and direction of an underlying trend and helps flag a potential change in price ahead.
MACD takes the difference between two exponential moving averages (using closing prices) – the 12-day EMA and the 26-day are the most commonly used. Then the “signal line” (a 9-day SMA of the MACD itself) is placed over the MACD. It’s called the ‘signal line’ because when the MACD line crosses it, it’s a signal to either buy or sell.
When the MACD crosses over the signal line, this may signal an upward trend and could be a sign to buy. If it crosses below, thats a downward trend and a time to sell.
Divergence is when the lines go in opposite directions, pointing to a possible reversal.

Parabolic SAR
A trend-following indicator, this is displayed as a series of dots either below or above the price bars (depending on the direction of the trend) and is calculated using the most recent highest and lowest prices and an acceleration factor.
Signals are generated when the dots swap from above to below the price. It’s best for gauging momentum in the short term only and therefore likely to be most helpful for day traders.

RSI Relative strength index
Most useful in ranging markets, this helps show possible overbought or oversold scenarios.
If the RSI goes above 70, it is considered overbought. If it goes under 30, it is considered oversold. The 50 mark is also generally used to confirm a trend

Stochastic Oscillator
Like the RSI, this is useful in ranging conditions. 2 lines (called %K and %D) measure an asset’s closing price against the high and low ranges of its price over an adjustable period of time. The typical period of time is usually 14 periods, but you can alter this to reduce or increase the indicator’s sensitivity to the market.
This is used now to alert traders to overbought or oversold conditions. When the lines are above 80, an asset is thought to be overbought (and the trend likely to reverse so traders should sell) and when they are below 20, an asset is thought to be oversold (so traders should buy).

Bollinger Bands
Helpful for forecasting market movements. In a steady market, the upper and lower bands tend to act as support and resistance levels, encouraging prices back towards the middle in a phenomenon known as the ‘Bollinger Bounce’.

Ichimoku Kinko Hyo
Designed to give traders all the information they need using just one indicator, it can be hard for novice traders to read at first. It measures momentum as well as forecasting zones of support and resistance.
The five lines (tenkan-sen, kijun-sen, senkou span A, senkou span B and chikou span) are calculated using the highest high prices and the lowest low prices of different lookback periods. The lines show different key levels of support and resistance, as well as signals for reversals and tactical places to plot your stop loss points. Despite all this, most experts recommend using other forms of technical analysis with it.

eddieb

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Re: Popular Indicators
« Reply #1 on: October 31, 2019, 02:48:12 PM »
Good to see nice, clear explanations of these  :D

Markaria

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Re: Popular Indicators
« Reply #2 on: November 20, 2019, 10:08:32 PM »
Are there any of these indicators that you suggest for different things, like one is best for commodities,  another best for foreign exchange,  or does this not matter.