MACD stands for Moving Average Convergence Divergence, and is an indicator designed to
detect momentum change and signal overbought or oversold conditions.
How can you use it:
- Follow the momentum: The MACD line crossing above the signal line is a buy signal, and crossing below is a sell signal.
- Detect the momentum change: Overbought and oversold signals are generated when the MACD line moves far above or far below the signal line."
The RSI or Relative Strength Index is an indicator that measures the strength of all upward movements against the strength of all downward movements, and identifies turning points by indicating overbought and oversold levels.
- The RSI gives a reading between 0 and 100.
- If it is greater than 50, the upward force is stronger than the downward force. And if it is below 50, the downward force exceeds the upward force.
- RSI usually travels between 30 and 70. An RSI above 80 indicates that the instrument we are looking at is overbought, pointing to a potential sell opportunity.
- An RSI below 20 indicates an oversold market and gives a potential buy signal.
- The price is making lower lows while the RSI is making higher lows, signalling divergence. After such a pattern, we can expect the downtrend to slow down or reverse and vice versa.
KDJ indicator is invented by George C. Lane.It is a practical technical indicator which is most commonly used in short term market trend analysis.
The KDJ indicator is actually a derived form of the Stochastic with the only difference being an extra line called the J line.
The J line represents the divergence of the %D value from the %K.
A negative value of J combined with %K and %D at the bottom range indicates a strong over sold signal.Likewise, when the J value goes above 100, combined with %K and %D at the top range, it will indicate a strong over bought signal.
The exponential moving average together with two stand deviations above and below the EMA form the Bollinger bands.Accordingly, 95% of prices fall within the bands and the bands widen when market volatility increases and vice versa.
Bollinger bands are closely related to the chart pattern. When Bollinger Bands narrow, the volatility is low. The market is more likely to be in sideway. Bollinger Bands can help to forecast reversals, as prices are likely to bounce off the upper and lower bands. It also helps to adjust our trading according to the volatility. For times of low volatility, the stop loss may be placed closer to the entry point.
When Bollinger Bands widen, the volatility increases. It’s more likely to be in trending markets. After we identify the trend direction, we can look to sell when the price touches the upper Bollinger Band if the market is in a downtrend, and look to buy when the price touches the lower Bollinger Band if the market is in an uptrend. Besides, the stop loss should be further away from your entry point during time of high volatility. Remember, as always, the Bollinger bands are best used in combination with other indicators to avoid false signals.
Developed by Donald Lambert, the Commodity Channel Index (CCI) is a versatile indicator that can be used to identify a new trend or warn of extreme conditions. Lambert originally developed CCI to identify cyclical turns in commodities, but the indicator can be successfully applied to FX and other securities.
CCI measures the current price level relative to an average price level over a given period of time. CCI is relatively high when prices are far above their average and it's relatively low when prices are far below their average. In this manner, CCI can be used to identify overbought and oversold levels comparing the benchamarks of 100 and -100.But within the range of 100 to -100, the indication is not meaningful. Hence, this indicator is more designed for the extreme situations.
Introduced by Welles Wilder, ADX is used to determine the trend strength.ADX calculations are based on a moving average of price range expansion over a given period of time.It's usually used with other momentum indicators and chart patterns.
ADX cannot tell you where the market will go, but it can help you to quantify the trend strength.The higher the ADX, the stronger the trend. Investors can compare few consecutive ADXs to analyze the change of the trend strength.
MTM is also called Dynamic Index, which is the abbreviation of ‘Momentum index’. It’s a short to medium term technical analysis tool, specializing in analyzing the stock price fluctuation. Momentum index aims to analyze the speed of stock price volatility , and to study the various accelerations, decelerations, inertia effects of stock prices in the process of volatility and the phenomenon that stock prices change from static to dynamic or from static to dynamic. The theoretical basis of the momentum index is the relationship between price and supply and demand. When the momentum reduces gradually, and the speed of variance slow down, the trend would be reversed. The increase in stock price must be gradually reduced with time, the speed of change will slow down, and the market can be reversed. And vice versa. On the contrary, the decline is also true. The momentum index is this way by calculating the rate of fluctuation of stock price, we can get the different signals of the stock price entering the strong peak and turning into the weak trough, which becomes a kind of market tool for investors. The momentum index get the signals of peaking and bottoming by calculating the rate of fluctuation of stock price, which makes it a prevailing tool.
The dynamic variance of stock price can reflect by the curve composed of the daily momentum point. The momentum change of the stock price in the fluctuation can be reflected by the curve of the daily Momentum Point and the momentum line . In the Momentum Index graph, the horizontal line represents the time, and the vertical lines represent the momentum range. Momentum to 0 as the Central line, that is, the static speed zone, the center line is the upper part of the rising price zone, the lower part of the share price down zone. The momentum line periodically moves back and forth around the centerline according to the stock price wave, thus reflecting the speed of stock price fluctuation .
Gann Angle Line (Gann Fan), referred to as Gann Line, also known as Kane Line , is a common technical analysis tool for domestic investors, but due to the uniqueness of this tool, some stock analysis software is not well versed in it. It is undoubtedly a pity that the operator has no way to appreciate the powerful market-measuring effect of the Gann line. The angle line is an important part of Gann's theory series, it has very intuitive analysis effect.The crisscross trend line provided by the angle line can help the analyst to make a clear trend judgment. Therefore, the angle line is a set of inexpensive and analytical methods that anyone can easily learn with little time.
When it comes to the meaning of the angle line, Gann declared: "When the time and price of a square, the city's running potential is imminent." "Indicates that the angle line is not a trend line in general sense, and it promotes a unique analysis system based on the concept of time price two-dimensional space." As a result, analysts pointed out that the angle line is Gann's greatest invention, it opened the time and price irreconcilable but inseparable pattern, from the operational point of view, this is even the most valuable part of technical theory.
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