There are dozens of different indicators out there but you might be confused on which to use as a beginner. I was started with MACD, moving averages and RSI, stochastic etc as my early journey of buying some local country stocks. Technical indicators are often crucial to aid some trader as guide to make decisions to buy sell, limit, stop etc., which are based on numbers, Maths! Statistics, they called it. As we've been learned more and more different indicators, one can find out some are useful for themselves but it may not work for others. I did a little research as a newbie, so that I could spend sometimes writing and also have some brief ideas when I pick through different indicators.
Basically the websites / articles has split the categories of indicators per timing, which are lagging indicators, and leading. A lagging indicators make use of current prices as input variables, allow traders to confirm price trends before entering the trade. A leading indicators designed to anticipate future price movements, forecast future markets sentiments. The examples of leading indicators can be candlestick patterns.
There are also breakdown indicators by it's function. Mainly trends, momentum, volatility, and volume. For Trends indicators, designed to show traders directional targets, either bull (upward trends), bear (downward trends) or sideways. Examples of trend types indicators will be MACD, linear regression, forecast oscillators.
For Momentum indicators, are used to measure the speed of asset price movements in a give range of time. Examples of momentum indicators are RSI, stochastic. It's often relate momentum to its overbought and oversold conditions. For instance, when both RSI and stochastic below 20 , it indicates reduction of downward price momentum and it may cause a price reversal in that conditions.
Besides, for Volatility indicators used to predict the price fluctuation, for example sudden spike sharp swings. Examples of volatility indicators are ADX, ATR(Average True Range Indicator), Bollinger Bands.
Lastly, Volume indicators indicate the measure of the amount of traded financial assets in a given period of time. It's simple and often being neglected. Some of the examples of volume indicators are VPT (Volume Price Trend Indicator) and OBV (On-Balance Volume Indicator). Volume indicators are also often used with trend indicators to confirm market trend.
**For the next article, We wanted to discuss about which time frames to look at or details of some of the indicators discussed in this article. Thx for reading.
Comments
Post a Comment