|
Exponential Moving Average (EMA)
–
the 20-day moving average was determined after different tries
with long term like 50-day or even 200-day moving average.
The change of the 20-day moving average responds quicker to
price swings in strongly trending markets. More details are
given at the “investment
strategy” page.
Wilder's Relative Strength Index (RSI) - RSI is a momentum
oscillator that measures the speed and change of price
movements. RSI oscillates between zero and 100. Traditionally,
and according to Wilder, RSI is considered overbought when above
70 and oversold when below 30. Signals can also be generated by
looking for divergences, failure swings and centerline
crossovers. RSI can also be used to identify the general trend.
Slow
Stochastics - Stochastic attempts to predict turning points
by comparing the closing price of a security to its price range.
Prices tend to close near the extremes of the recent range just
before turning points. In the case of an uptrend, prices tend to
make higher highs, and the settlement price usually tends to be
in the upper end of that time period's trading range. When the
momentum starts to slow, the settlement prices will start to
retreat from the upper boundaries of the range, causing the
stochastic indicator to turn down at or before the final price
high.
When prices pop through and keep on going - that is, break out.
Rules to follow:
-
Increase long position - When price crosses the upper band
from below.
-
Increase short position - When price crosses the lower band
from above.
-
Liquidate position - When Stochastic %D crosses %K in
direction reversed to open trade.
Fibonacci
Retracement
Fibonacci retracement is a very popular tool among technical
traders and is based on the key numbers identified by
mathematician Leonardo Fibonacci in the thirteenth century.
However, Fibonacci's sequence of numbers is not as important
as the mathematical relationships, expressed as ratios,
between the numbers in the series. In technical analysis,
Fibonacci retracement is created by taking two extreme points
(usually a major peak and trough) on a stock chart and
dividing the vertical distance by the key Fibonacci ratios of
23.6%, 38.2%, 50%, 61.8% and 100%. Once these levels are
identified, horizontal lines are drawn and used to identify
possible support and resistance levels.
Using Pivot Points
-
When calculating pivot points, the pivot point itself is
the primary support/resistance. This means that the largest price
movement is expected to occur at this price. The other support and
resistance levels are less influential, but may still generate
significant price movements.
Pivot points can be used in two ways. The first way is for
determining overall market trend: if the pivot point price is broken
in an upward movement, then the market is bullish, and vice versa.
Keep in mind, however, that pivot points are short-term trend
indicators, useful for only one day until they need to be
recalculated. The second method is to use pivot point price levels
to enter and exit the markets. For example, a trader might put in a
limit order to buy 100 shares if the price breaks a resistance
level. Alternatively, a trader might set a stop-loss for his active
trade if a support level is broken.
|
