Home General Concepts of Indicators

General Concepts of Indicators

Using multiple indicators for trading signals

Price-sensitive techniques

Moving Averages - Gives the general trend of price based on its recent behavior and tells when the trend has been broken.

Relative Strength - Measures the strength left in a price trend by comparing number of up and down days over a recent timeframe.

Percentage R - This compares a day’s closing price to a recent range of prices to determine if a market is overbought or oversold.

Oscillators - Measure the momentum of a price trend based on recent price behavior.

Stochastic - Combines indicators like moving average and relative strength to measure overbought and oversold tendencies.

Point-and-Figure/ kagi - Plots trends and reversals in price movement and then gives buy/ sell signals based on recognizable patterns.

Basic Charting - Techniques for recognizing common price movement patterns and gaugingmarket movements.

Swing Charting - Provides rigid entry and exit signals based on recent price history.

Volume-sensitive techniques

Tic Volume - This is similar to On-Balance Volume, but looks at the volume and directions of individual trades.

On-Balance Volume - Discovers “smart money’s” moves by balancing the volume of days with rising prices against falling days.

Composite methods

Elliott Waive - Uses rules of cyclic market behavior and pattern formations to predict future price levels, trends, and reversal points.

How to use the tool kit of trading techniques

Price-sensitive techniques

Moving Averages - Gives very good signals in a trending market, but can reduce profits in a trading market.

Relative Strength - This confirms other methods in trading markets. Users have to keep adjusting the scale in trending markets.

Oscillators - Can confirm other techniques and indicate whether market is overbought or oversold and should be sold or bought.

Stochastic - Accurate for predicting trading market lows and highs.

Point-and-Figure - Gives acceptable results most of the time, but can be unreliable in strongly trending markers.

Basic Charting - Gives general framework for interpreting most other techniques. Volume analysis is an offshoot of basic charting.

Swing Charting - Works in trending markets. Combine longer and shorter period charts to avoid choppiness in trading markets.

Nifty Chart Showing RSI and Stochastic Nifty Chart Showing RSI and Stochastic Indicators

This post is licensed under CC BY 4.0 by the author.