1. Define your trading strategy A consistently successful trader always has a defined trading method. Guessing or going by your gut doesn’t always work. Without a defined trading method there is no way for you to know what constitutes a buy or a sell signal, or to even consistently identify the trend. Decide what your method is, which technical indicators or other tools...

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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. In trending markets, it can detect momentum change; while in ranging markets, it can spot overbought or oversold conditions. The RSI gives a reading between 0 and 100. If...

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MACD stands for Moving Average Convergence Divergence, and is an indicator designed to detect momentum change and signal overbought or oversold conditions. It is made up of two parameters: the ‘MACD line’ showing the difference between 12 and 26 period EMA, and the ‘signal line’ showing the nine day EMA of the MACD line. Sometimes it also contains a histogram which gives a...

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The chart below shows Moving Averages (MAs) for 20, 50 and 100 days. You can see the Mas generally moving with the price, and the price crossing the MAs when it changes direction. MAs are what we call a lagging indicator, meaning they follow the trend. You can also notice that the longer MA is a lot smoother than the shorter MAs –...

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We are about to look at a few major indicators that can be used during technical analysis by traders. Each indicator is suitable for different situations, so you need to know which work best under different conditions and base your choice of indicator on your specific needs. Some, like MA and MACD, work best in trending markets, while others such as the RSI...

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