technical forex1

7/28/2019 Technical Forex1

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Technical Indicators

Average True Range

Bollinger Bands

Linear Regression

Moving Average Convergence/Divergence (MACD)

Momentum

Moving Average

Parabolic SAR

Relative Strength Index (RSI)

Standard Deviation

Stochastic

Average True Range

Average True Range - is an indicator that measures volatility of the market.

Methods of usage are similar to the methods of usage of Standard Deviation

Value of this indicator is usually high if prices change sharply.

If the value of this indicator isn't high so the prices stay stable.

Before the significant rise/fall of prices the value of this indicator is usually low.

Bollinger Bands

Usage ofBollinger Bands is based on the fact that prices usually remain within the limits of

upper and lower borders. The variable width of Bollinger Bands is caused by volatility of prices

Methods of usage:

Sharp changes of the price take place after the line narrows.

If prices cross the borders of the line the current trend would stay.

When lines are narrow: The price movement started from one border usually reaches

the other border.
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Linear Regression

Linear Regression is a statistical method of following the trend. Its results are usually close

to the Moving average & methods of usage are similar.

Methods of usage

The direction of the indicator shows whether bullish or bearish trend is in the market at

the moment.

The Crossing of the indicator and the price chart confirms the trends change. It only

confirms because the change of this indicator is late in comparison with a price

change.


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Moving Average Convergence/Divergence (MACD)

Moving Average Convergence/Divergence (MACD) is an indicator that follows the trend. It

consists of Exponential Moving Average 12 periods (MACD is green), Exponential Moving

Average 26 periods (Signal is navy) and histogram (red) which shows the difference between

them. MACD is used when prices vary in the price corridor.

Methods of usage

When MACD is lower than Signal - you should sell.

When MACD is higher than Signal - you should buy.

MACD crossings with zero line up/down are being used as signals for buy/sell.


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Momentum

Momentum is the rate of acceleration of a currency's rates.

Methods of usage

As an oscillator that follows the trend: a signal for buy occurs when the indicator

reaches the bottom of downward curve and then starts growing; a signal for sell occurs

when the indicator the top of upward curve and then starts declining.

As a forerunning indicator: the proximity of the market to top/bottom is accompanied

by the drastic surge of the indicator, following by decline in the value of the indicator

while the rates continue to rise/fall (or move horizontally). In such case divergence

takes place.


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Moving Average

Moving Average shows the average price in the period of time defined by trader. Moving

Average of different types (Simple, Exponential, Weighted) differ from each other only in terms

of weight coefficients, which are assigned to the last data.

Methods of usage of Moving Average of different types are absolutely similar:


the moment.


confirms because the change of this indicator is late in comparison with a price change


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Moving Average

Moving Average shows the average price in the period of time defined by trader. MovingAverage of different types (Simple, Exponential, Weighted) differ from each other only in terms

of weight coefficients, which are assigned to the last data.

Methods of usage of Moving Average of different types are absolutely similar:


the moment.


confirms because the change of this indicator is late in comparison with a price change


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Relative Strength Index (RSI)

Relative Strength Index (RSI) is a price-following oscillator that ranges between 0 and 100.

There are 3 distinct zones in the chart of this indicator: Upper overbought zone. from 70% to

100%; Lower oversold zone. from 0% to 30%; Middle zone. from 30% to 70%.

Methods of usage

If the top of RSI was formed in the upper zone (overbought zone 'Right' 70%) and then

the indicator returned to the middle zone, the price would move in the same direction

If the bottom of the RSI was formed in the lower zone (oversold zone 'Left' 30%) and

then the indicator returned to the middle zone, the price would move in the same

direction.

Divergence: when price reaches a new minimum/maximum, but is not confirmed by a

new minimum/maximum on the RSI chart, the price correction takes place in favor of

the direction of RSI.

Note: On the RSI chart levels of support/resistance and reversal patterns are sometimes visible

more distinctly than on the price chart.


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Standard Deviation

Standard Deviation is a statistical measure of volatility. It's usually used not as a separate

indicator but as a component of other indicators.

Methods of usage

Value of this indicator is usually high if prices change sharply.

If the value of this indicator isn't high so the prices stay stable.

Before the significant rise/fall of prices of this indicator is usually low.


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Stochastic

This oscillator consists of two lines: main line is called %K (%K is Fuchsia color) and the

secondary is called %D (%D is Navy Color). In the main line (%K) fluctuations are usually more

distinct than in the secondary line (%D), because %D - is moving average for the line %K.

Stochastic indicator is measured on a scale from 0% to 100%.

Methods of usage

If both lines have topped in the upper zone (above 80% mark) and then the indicator

returned to the middle zone, the rate would move in the same direction.

If both lines have bottomed in the lower zone (below 20% mark) and then the indicator

returned to the middle zone, the rate would move in the same direction.

Divergence: if rates produce series of new minimum/maximum and the oscillator

doesn't then some rate correction is possible in the direction of the oscillator's

movement.


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