Top 3 Technical Indicators that Traders Use

Technical traders use tools and indicators to help them deal with the market. The following are the most popular trading technical indicators you can learn to use to improve your profit-gaining abilities. 

Moving Averages 

 

These moving averages try to “smooth” out the price data by becoming a single-flowing line. This line shows the average price over a period of time. 

The trader Vlom Broker Review is the one to decide which moving average is best to use. And he does that by determining the time frame in which he or she will trade. 

Among the popular choices for investors and long-term trend traders are the 200-day, 100-day, and 50-day moving averages. 

You can use moving averages in a variety of ways. Check the angle of the MA. If it’s moving horizontally or flat, that means there is no trend in the market. Rather, it’s ranging. If it’s angled up, it’s an uptrend. But if it’s angled down, it’s a downtrend. 

You can also check for crossovers. When the 50-day moving averages crosses above the 200-day moving average, that’s what you call the golden cross. This is a buy signal, and it usually indicates bullishness on the asset. 

If the 200-day moving average crosses above its 50-day counterpart, it’s the death cross, which means bearishness in the asset. That means you may have to sell it. 

Moving Average Convergence Divergence 

 

Meanwhile, the MACD refers to the oscillating indicator that moves up and below zero. It’s a trend following indicator as well as a momentum indicator. 

One common Forex Brokers List way to use the MACD indicator is to see whether it’s trading above or below zero. If it’s above zero for an extended period of time, that means the trend will likely go up. 

If it is below zero for a longer amount of time, the trend is probably down. Obviously, an uptrend means a buy opportunity, while a downtrend means a sell signal.

A MACD also has two lines: fast line and slow line. You’re looking at a buy signal when the fast line crosses through and above the slow line, while a sell signal may be in place when the fast line crosses through and below the slow line. 

Relative Strength Index 

 

The relative strength index is also an oscillating indicator. However, it offers a different kind of information from that of the MACD in that it oscillates between 0 and 100.

A more common way for a trader to interpret the RSI is that when the indicator on the histogram is above 70. This means the prices are overbought and may be due for a correction. Meanwhile, if the histogram shows below 30, the prices might be oversold and are due for a rebound. 

During strong, uptrending markets, prices can stay above 70 for a prolonged period of time. Meanwhile, downtrending markets can push the indicator below 30 for an extended period of time.

And although the overbought and oversold signals are often accurate, they may not offer the timeliest signals for trend traders. 

To fix this downside, you can use trendlines and moving average with the RSI to establish a trend direction and to determine the direction to take trade signals. 

 

Leave a Reply