Techincal Analysis

Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.

Indicators

Indicators are independent trading systems introduced to the world by successful traders. Indicators are built on preset logic using which traders can supplement their technical study (candlesticks, volumes, S&R) to arrive at a trading decision. Indicators help in buying, selling, confirming trends, and sometimes predicting trends.

Indicators are of two types:

• Leading - A leading indicator leads the price, meaning it usually signals the occurrence of a reversal or a new trend in advance. Leading indicators are notorious for giving false signals. Therefore, the trader should be highly alert while using leading indicators. In fact, the efficiency of using leading indicators increases with trading experience.

  A majority of leading indicators are called oscillators as they oscillate within a bounded range. Typically an oscillator oscillates between two extreme values – for example, 0 to 100. Based on the oscillator’s reading (for example 55, 70 etc.) the trading interpretation varies.

• Lagging - A lagging indicator lags the price; meaning it usually signals the occurrence of a reversal or a new trend after it has occurred. You may think, what would be the use of getting a signal after the event has occurred? Well, it is better late than never. One of the most popular lagging indicators is the moving averages.

Moving Averages

In an average calculation where the latest data is included, and the oldest is excluded called a Moving Average

Momentum

Momentum is the rate at which the price changes.