Friday, 26 June 2015

Top 7 Technical Analysis Tools Securities

Basic Trading Concepts Defined

Relative Strength Index:
The relative strength index (RSI) is used to signal overbought and oversold conditions in a security. The indicator is plotted between a range of zero-100, where 100 is the highest overbought condition and zero is the highest oversold condition. The RSI helps to measure the strength of a security's recent up moves, compared to the strength of its recent down moves. This helps to indicate whether a security has seen more buying or selling pressure over the trading period.

The stochastic oscillator:
The stochastic oscillator is another well-known momentum indicator used in technical analysis. In an upward trend, the price should be closing near the highs of the trading range. In a downward trend, the price should be closing near the lows of the trading range. When this occurs, it signals continued momentum and strength in the direction of the prevailing trend. The stochastic oscillator is plotted within a range of zero-100, and signals overbought conditions above 80 and oversold conditions below 20. 

Tools of the Trade: Conclusion

The goal of every short-term trader is to determine the direction of a given asset's momentum and to attempt to profit from it. There have been hundreds of technical indicators and oscillators developed for this specific purpose, and these graphics have just revealed the tip of the iceberg. Now that you have been acquainted with a few of the basic indicators used in technical analysis, you can go forward and learn more - you are one step closer to being able to incorporate powerful technical indicators into your own strategies.

Reference: Investopedia

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