## Top Five Technical Indicators are the best friends of a Trader

Technical analysis represents the sentiment of the market at a particular time period or during the stretch of a time. Technical analysis has been improving and adding in new things for its followers. As we have already discussed that technical indicators analyze the psychology of investors in a stock market, it is important to understand that dependence on one particular technical analysis indicator won’t be recommended at all. Here are top five technical indicators that can help ascertain the possible direction of the market.

#### Volume

The volume of a stock traded in a market speaks volumes for that stock. Volume shouldn’t be looked at in isolation. Usually, it has to be associated with the price in the market at that time. If you can tightly monitor and correlate the movement of each with the other, this can also help you in determining the probable course the market is going to take.

## An introduction to moving averages

The following article is an introduction to moving averages for those new to technical analysis. After trend lines, moving averages are probably the best known of the tools used by the technical analyst. This is in part due to the fact that their concept is easily understood by the novice trader or investor and also because their usefulness (in a trending market) can be easily demonstrated. In its basic form, a moving average is no more than a smoothening of the closing price line chart. It is a trend following indicator which means, firstly, that its action lags behind price action, and secondly, that its direction reveals the direction of the trend.

### Calculation of a Simple Moving Average

A moving average is described by the number of periods being averaged (the length, or speed, of the moving average). For example, if you wanted to calculate a 10 day moving average of the closing price of a stock, you would add up the last 10 days of closing prices, and divide by 10. That would give you your first point on the chart. To obtain the second point for the moving average line, you would drop off the 1st day and average the 2nd to 11th days. And so it goes on, the average “moving” so that the last 10 days of price are averaged.

Excel exercise: Take Last 10 days close prices of any stock and use the function =AVERAGE(Your range)

In practice, your charting program does these calculations and the moving average is usually plotted as a line on a price bar chart.

## The 50 and 200 Day Moving Average Trading System

### The 50 and 200 Day Moving Average Trading System

I have always been interested in mechanical trading systems and I began to use different systems to trade the markets in the 90s. Later on, when I had access to a good computer, I back-tested the most promising systems for 10 years of price data for the BSE SENSEX. The Sensex is ideal for back-testing because it does not trend as smoothly as many things you could trade. If a system works with the Sensex, it has to be pretty good! Most of the trading systems I tested showed poor results against this data series. The short-term trading systems fared the worst.

The only system I tested, which is good enough to actually use in the stock market is the 50 and 200-day moving average crossover system. The rules are simple: when the 50 days moving-average of the NIFTY crosses above the 200-day moving average, buy the NIFTY at the open the next morning; stay long until the 50 day moving average crosses below the 200, then liquidate the position the following morning. This is a long-term trading system which gives infrequent signals. It keeps you in the market during protracted rallies but gets you out soon after a serious correction gets underway. And if the correction turns into a multi-year bear market, the system will keep you on the sidelines for the duration.

The 50 and 200 Day Moving Average Trading System does not do quite as well as a buy-and-hold strategy, but it does capture most of the upside with a lot less risk.
During the 10 year test period there were several lengthy whipsaw markets, which resulted in 3 or 4 unprofitable trades in a row. It would have been hard to stick with the system during one of those difficult periods, but if you had, you would have done quite well in the end.

Nifty is the ideal vehicle to use with the 50 and 200 Day Moving Average Trading System, but it works well Continue reading “The 50 and 200 Day Moving Average Trading System”

## Types of Charts

There are as many types of Charts and ideas as there are chartist and profitable traders who make money from their squiggly lines on graph paper.

### Line Charts

The simplest is the basic line chart which we see in the newspaper each day. Generally, these use only the closing price for the day, week or month as a representative sample of the time period being looked at. With daily charts, the closing price also carries increased significance as this is the settlement price which has to be paid at the end of each trading day for the parcel of shares or contracts.

# What is Elliott Wave?

According to the Elliott wave theory, a total of eight waves represents an entire movement of a price cycle. Out of eight waves, five refers to as Impulsive waves and three and remaining three referred to as Corrective waves.

At the point when the essential market pattern is bullish, impulsive waves are in the direction of the trend (upwards) whereas corrective waves are opposite to the trend (downwards).

Similarly, once the first market trend is pessimistic, impulsive waves are in the direction of the trend (downwards) whereas corrective waves are opposite to the trend (upwards).
The above pattern formation doesn’t rely on a time frame. You’ll be able to observe Elliott wave patterns in Intraday charts still as monthly charts. However, the likelihood of false waves decreases in higher time frame charts.

#### There are three general wave theory rules in Elliott wave theory:

• Rule 1: Wave 2 cannot retrace more than 100% of Wave 1, means wave 2 cannot go below the start point of wave 1.
• Rule 2: Wave three will never be the shortest of the 3 impulse waves. (Generally, it is the biggest wave and most furious).
• Rule 3: Wave four can never overlap Wave one.

Elliott Wave Principle: Key to Market Behavior

Developed by Ralph Nelson Elliott in the 1930s and ’40s, the Elliott Wave Principle is a powerful analytical tool for Predicting Share market behavior. The basic idea behind the Principle is that Share market prices rise and fall in discernible patterns and that those patterns can be linked together in form of waves. Since, its inception, this classic guide to the Elliott Wave Principle has acquired a cult status among technical analysts, worldwide. And with each new edition, the authors have refined and enhanced the principle, while retaining all the predictions from past editions. This book clearly describes Elliott Wave theory and applications and includes the authors’ latest forecasts, including their prediction of the great bear market to follow the past decade’s bull market.
`You can Buy this Book from below link:`

#### Trading Calculator 1: To find Support and resistance levels of stocks.

Enter these details:
HIGH: Enter High of the day
LOW: Enter low of the day
CLOSE: Enter the Previous close price of the day. (If using for intraday purpose then Close means Current price)
( Refresh page to find another stock level)
All you need to do is enter your data in Non_Yellow cells only.

#### Trading Calculator 2: To know how much Quantity to buy for a stock as per your risk tolerance levels of stocks.

for example: for Risk reward ratio 1:2, You enter 2
We prefer and advice to Trade only those stocks where risk reward ratio is greater than 1:3 in delivery
and greater than 1:2 in day trading.
All you need to do is enter your data in Non_Yellow cells only.
If you have any feedback about Trading calculators or want to see any other calculators. Please e-mail me (contact form)