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.
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.
Have a record of the last closing and opening prices of the stock on each separate date. Try to make a data for about two months at least with exact changes on prices for particular days of the week. Keep that data with you and try to ascertain what kind of changes are occurring and what are the things that are mostly making the changes happen.
Relative Strength Index
RSI or relative strength index represents the fact that whether the stocks are overbought or undersold. This indicator is typically helpful when the market is going for few of the stocks and neglecting the overall segment of the market. In this situation, it becomes really tricky which of those few stocks to buy and which one to sell. RSI can be governed using either the 80 20 rule or the 70 30 rule.
Matching with random market movements
At times stock market reacts very ferociously without any prediction applying to it. It may start moving up or down. In that condition choice of the right types of technical indicators is very important. If the market is going up, you should use the indicators that are implied especially for an upmarket and vice versa if the market is going down.
Using moving averages
Moving averages are very helpful in certain market situations. When the market is faced with tremendous pressure, then moving averages are used. The basic assumption behind the use of moving averages is that commodities cannot hold on to some upper or lower level without continuous buying or selling taking place in the market.