Technical Analysis

Is the RSI the best technical indicator? There are plenty of traders who consider the RSI to be the single best indicator for certain types of trading, and those who rely heavily on monitoring short-term price movement as part of their trading strategy would never work without it. However, it is always dangerous to rely…

One of these chart-reading trading strategies is called the “head and shoulders” pattern. It is a widely used pattern that is commonly known as “shampoo” after the well-known shampoo brand. This pattern consists of three notable peaks: a high peak in the center of the pattern and two double peaks placed on either side of…

Lagging indicators A lagging indicator comes with a signal after a significant event occurs on the chart. This essentially means the indicator lags the price action after the event. The two most commonly used of these indicators are the simple moving average (SMA) and the moving average convergence divergence (MACD). An SMA indicator can fail…

The calculations behind the indicator The size of the movement is basically the momentum. To get to the momentum, you need to calculate the ratio of the present market price to the price at which it was a few periods ago. If you take the central line of the oscillator to be at the 100…

Consolidation Occurs Before a Trend Further study led me to the reason for the out performance. A period of consolidation in the stock market is followed by a trend then back to consolidation again. This is one of the few universal truths that has stood the test of time and continues to be relevant in…

One of these patterns is called a dead cat bounce, and it entails the correction of a bearish trend in price action. A dead cat bounce occurs when, for example, a stock is continuing in a strong downtrend. There will be a combination of short sellers and those who will close their position or change…

Technical analysis is limited to short-term and day trading Because technical analysis monitors trends over a shorter period of time than fundamental analysis does, it is often believed it is only applicable to short-term trading, high-frequency trading (HFTs) and day trading. The idea that it is limited to these forms of trading is not true…

These lines are created by connecting the highs or lows of each candlestick in the pattern. Therefore, these trendlines are also known as support lines in a trend, showing the direction and limits of the trend. The aim of trend analysis is to recognize potential in price action and enter or exit trades accordingly. Here…

Pattern types Each pattern creates a different visual shape on the chart and can be recognized by this shape. All of these formations allow you to monitor trends in price changes and use this knowledge when entering your own trades. One of the greatest benefits of this method is that it is not limited to…

These indicators fluctuate from one extreme to another, indicating overbought conditions, ie buyers have been over enthusiastic or oversold conditions with the sellers being over enthusiastic. It is likely that from any of these extremes the share will reverse. The 3 Indicators we’ll be looking at today are: Stochastics; Relative Strength Index (RSI); and Williams…

What is a bearish market? Identifying a bear market on the whole opens up several strategies as possibilities, including inverse ETFs. In short, a bear market is one in which prices are falling and everyone is selling; it could be a good time to pick up some bargains. On average, a bear market historically has…

Once you’ve come to grips with the fundamentals of the Elliott Wave, the next thing to master is the three ways in which these waves can be traded. Having a variety of trading strategies differentiates good traders from great ones and also makes you more resilient because you’ll have a profit-making technique suited to any…

Today we’ll will look at four chart patterns and how you can get the most out of these opportunities as they occur in the market. There are many more patterns that exist, however these four are relatively easy to identify and trade. The 4 Chart Patterns we’ll look at today are: Rounding bottom Wedges Ascending…

There is a good reason why CFD trading tips often revolve around the importance of technical analysis. Learning CFDs is really all about learning to monitor and predict price action, with little concern for the long-term value of the underlying asset or any other market condition. So, finding good technical indicators that focus on price…

Today we’ll take a closer look at the top 6 chart patterns and the best way to position yourself when they occur. Always remember the best course of action is to be educated on each pattern so you can instinctively know the best way to react. Rounding tops and V formations can signal the end…

The word fractal has been recognized in human thought for centuries. However, the man credited for bringing fractals to mathematics and science is Benoit Mandelbrot. Mandelbrot developed the Mandelbrot set – this is essentially an image which visualizes the results of an analysis. Before Mandelbrot introduced fractals to mathematics and science, fractals were a common feature…

There are a number of continuation patterns such as triangles, flags, pennants and rectangles. They occur mid-trend and are an indication that the trend will occur once the pattern is finished being ‘drawn’. You can find these patterns on all time frames, so there’s no need to fear that you’ll miss them on the weekly…

A grand master will look at the whole picture and from the whole picture draw a conclusion as to the likely moves of the opposition and the outcome of the game. The chess grandmaster started out as a beginner and had to learn the basics of the game as a new trader must learn the…

There is also a very committed subset of traders that subscribe to a set of rules known as the Elliott Wave Principles, or “EWP” for short. Complex would be an understatement when describing this analytical method. Its enthusiasts, at least the ones that believe and accept the basic premises, glorify its conclusions, as if delivered…

Do you want to be a discretionary trader, a systematic trader or a systematic discretionary trader? This question is crucial for your trading strategies and investment potential. Being a systematic trader consists of allowing the system’s algorithms a large level of – if not total – control over your trades. The idea of coding and…