Technical Analysis tool with Bollinger Bands, RSI, Stochastic and MACD - Singapore Forex Trading, Singapore Forex Academy, Singapore Forex Association

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Technical Analysis tool with Bollinger Bands, RSI, Stochastic and MACD

Forecasting tools common chart (Chart Indicators)

What is the toolbox of the transaction? Simply put, your toolbox is what you will use to build your trading account.
For this lesson, you learn forecasting tool (indicator, hereinafter referred to simply as the only tool ). You may not need to use all these tools, but it is better for you to have the option. Let's start.

5.1 Bollinger Bands

Bollinger bands are used to measure the volatility of the market. The tool tells you the market quiet or active! When the market is quiet, shrinking ice sheets; and the vibrant market wider band. Note on the chart below the price band almost stand still close together, but when prices rose ribbon expand outward.
That is all what we have. Well, I can continue and annoy you with the history of the Bollinger band, how to calculate it, the equation behind it and again, but I really do not want to give more.
I think the important thing is to show you how to apply the Bollinger bands to your trading.
5.1.1 The Bollinger Bounce
The first thing you should know about Bollinger bands are the prices tend to go back between bands. This is the whole meaning of the Bollinger bounce. For this case, look at the chart above you can tell how the upcoming price?
If you answer correctly, you are down! As you can see, the price back down to the area between the bands.
That is all what we have. What you just saw was a classic Bollinger bounce. The Bollinger bands act as support and resistance levels small. For a longer time frame, the band will be stronger. Many traders have developed systems based on the bounce to thrive. This tactic is best used when the market is up and down between 02 levels and no clear trend.
Now let's see how to use Bollinger bands formed when market trends.
5.1.2 Bollinger Squeeze
Bollinger squeeze Name (compressed) explains itself quite clearly. When the strips bonded together, it usually means one break imminent. If shelving begin on the band beyond direction change will usually increase. If the bracket starts beyond the band under the direction change will usually continue to go down. Looking at the graph above, you can see the band pressed again. Rates start beyond the upper band. Based on this information you think prices will change look like?
If you answer correctly, you rise. This is how a typical Bollinger Squeeze works. This strategy is designed so that you could catch an early change. This format does not happen every day, but you can spot them a few times a week if you see a 15-minute chart.
Now you know what is the Bollinger tapes, and you know how to use them. There are many other things you can do with Bollinger Bands, but the most common 02 tactics. And now you can add a tool, we can switch to another tool. 5.2 MACD

MACD is an acronym for M oving A verage C onvergence D ivergence (Average Convergence Divergence change). This tool is used to determine the average change to indicate a new trend, bullish or bearish. After all, the priority number one of us in the transaction that may find the trend because it makes money.
With MACD graph, you'll often see an 03 parameter is used to install it. The first is the period used to calculate average rapid change, the second is the amount of time the average user of change is slow, and the third is the ratio used to calculate the average change of difference The average standard variable southeast fast and slow moving averages change.
For example if you have the parameters MACD is "12, 26, 9 '(usually the default value for the graph), we understand the following:
  1. The number 12 represents the previous 12 bars of the faster moving average changes
  2. The number 26 represents the previous 26 bars of the slower moving average changes
  3. Number 9 represents the previous 9 bars of the difference between the averages 02 changes. It was painted by markers stand called a histogram (blue lines in the chart above)
There is a common misconception for the road of the MACD histogram. Two lines are drawn are not averages of the price change. Instead, they are modified moving average of the difference between two moving averages change.
In the above example, the moving average is faster change change moving average of the difference between average lines 12 and 26. Line change mean slower change in value of the MACD previous average. Again, for this example, the moving average is modified with the period of 9. That is, we are talking about the average value of 9 previous periods of fast MACD line and draw it into sugars Average changes more slowly. This flattening more original way and give us a more accurate way.
Histogram drawing the moving average difference between fast and slow moving average. If you look at the original chart, you can see that 02 separate moving average, larger histogram. This is called divergence (divergence) because averages are diverging rapidly changing or moving away from the moving average slow change. When the modified moving average approach each other, the smaller histogram. This is called convergence (convergence) because averages rapidly changing averages approached slowly change. And so we called MACD.
MACD crossover 5.2.1
Because there averages 02 changes with different speeds, faster way obviously will reflect price changes faster with slow line. When a new trend occurs, the faster way would reflect first and eventually cut through the delay. When 02 different diagonals and quickly begin to distance road dotted line a new trend has formed.
From the chart above you can see that cross underneath the road fast and slow way down just a new direction. Note that when the junction histogram temporarily disappears. This occurs because the time difference between the lines is 0. When the downward formed and fast way away from the slow line, histogram larger, this indicates a strong trend.
There is a limit to MACD. These averages tend to change slowly than prices. However, it remains a favorite tool.

From top to now, we have considered the main tool to catch the start of a new trend. Determining a new trend point is important, and equally important is able to determine the end of a trend.
One tool that can help us determine the end of a trend is Parabolic SAR ( S top A nd R eversal, stops and reverses direction). A drawing Parabolic SAR dots on the graph to indicate possible reversal of the price. From the chart above you can see that the transition point from below the rack in an uptrend, up above the trestle switch downward trend.
5.3.1 Using Parabolic SAR
The nice thing about Parabolic SAR is very simple to use. When the point below the racks it is a buy signal; and when the point above the racks it is a sell signal. This is probably the most straightforward tool because it said the price is up or down. This tool is used best in the market tends to recover or reduce long. You do not use this tool in the market up and down constantly, where prices fluctuate sideways.
5.4 Stochastics
Stochastic is another tool to help us identify the point where a trend may be ending. Stochastic is an oscillator (oscillating tool) to measure the state of overbought (overbought) and oversold (oversold) in the market. Two similar way the MACD on the meaning a faster way remaining sugar.
5.4.1 How to apply Stochastic
As I said, the Stochastic shows us time oversold market or overbought. The Stochastic is divided from 0 to 100. When the stochastic line above 70 (red dotted line in the chart above), it means overbought market. When the stochastic line below 30 (blue dotted line) it means oversold market. As rule, we buy when the market is oversold and overbought market sell
Looking at the graph latency, you can see that the stochastic lines were showing overbought condition many times. Based on this information, you can guess the price will go to the stars?
If you say that prices will fall, you're absolutely right. Because the market was oversold for a long time, a limited reversal occurs.
That is the basic form of Stochastics. Many traders use the stochastic lines in different ways, but the main purpose of this tool is only for our market position overbought or oversold.
5.5 -RSI Relative Strength Index (relative strength index)
Relative Strength Index (RSI) is similar to the Stochastic, it recognize the state of overbought and oversold in the market. It is divided from 0 to 100. For this graph, below 20 indicate oversold, while above 80 indicate overbought.
5.5.1 Using RSI
RSI can be used just like the Stochastic. From the chart above you can see that when RSI below 20 it recognize an oversold market. After the reduction, prices quickly rebounded.
RSI is a very popular tool because it can also be used to determine the formation of a trend. If you think a trend is forming, please browse through RSI and watch it above or below 50. If you are expecting an upward trend, ensure RSI over 50. If you are expecting a penny downward, so make sure the RSI below 50.
In the chart above you can see a potential uptrend is forming. To avoid being deceived, you can wait for the RSI crossing above 50 to determine your tendency. When RSI crossing above 50, which is a good confirmation that an upward was actually formed.
5.6 Combine together indicator:
In a perfect world, we could only get one of these tools and the transaction entirely on the tools. The problem is that we do not live in a perfect world and each one tool does not achieve perfection. That is why many traders combine different tools so that they can check each other. They may have 03 different instruments and they will not be traded if the engine 03 not give the same result.
When you conduct transactions, you will find the best tool for you. I can tell you is that I prefer to use MACD, Stochastics, and RSI, but you may have other preferences. Every trader tries to find the perfect combination of tools that will always give them the right signal, but the truth is no such thing.
You learn stuff until you understand exactly how it reflects fluctuations in the price and proceed to create your own combinations to fit with your trading method. After this article, I will show you a system that combines different tools to give you an idea of ​​how you can incorporate these tools together.
In summary:
  • What you learn will provide additional tools for you. Your tools will help you build up your trading account easier.
  • Bollinger Bands (Bollinger Band):
    • Used to measure the volatility of the market
    • They act like the support and resistance levels Small
    • Bollinger Bounce
      • One tactic is based on the view that prices tend to always return to between Bollinger Band
      • You buy when the price hits the lower band
      • You sell when prices hit the upper band
      • Using the best in horizontal markets
    • Bollinger Squeeze
      • One tactic used to catch early the goal of breaking the market
      • When the Bollinger squeeze sugar prices have meant very quiet market and one is too good break. When one breaks happen, we conduct transactions based direction of the market break.
  • MACD
    • Used to hold early trends and we also support the flip point.
    • MACD include modified moving average 02 (1 fast, 1 slow) and vertical lines called a histogram showing the difference between averages 02 changes.
    • Contrary to the thinking of many people, the moving average is not change the moving average of the price change. They are modified moving average moving average of other changes.
    • One way to use MACD fast line waiting to cross the road cut slowly and make transactions under because it signals a new trend.
  • Parabolic
    • This tool is used to draw the flip point; hence the name Parabolic SAR ( S top A nd R eversal, stops and reverses direction)
    • This is most easily understood tool because it only gives the signal increases and discounts.
    • When the point above the racks, it is a sell signal
    • When the points below shelving, it's a buy signal
    • This tool is best used in the market tend to be up and down a lot.
  • Stochastics
    • Used to identify overbought condition or oversold
    • When the averages over 70 means that the market is overbought and you should sell.
    • When the averages below 30 means the market is oversold and you should buy.
  • Relative Strength Index (RSI)
    • Similar to stochastics, RSI also identify overbought condition and oversold
    • When RSI above 80 means the market overbought and you should sell
    • When RSI below 20 means oversold market and you should buy
    • RSI is also used to determine the formation of the trend. If you think a trend is forming, wait for RSI crossing 50 or falls below 50 (depending on whether you are awaiting the trend up or down) before executing the transaction.
  • Each tool has its shortcomings. So traders have to incorporate many different tools to verify each other. As you progress further through the transaction, you will learn the tools which you like best and can combine them the way you fit your transaction.
I knew this lesson too long and I recommend you read back what you do not understand fully. Sometimes it just takes a little time to read before you really understand something. Once you understand the concepts of these tools, see the graph and start practicing with it. Learn how each tool reflects the dynamics of prices.
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