“Essential Technicals

 > Explanatory Article by Marios Kyriakou, MSc Economics


About the author: Marios Kyriakou has a bachelor’s degree in Economics from the University of Cyprus and a master’s degree in Economics from the University of Warwick. He is also a holder of CySEC’s Advanced Certificate in Financial Services Legal Framework and a professional in Online Trading, Forex and CFDs with more than 7 years of experience.

  Watch our Videos on YouTube


> Should you find this article and video useful share so you can help your friends too. Click the like button and the subscribe button to our YouTube channel  so in the future, you can be notified when we upload more useful free educational videos to watch.

<Last updated 25.04.2020>

Dear reader,

Hi! If you are interested in Forex please read carefully the below article that shows essential technical tools you must know when you start with technical analysis.

 

Technical Analysis and Indicators


In technical analysis price charts are studied with the help of various tools such as indicators.

Technical indicators are statistically programmed add-ons to the body of trading platforms that process and display information about the price movement or estimated future price movement in an attempt to assist with price prediction.

> Pricing indicators help you gauge overall price movement trends.

> Oscillator indicators can help you determine the degree to which overall trends are changing.

By analyzing price data, indicators can provide useful information about the strength of a trend, momentum, potential turning points, and possible reversals. It is, therefore, no surprise that indicators are considered the most important technical analysis tool.

 

Oscillator


Oscillators are momentum indicators that construct high and low bands between two extreme values, and then build a trend indicator that fluctuates within these bounds.

We use the trend indicator to discover short-term overbought or oversold conditions. Oscillators are often combined with moving average indicators to signal trend breakouts or reversals.

The most common oscillators are the stochastic oscillator, relative strength (RSI), rate of change (ROC), and money flow (MFI).

Technical analysts consider oscillators better suited for sideways markets. Better to combine them with an indicator to assess the market.

For example, a moving average crossover indicator can be used to determine if a market is, or is not, in a trend. Once the analysts determine that the market is not in a trend, the signals of an oscillator become much more useful and effective.

 

Crossover


A crossover is a point on the trading chart in which price and a technical indicator line intersect, or when two indicators themselves cross.

 

Moving averages can determine a change in the price trend based on the crossover.

 

Crossovers are used in technical analysis to confirm patterns and trends such as reversals and breakouts, generating buy or sell signals accordingly.

Longer time frames result in stronger signals. For example, a daily chart carries more weight than a one-minute chart.

Conversely, the shorter time frames give earlier indicators, but they are also susceptible to false signals as well.

 

Stochastic Crossover


A stochastic crossover measures the momentum of an underlying financial instrument. To gauge whether the instrument is being overbought or oversold.

When the stochastic crossover exceeds the 80 band, the asset is determined to have been overbought. When it drops below the 20 band, the asset is determined to have been oversold.

 

Golden Cross


The situation when a short-term moving average (50 days) crosses over a major long-term moving average (200 days) to the upside interpreted as signaling a definitive upward turn in a market.

 

Death Cross


The death cross occurs when the short term average trends down and crosses the long-term average, basically going in the opposite direction of the golden cross.

 

Divergence


Divergence is the situation in which the price of an asset is moving in the opposite direction of a technical indicator, such as an oscillator, or is moving contrary to other data. Divergence warns that the current price trend may be weakening, and in some cases may lead to the price changing direction (reversal).

There is positive and negative divergence. Positive divergence indicates a move higher in the price. Negative divergence signals a move lower.

> Positive divergence signals price could start moving higher soon. It occurs when the price is moving lower but a technical indicator is moving higher or showing bullish signals.

 

The indicator is signaling the expected future price path.

 

> Negative divergence points to lower prices in the future. It occurs when the price is moving higher but a technical indicator is moving lower or showing bearish signals.


 

“I hope I am clear on this one. If not, contact us on social media and we will do our best to help you.

Thank you for reading my articles and watching my videos.”

Marios Kyriakou

Disclaimer: This article is intended for educational purposes only and does not replace independent professional judgement. Its purpose is to act as a complementary educational service to society, promoting personal development and social, economic and cultural progress of citizens. While this content has been prepared in good faith, no representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by the creator to the accuracy or completeness of the information presented or any other written or oral information made available to any interested party and any such liability is expressly disclaimed.
Risk Warning: Trading in Forex and Contracts for Difference (CFDs), which are leveraged products involves substantial risk of loss as there is considerable exposure to risk in any off-exchange transaction, including, but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of the markets that you are trading. You should carefully consider your investment objectives, level of experience and risk appetite before making a decision to trade with us. Most importantly, do not invest money you cannot afford to lose. It is possible to lose all the initial capital invested.

© HCPro Human Capital Professional Education 2018-2020 | All Rights Reserved. HCPro Human Capital Professional Education is a tradename of COME WITH ME EDUCATION LTD - Company Registration No. HE 390680.

Log in with your credentials

Forgot your details?