Technical Analysis: Indicators

Technical analysis is a mathematical/graphics approached by traders to predict future market movements based on historical data graphically for a specified time of period. There are several indicators used by traders to assist them in predicting future market movements. The indicators commonly used are:

1. Simple Moving Average (SMA)

This indicator is based on the average value of the market price for a certain period of time. Where each value has the same weight for that particular period.

2. Exponential Moving Average (EMA)

This indicator is based on the average value of the market price for a certain time period in which recent data weighs more decisive. Example: If we use the EMA with a period of 10 days. Then the last 5 days will have more weight to determine the indicator than several days before.

3. Parabolic SAR

Unlike the two previous indicators, Parabolic SAR is more appropriately used to determine when to exit the market. This indicator can work well when there is significant bullish or bearish trend. But for a market that tends to move sideways, the use of this indicator is less useful.

4. Relative Strength Index (RSI)

This indicator is one indicator of who belong to the category of oscillators. Has a range from 0 to 100. Very popular among traders, and is used as a tool to indicate when the market is overbought or oversold experience. When the market was overbought meaning prices have been too high, and there will be a tendency to experience a reversal of declining prices. And vice versa when the market has oversold it means the price was too low, and there will be a tendency to experience a reversal of rising prices.

5. Stochastic

This indicator is a momentum indicator that uses support and resistance levels which represents the position of current price to the price range at a specific time period. The ultimate goal of this indicator is to predict where the market price will reverse its direction.

6. ADX

This is a pretty powerful indicator in measuring the strength of the market current trend and to find out whether the market is directed to a particular trend or not.

7. Bolinger Bands

The basic principle of this indicator is to predict the range of market price movement which normally is in between the indicator lines. By using this indicator, we can determine when we should buy and when to sell. And we can predict well how about the highest and lowest market price in the future.

There are many other indicators that could be used, but some of the indicators mentioned above are very reliable to assist you in determining buy and sell signals as well as when to get out of the market.

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