Tag: technical analysis tools

Trading with Relative Strength Index

Trading with Relative Strength Index

Trading Indicators
RSI for short, Relative Strength Index is a technical analysis tool developed by J. Welles Wilder and was first published in his book, 'New Concepts in technical trading systems' during 1978. Welles Wilder is attributed to many other technical indicators such as the Average True Range, Parabolic SAR and Average Directional Index. Ever since its introduction, RSI has become one of the most important and commonly used indicator as part of a larger trading system or strategy. Due to its importance, the RSI indicator is available by default on most trading platforms or charting packages. The RSI indicator is a momentum indicator. The concept of momentum in trading is based on the principle that trends are usually followed by momentum. Higher the momentum, the more trending the market...
Trading with Bollinger Bands <sup>®</sup>

Trading with Bollinger Bands ®

Trading Indicators
Developed by John Bollinger in the 1980's, Bollinger Bands® is a technical analysis tool which comprises of two price channels (upper and lower bands) plotted two standard deviations (used to measure volatility) away from a moving average (the median line). Despite a decade since Bollinger bands was developed, it is still widely used amongst traders and market technicians to identify volatility and trends in the markets and can be used across different time frames. Bollinger Bands® are part of the standard technical analysis tools available by default and for free in most trading platforms. Also referred to as Bands, this technical analysis tool is used across various markets including Forex, Stocks and commodities. In this article, we'll take a look at Bollinger Bands® and how to imple
Commodity Channel Index – Understanding the basics

Commodity Channel Index – Understanding the basics

Trading Indicators
Commodity Channel Index, or CCI for short is an indicator in technical analysis, used in identifying the cyclic trends in security and is commonly used to analyze commodities. It measures the currency price relative to an average price level for a given time period. Donald Lambert developed the Commodity channel index and is used as a versatile indicator to identify new trends or warn the trade of volatile trading conditions. The Commodity Channel indicator can be used not only for commodity trading but can be equally used with trading ETF's, Indices, stocks and forex markets. The way the CCI works is quite simple. The CCI reading is relatively high when prices are far above their average and is low when prices fall below their average. Thus, CCI can be efficiently used for identifying ...
How to draw trend lines the right way

How to draw trend lines the right way

Trading Indicators
Trend lines form one of the basic blocks of technical analysis and thus are very important to a chartist. Simply put, trend lines are nothing but sloping support and resistance levels and in fact price behaves similarly as it does when approaching a traditional (horizontal) resistance or a support level. Despite its simplicity, trend lines can often turn out to be subjective and thus can confuse a chartist if indeed they have plotted a trend line correctly. The most important aspect of trend lines is that they tend to work on any time frame and in any market which is why they are one of the most popular technical analysis tools for a chartist. It is possible to trade only with trend lines although they are mostly used in conjunction with other methods. A good example of trading based off t...