5 IMPORTANT INDICATORS FOR BEGINNERS
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Consider following me for the latest updates and Long /Short calls on almost every exchange.
I post short mid and long-term trade setups too.
Moving Average
A moving average is a technical indicator that combines price points of an instrument over a specified time frame, and divides by the number of data points, to give you a single trend line. It is popular amongst traders because it can help to determine the direction of the current trend, while lessening the impact of random price spikes.
A moving average will enable you to examine the levels of support and resistance, by analysing the previous movement of an asset’s price. It is a measure of change that trails the previous price action of an asset, assessing the history of market movements to determine possible future patterns. A moving average is primarily a lagging indicator, which makes it one of the most popular tools for technical analysis.
Calculating an MA requires a certain amount of data, which can be a large quantity depending on the length of the moving average. For instance, a ten-day MA will require ten days of data, while a one-year MA will require 365 days’ worth. A 200-day period is a very commonly used timeframe for MA.
The indicator is described as ‘moving’ because the introduction of new figures will replace old data points and ‘move’ the line on the chart.
Bollinger Bands
Bollinger Bands are typically plotted as three lines:
An upper band
A middle line
A lower band
The middle line of the indicator is a simple moving average (SMA).
Most charting programs default to a 20-period, which is fine for most traders, but you can experiment with different moving average lengths after you get a little experience applying Bollinger Bands.
The upper and lower bands, by default, represent two standard deviations above and below the middle line (moving average).
If you’re freaking out because you’re not familiar with standard deviations.
Have no fear.
The concept of standard deviation (SD) is just a measure of how spread out numbers are.
If the upper and lower bands are 1 standard deviation, this means that about 68% of price moves that have occurred recently are CONTAINED within these bands.
If the upper and lower bands are 2 standard deviations, this means that about 95% of price moves that have occurred recently are CONTAINED within these bands.
Relative Strength Index ( RSI )
RSI is considered overbought when above 70 and oversold when below 30. These traditional levels can also be adjusted if necessary to better fit the security. For example, if a security is repeatedly reaching the overbought level of 70 you may want to adjust this level to 80.
Note: During strong trends, the RSI may remain in overbought or oversold for extended periods.
RSI also often forms chart patterns that may not show on the underlying price chart, such as double tops and bottoms and trend lines. Also, look for support or resistance on the RSI.
In an uptrend or bull market, the RSI tends to remain in the 40 to 90 range with the 40-50 zone acting as support. During a downtrend or bear market the RSI tends to stay between the 10 to 60 range with the 50-60 zone acting as resistance. These ranges will vary depending on the RSI settings and the strength of the security’s or market’s underlying trend.
If underlying prices make a new high or low that isn't confirmed by the RSI, this divergence can signal a price reversal. If the RSI makes a lower high and then follows with a downside move below a previous low, a Top Swing Failure has occurred. If the RSI makes a higher low and then follows with an upside move above a previous high, a Bottom Swing Failure has occurred.
MACD(Moving Average Convergence Divergence)
Moving average convergence divergence, or MACD, is one of the most popular tools or momentum indicators used in technical analysis. This was developed by Gerald Appel towards the end of 1970s. This indicator is used to understand the momentum and its directional strength by calculating the difference between two time period intervals, which are a collection of historical time series. In MACD, ‘moving averages’ of two separate time intervals are used (most often done on historical closing prices of a security), and a momentum oscillator line is arrived at by taking the difference of the two moving averages, which is also denoted as ‘divergence’. The simple rule for taking the two moving average is that one should be of shorter time period and the other longer time period. Generally, exponential moving averages (EMA) are considered for this purpose.
Description: The main points for an MACD indicator are:
a) Time period or interval – which the user can define. Commonly used time periods are:
Short-term intervals – 3, 5, 7, 9, 11, 12, 14, 15-day intervals, but 9-day and 12-day durations are more popular
Long-term intervals – 21, 26, 30, 45, 50, 90, 200-day intervals; 26-day & 50-day intervals are more popular
b) Momentum oscillator line or divergence or MACD line – which can be simple plotting of ‘divergence’ or difference between two interval moving averages
c) Signal Line – which is exponential moving average of divergence data e.g. 9-day EMA
d) Normally a combination of 12-day and 26-day EMA of prices and 9-day EMA of divergence data is used, but these values can be changed depending on the trading goal and factors
e) The above data is then plotted on a chart, where the X- axis is for time and Y-axis is price, to get MACD line, signal line and histogram for the difference between the MACD and signal line, which is shown below the X-axis
Volume
Volume, or trading volume, is the number of units traded in a market during a given time. It is a measurement of the number of individual units of an asset that changed hands during that period.
Each transaction involves a buyer and a seller. When they reach an agreement at a specific price, the transaction is recorded by the facilitating exchange. This data is then used to calculate the trading volume.
Trading volume can be denominated in any trading asset, such as stocks, bonds, fiat currencies or cryptocurrencies. For example, if Alice sells Bob 5 BNB for 20 USD each, the volume of that transaction can be either 100 USD, or 5 BNB, depending on what the trading volume is denominated in.
This also means that for a stock, for example, the trading volume refers to the number of individual stocks that were traded during the measured period. So if 100 shares are traded in one trading day, the daily volume of the stock is 100 shares.
Traders tend to use the volume indicator as an attempt to gain a better understanding of the strength of a given trend. If volatility in price is accompanied by high trading volume, it may be said that the price move has more validity. Conversely, if a price move is accompanied by low trading volume, it may indicate weakness of the underlying trend.
Price levels with historically high volume can also give traders an indication regarding where the best entry and exit points could be located for a specific trade setup.
Typically, a rising market should see increasing volume, indicating continuous buyer interest to keep pushing prices higher. Increasing volume in a downtrend may indicate increasing sell pressure.
Reversals, exhaustion moves, and sharp changes in price direction are often accompanied by a high volume spike, as these tend to be the times when the highest amount of buyers and sellers are active in the market.
Volume indicators often also incorporate a moving average, measuring the volume of the candles in a given period and producing an average. This gives traders an additional tool to gauge the strength of the current market trend.
If you like our content, please feel free to support our page with a like, comment & follow for future educational ideas and trading setups.
Consider following me for the latest updates and Long /Short calls on almost every exchange.
I post short mid and long-term trade setups too.
Moving Average
A moving average is a technical indicator that combines price points of an instrument over a specified time frame, and divides by the number of data points, to give you a single trend line. It is popular amongst traders because it can help to determine the direction of the current trend, while lessening the impact of random price spikes.
A moving average will enable you to examine the levels of support and resistance, by analysing the previous movement of an asset’s price. It is a measure of change that trails the previous price action of an asset, assessing the history of market movements to determine possible future patterns. A moving average is primarily a lagging indicator, which makes it one of the most popular tools for technical analysis.
Calculating an MA requires a certain amount of data, which can be a large quantity depending on the length of the moving average. For instance, a ten-day MA will require ten days of data, while a one-year MA will require 365 days’ worth. A 200-day period is a very commonly used timeframe for MA.
The indicator is described as ‘moving’ because the introduction of new figures will replace old data points and ‘move’ the line on the chart.
Bollinger Bands
Bollinger Bands are typically plotted as three lines:
An upper band
A middle line
A lower band
The middle line of the indicator is a simple moving average (SMA).
Most charting programs default to a 20-period, which is fine for most traders, but you can experiment with different moving average lengths after you get a little experience applying Bollinger Bands.
The upper and lower bands, by default, represent two standard deviations above and below the middle line (moving average).
If you’re freaking out because you’re not familiar with standard deviations.
Have no fear.
The concept of standard deviation (SD) is just a measure of how spread out numbers are.
If the upper and lower bands are 1 standard deviation, this means that about 68% of price moves that have occurred recently are CONTAINED within these bands.
If the upper and lower bands are 2 standard deviations, this means that about 95% of price moves that have occurred recently are CONTAINED within these bands.
Relative Strength Index ( RSI )
RSI is considered overbought when above 70 and oversold when below 30. These traditional levels can also be adjusted if necessary to better fit the security. For example, if a security is repeatedly reaching the overbought level of 70 you may want to adjust this level to 80.
Note: During strong trends, the RSI may remain in overbought or oversold for extended periods.
RSI also often forms chart patterns that may not show on the underlying price chart, such as double tops and bottoms and trend lines. Also, look for support or resistance on the RSI.
In an uptrend or bull market, the RSI tends to remain in the 40 to 90 range with the 40-50 zone acting as support. During a downtrend or bear market the RSI tends to stay between the 10 to 60 range with the 50-60 zone acting as resistance. These ranges will vary depending on the RSI settings and the strength of the security’s or market’s underlying trend.
If underlying prices make a new high or low that isn't confirmed by the RSI, this divergence can signal a price reversal. If the RSI makes a lower high and then follows with a downside move below a previous low, a Top Swing Failure has occurred. If the RSI makes a higher low and then follows with an upside move above a previous high, a Bottom Swing Failure has occurred.
MACD(Moving Average Convergence Divergence)
Moving average convergence divergence, or MACD, is one of the most popular tools or momentum indicators used in technical analysis. This was developed by Gerald Appel towards the end of 1970s. This indicator is used to understand the momentum and its directional strength by calculating the difference between two time period intervals, which are a collection of historical time series. In MACD, ‘moving averages’ of two separate time intervals are used (most often done on historical closing prices of a security), and a momentum oscillator line is arrived at by taking the difference of the two moving averages, which is also denoted as ‘divergence’. The simple rule for taking the two moving average is that one should be of shorter time period and the other longer time period. Generally, exponential moving averages (EMA) are considered for this purpose.
Description: The main points for an MACD indicator are:
a) Time period or interval – which the user can define. Commonly used time periods are:
Short-term intervals – 3, 5, 7, 9, 11, 12, 14, 15-day intervals, but 9-day and 12-day durations are more popular
Long-term intervals – 21, 26, 30, 45, 50, 90, 200-day intervals; 26-day & 50-day intervals are more popular
b) Momentum oscillator line or divergence or MACD line – which can be simple plotting of ‘divergence’ or difference between two interval moving averages
c) Signal Line – which is exponential moving average of divergence data e.g. 9-day EMA
d) Normally a combination of 12-day and 26-day EMA of prices and 9-day EMA of divergence data is used, but these values can be changed depending on the trading goal and factors
e) The above data is then plotted on a chart, where the X- axis is for time and Y-axis is price, to get MACD line, signal line and histogram for the difference between the MACD and signal line, which is shown below the X-axis
Volume
Volume, or trading volume, is the number of units traded in a market during a given time. It is a measurement of the number of individual units of an asset that changed hands during that period.
Each transaction involves a buyer and a seller. When they reach an agreement at a specific price, the transaction is recorded by the facilitating exchange. This data is then used to calculate the trading volume.
Trading volume can be denominated in any trading asset, such as stocks, bonds, fiat currencies or cryptocurrencies. For example, if Alice sells Bob 5 BNB for 20 USD each, the volume of that transaction can be either 100 USD, or 5 BNB, depending on what the trading volume is denominated in.
This also means that for a stock, for example, the trading volume refers to the number of individual stocks that were traded during the measured period. So if 100 shares are traded in one trading day, the daily volume of the stock is 100 shares.
Traders tend to use the volume indicator as an attempt to gain a better understanding of the strength of a given trend. If volatility in price is accompanied by high trading volume, it may be said that the price move has more validity. Conversely, if a price move is accompanied by low trading volume, it may indicate weakness of the underlying trend.
Price levels with historically high volume can also give traders an indication regarding where the best entry and exit points could be located for a specific trade setup.
Typically, a rising market should see increasing volume, indicating continuous buyer interest to keep pushing prices higher. Increasing volume in a downtrend may indicate increasing sell pressure.
Reversals, exhaustion moves, and sharp changes in price direction are often accompanied by a high volume spike, as these tend to be the times when the highest amount of buyers and sellers are active in the market.
Volume indicators often also incorporate a moving average, measuring the volume of the candles in a given period and producing an average. This gives traders an additional tool to gauge the strength of the current market trend.
If you like our content, please feel free to support our page with a like, comment & follow for future educational ideas and trading setups.
Comment:
![TOP 20 Key Patterns [cheat sheet]](https://static.tradingview.com/static/images/svg/idea-image-placeholder.svg)
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Comment:
In this chart, we will present some basic information about the bedrock of technical analysis – the trend.
Technical research is founded on one main assumption: market prices move in trends as they are freely traded. Traders and investors hope to buy a security at a low price at the outset of an upward trend, ride the trend, and then sell the security at a better price when the trend stops. While this technique is straightforward, putting it into effect is incredibly difficult.
Trends come in all shapes and sizes, from long-term patterns that last decades to short-term patterns that emerge minute by minute. All trends tend to have the same characteristics. Investors must choose which trend is most important for them based on their investment objectives, personal preferences, and the time they are ready to spend watching market prices.
Trends are obvious in hindsight, but ideally, we would like to spot a new trend right at its beginning, buy, spot its end and sell. However this ideal almost never happens, except by luck.
What exactly is a trend?
1. An uptrend or upward trend occurs when prices reach higher highs and higher lows.
2. A downtrend or downward trend is the opposite: when prices reach lower lows and lower highs.
3. A sideways or flat trend occurs when prices trade in a range without significant upward or downward movement.
From the investor/trader’s perspective, a trend is a directional movement of prices that remains in effect long enough to be identified and still be profitable.
The most popular method amongst traders to identify a trend is looking at a graph of prices for extreme points, tops & bottoms, and drawing lines between these extreme points. These lines are called trend lines . By drawing lines between tops and bottoms we get a „feeling” of the direction of price movement, rate of change of movement, and also its limits. When those limits are broken, they can warn us that the trend might be changing.
Another method for the study of trends is the moving averages which smooth out and reduce the effect of smaller trends within longer trends.
The number of trend lengths is unlimited. The ability for trends to act similarly over different periods is called fractal nature. When we say that the trends are fractal in nature we mean that in any period we look at we see trends with similar characteristics and patterns as each other. The trend length of interest is determined solely by the trader’s period of interest. This doesn’t mean that different trend lengths should be ignored. Because shorter trends make up longer trends, any analysis of a period must include an analysis of longer and shorter trends around it.
Trends are determined by supply and demand .
As in all markets, whether apples, oil , or used car components the economic principle of interaction between supply and demand determines prices in trading markets. Each buyer bids for a certain quantity at a certain price and each seller asks for a certain quantity at a certain price. When the buyer and seller agree and transact, they establish a price for that instant in time, whatever the reasons might be for the buyer wanting to buy and the seller wanting to sell.
The technical analyst, therefore, watches the price movement and the rate of change of prices and doesn’t concern himself/herself with the reasons for the transactions because most times they are indeterminable. The number of players and the number of different reasons for their participation in supply and demand is close to infinite. Thus, for the technical analyst, it is futile to analyze the components of supply and demand except through the prices it creates.
Furthermore, when someone invests or trades the price is what determines profit or loss, not corporate earnings or Federal Reserve policy. The bottom line is that the price determines success and fortunately, for whatever reason, prices tend to trend.
Trade with care.
If you like our content, please feel free to support our page with a like, comment & subscribe for future educational ideas and trading setups.
In this chart, we will present some basic information about the bedrock of technical analysis – the trend.
Technical research is founded on one main assumption: market prices move in trends as they are freely traded. Traders and investors hope to buy a security at a low price at the outset of an upward trend, ride the trend, and then sell the security at a better price when the trend stops. While this technique is straightforward, putting it into effect is incredibly difficult.
Trends come in all shapes and sizes, from long-term patterns that last decades to short-term patterns that emerge minute by minute. All trends tend to have the same characteristics. Investors must choose which trend is most important for them based on their investment objectives, personal preferences, and the time they are ready to spend watching market prices.
Trends are obvious in hindsight, but ideally, we would like to spot a new trend right at its beginning, buy, spot its end and sell. However this ideal almost never happens, except by luck.
What exactly is a trend?
1. An uptrend or upward trend occurs when prices reach higher highs and higher lows.
2. A downtrend or downward trend is the opposite: when prices reach lower lows and lower highs.
3. A sideways or flat trend occurs when prices trade in a range without significant upward or downward movement.
From the investor/trader’s perspective, a trend is a directional movement of prices that remains in effect long enough to be identified and still be profitable.
The most popular method amongst traders to identify a trend is looking at a graph of prices for extreme points, tops & bottoms, and drawing lines between these extreme points. These lines are called trend lines . By drawing lines between tops and bottoms we get a „feeling” of the direction of price movement, rate of change of movement, and also its limits. When those limits are broken, they can warn us that the trend might be changing.
Another method for the study of trends is the moving averages which smooth out and reduce the effect of smaller trends within longer trends.
The number of trend lengths is unlimited. The ability for trends to act similarly over different periods is called fractal nature. When we say that the trends are fractal in nature we mean that in any period we look at we see trends with similar characteristics and patterns as each other. The trend length of interest is determined solely by the trader’s period of interest. This doesn’t mean that different trend lengths should be ignored. Because shorter trends make up longer trends, any analysis of a period must include an analysis of longer and shorter trends around it.
Trends are determined by supply and demand .
As in all markets, whether apples, oil , or used car components the economic principle of interaction between supply and demand determines prices in trading markets. Each buyer bids for a certain quantity at a certain price and each seller asks for a certain quantity at a certain price. When the buyer and seller agree and transact, they establish a price for that instant in time, whatever the reasons might be for the buyer wanting to buy and the seller wanting to sell.
The technical analyst, therefore, watches the price movement and the rate of change of prices and doesn’t concern himself/herself with the reasons for the transactions because most times they are indeterminable. The number of players and the number of different reasons for their participation in supply and demand is close to infinite. Thus, for the technical analyst, it is futile to analyze the components of supply and demand except through the prices it creates.
Furthermore, when someone invests or trades the price is what determines profit or loss, not corporate earnings or Federal Reserve policy. The bottom line is that the price determines success and fortunately, for whatever reason, prices tend to trend.
Trade with care.
If you like our content, please feel free to support our page with a like, comment & subscribe for future educational ideas and trading setups.
Comment:
Have you ever seen a key resistance level breached and entered a long position right before the market turns the other way and dumps hard?
Have you watched the price smash through support, and entered into a short position only to watch the market bounce?
Don’t feel bad, this has happened to everyone – you’re just one of many victims of the false breakout, and learning to spot these things can be tricky.
Read on as we discuss breakouts, and fakeouts and introduce two powerful indicators from the @CRYPTOMOJO_TA team that can help you stay on the right side of the market and avoid further pain.
The solution to this problem is actually pretty simple (as depicted above). Rather than act on trade in real-time as soon as the price breaks a key level, we should wait until the candle closes to confirm the breakout’s strength. So the idea of setting entry orders above or below support or resistance levels to automatically get us into a breakout trade is not a very good one. Entry orders allow us to get “wicked” into breakout trades that never actually materialize.
On the surface, this would lead us to believe that the only way to effectively trade breakouts, is to be at our trading terminals ready to act as soon as the candle closes in breakout territory. Once the candle closes, we can then open our position that hopefully has a higher chance of success.
Fake-out Trading:
Fake-out trading simply means trading in the opposite direction of the breakout fake out trading=trading false breakout.
You would trade fake out if you believe that a breakout from support or resistance level is false and unable to keep moving in the same direction. Fake trading is a great short-term strategy so if you are a long-term trader avoid that.
Trading breakout appears to independent traders because of greedy mentalities they believe in trading in the direction of the breakout. They believe in huge gains on huge moves. Catch the big fish, forget the small fries.
The institutional trade prefers to fake out trading as we know to sell sometime, there must be a buyer.
Have you watched the price smash through support, and entered into a short position only to watch the market bounce?
Don’t feel bad, this has happened to everyone – you’re just one of many victims of the false breakout, and learning to spot these things can be tricky.
Read on as we discuss breakouts, and fakeouts and introduce two powerful indicators from the @CRYPTOMOJO_TA team that can help you stay on the right side of the market and avoid further pain.
The solution to this problem is actually pretty simple (as depicted above). Rather than act on trade in real-time as soon as the price breaks a key level, we should wait until the candle closes to confirm the breakout’s strength. So the idea of setting entry orders above or below support or resistance levels to automatically get us into a breakout trade is not a very good one. Entry orders allow us to get “wicked” into breakout trades that never actually materialize.
On the surface, this would lead us to believe that the only way to effectively trade breakouts, is to be at our trading terminals ready to act as soon as the candle closes in breakout territory. Once the candle closes, we can then open our position that hopefully has a higher chance of success.
Fake-out Trading:
Fake-out trading simply means trading in the opposite direction of the breakout fake out trading=trading false breakout.
You would trade fake out if you believe that a breakout from support or resistance level is false and unable to keep moving in the same direction. Fake trading is a great short-term strategy so if you are a long-term trader avoid that.
Trading breakout appears to independent traders because of greedy mentalities they believe in trading in the direction of the breakout. They believe in huge gains on huge moves. Catch the big fish, forget the small fries.
The institutional trade prefers to fake out trading as we know to sell sometime, there must be a buyer.
Hi guys, This is @CRYPTOMOJO_TA One of the most active trading view authors and fastest-growing communities.
Consider following me for the latest updates and Long /Short calls on almost every exchange.
I post short mid and long-term trade setups too.
DEFINITION
The risk/reward ratio, sometimes known as the R/R ratio, is a measure that compares the potential profit of a trade to its potential loss. It is calculated by dividing the difference between the entry point of a trade and the stop-loss order (the risk) by the difference between the profit target and the entry point (the reward).
Limiting Risk and Stop Losses
Unless you're an inexperienced stock investor, you would never let that $500 go all the way to zero. Your actual risk isn't the entire $500.
Every good investor has a stop-loss or a price on the downside that limits their risk. If you set a $29 sell limit price as the upside, maybe you set $20 as the maximum downside. Once your stop-loss order reaches $20, you sell it and look for the next opportunity.
Because we limited our downside, we can now change our numbers a bit. Your new profit stays the same at $80, but your risk is now only $100 ($5 maximum loss multiplied by the 20 shares that you own), or 80/100 = 0.8:1. This is still not ideal.
What if we raised our stop-loss price to $23, risking only $2 per share or $40 loss in total? Remember, 80/ 40 is 2:1, which is acceptable. Some investors won't commit their money to any investment that isn't at least 4:1, but 2:1 is considered the minimum by most. Of course, you have to decide for yourself what the acceptable ratio is for you.
Notice that to achieve the risk/reward profile of 2:1, we didn't change the top number. When you did your research and concluded that the maximum upside was $29, that was based on technical analysis and fundamental research. If we were to change the top number, in order to achieve an acceptable risk/reward, we're now relying on hope instead of good research.
The risk-to-reward ratio is one of the most important things that traders and investors should watch out for before placing a trade. Once you’ve calculated the R/R ratio for a trade, you can place your stop-loss order to limit the losses. Similarly, you can also place the book profit order to exit the position at your preferred price.
If you are new to stock trading, then a 1:2 R/R ratio should be ideal. You can start experimenting after gaining some experience. But as stock trading is risky, do your own research before you start investing. You can also consult an investment advisor if your goal is to build a long-term stock portfolio.
Trade with care.
If you like our content, please feel free to support our page with a like, comment & follow for future educational ideas and trading setups.