Showing posts with label technical analysis indicators explained. Show all posts
Showing posts with label technical analysis indicators explained. Show all posts

## INDICATORS AND OSCILLATORS

A Technical indicator is a mathematical formula applied to the security’s price, volume or open interest. The result is a value that is used to anticipate future changes in prices. A technical indicator is a series of data points derived by applying a formula to the price data of a security. Price data includes any combination of the open, high, low or close over a period of time. Some indicators may use only the closing prices, while others incorporate volume  and open interest into their formulas. The price data is entered into the formula and a data point is produced.

### uses of indicators

Technical Indicators broadly serve three functions: to alert, to confirm and to predict. Indicator acts as an alert to study price action, sometimes it also gives a signal to watch for a break of support. A large positive divergence can act as an alert to watch for a resistance breakout. Indicators can be used to confirm other technical analysis tools. Some investors and traders use indicators to predict the direction of future prices.

Technical Indicators broadly serve three functions: to alert, to confirm and to predict. Indicator acts as an alert to study price action, sometimes it also gives a signal to watch for a break of support. A large positive divergence can act as an alert to watch for a resistance breakout. Indicators can be used to confirm other technical analysis tools. Some investors and traders use indicators to predict the direction of future prices indicators.

### time frame

Technical analysts use indicators to look into a different perspective from which stock prices can be analyzed. Technical indicators provide unique outlook on the strength and direction of the underlying price action for a given time frame. different time frame shows different buy and sell zone see in a chart.

### using of technical  indicators

There are a large number of Technical Indicators that can be used to assist you in selection of stocks and in tracking the right entry and exit points. In short, indicators indicate. But it doesn’t mean that traders should ignore the price action of a stock and focus solely on the indicator. Indicators just filter price action with formulas. As such, they are derivatives and not direct reflections of the price action. While applying the indicators, the analyst should consider: What is the indicator saying about the price action of a security? Is the price action getting stronger? Is it getting weaker?

### when to buy or sell

The buy and sell signals generated by the indicators, should be read in context with other technical analysis tools like candlesticks, trends, patterns etc. For example, an indicator may flash a buy signal, but if the chart pattern shows a descending triangle with a series of declining peaks, it may be a false signal.

An indicator should be selected with due care and attention. It would be a futile exercise to cover more than five indicators. It is best to focus on two or three indicators and learn their intricacies inside and out. One should always choose indicators that complement each other, instead of those that move in unison and generate the same signals. For example, it would be redundant to use two indicators that are good for showing overbought and oversold levels, such as Stochastic and RSI. Both of these indicators measure momentum and both have
overbought/oversold levels.

### types of indicators

Indicators can broadly be divided into two types “LEADING” and “LAGGING