Sunday, 23 September 2018

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Technical Indicators in Stock Market:

Data points plotted on a chart helps to look at the direction of stock prices, but deeper analysis requires more data crunching. Trends can be visually tracked with indicators like moving averages, which are dynamic lines that connect each period’s closing (last) price. Charting or trading platforms enable users to manually draw in their own trend lines directly onto their charts. Different traders may have different trend lines based on the time frame of the chart as well as the starting point.


Price indicators


Indicators that output price-based information like trends, support and resistance are price indicators. They are usually displayed and tracked on the price segment of a chart, usually the upper chart. Moving averages, candlesticks/bars/lines, pivot points, three line break and bars are all popular price indicators. Trend lines and trend channels are either manually or automatically drawn are strong price indicators as well.


Momentum indicators

Indicators that measure the momentum of a stock including overbought and oversold conditions are momentum indicators. Basic momentum indicators come pre-programmed in most charting or trading platforms. These indicators help traders to better time their entries and exits. When properly used, traders are able to avoid pursuing prices when momentum indicators show overbought conditions like a stochastic peaking and falling back. While price is important, understanding how the price level is achieved can be just as significant. Stochastic Index, Relative Strength Index (RSI) and Commodity Channel Index (CCI) are three widely used momentum indicators.
Using a combination of price and momentum indicators can help generate effective entry and exit signals. The knowledge of successful trading utilizes the technical indicators to generate high probability set-ups with prudent disciplined trade management. Technical indicators optimize the process of price analysis.

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