Technical analysis has collected information on market price movements, using a chart and it is predicted future trends. The concept of technical analysis based on the assumption that all the factors that affect or may affect the price already included in the current price. Based on previous trends can predict the future price movements of shares of a certain company. The trend can be bullish or rising trend line and decline or bearish trend line. The primary means of technical analysis are graphs. The concept of technical analysis involves the application of a wide range of graphs, among which the most significant were: line, bar, and candlestick. The main task of technical analysts, therefore, involves the monitoring of the previous trend of share prices as a basis for predicting future trends - growth, decline or stagnation. For this purpose, technical analysts or chartist, using different techniques such as figures that indicate a change or continuation of trend and indicators.
Significant help from modern users of technical analysis provides software solutions - specific programs of technical analysis that simplify the job of reading the chart and predict future trends. Technical analysis represents only a tool that can help us in making the right investment decisions. This is because that is the time when the most participants are in the market. It can be used during the European session as well but stick with the more heavily trading pairs. This strategy focuses on one-hour charts and is almost purely technical in nature. It has produced similar results across the entire list of commonly traded forex. It uses a blend of indicators that seeks to weed out market fluctuations in favor of the underlying trend. The RSI, MACD are used together to pick only trades that follow the trend and to confirm each other. When the indicators do not agree and being to diverge a trader needs to find a balance. MACD can be used to predict a reversal of the trend. For example, if the MACD indicator rises as prices continue to fall, it could be an exit point and signal a possible reverse trade. When the indicators agree then the strongest signals occur.
Prices and trading volume are the bases of research. The method of technical analysis includes statistical methods, among which are the most popular: moving averages, indicators, and oscillators, trend monitoring. These methods are known as methods of filtration. They have practical applicability. In different ways signaled the change of the prevailing trend and the occurrence of adverse confirm current price development scenario - growth, decline or absence of a serious disturbance.
MACD trading tool is used to identify average trends indicating a new trend, regardless of whether it is bullish or bearish. After all, the most important priority in trading is to find a trend, because this is where most of the money spinning. With the MACD chart you will usually see three numbers that are used to adjust:
The first is the number of periods used to calculate the average faster movement.
The second is the number of periods used to calculate the average slower movement.
The third is the number of candles that are used to calculate the average movement of the difference between the faster and slower the average movement.
For example, if you see that 12,26,9 as the MACD default parameters (which is usually the default setting for most of the chart), you like to interpret:
12 represents the previous 12 candles faster average trends
26 represents the previous 26 candles slower average trends
9 accounts for the previous candle 9 the difference between two average of movement and it is plotted using the vertical line, which is called a histogram (blue line in the graph).
Relative strength index is used to compare two different power price action, or compare individual stocks with a market index. Indicates the relative position of positive and negative price changes in a given period of time. The index value ranged from 0-100, a number of periods are usually 14 Signal for purchase is generated when the value of the indicator is less than 30, while a sell signal is generated when the value of the index over 70.
Its simplest meaning would be like moving average. Moving average is one of the most popular and most widely used tools for technical analysis. It is the average cost of the currency in a specific period of time (usually 20, 30, 50, 100 and 200 days), which is used in order to correct large fluctuations. Moving average data is used to create charts that show the direction of movement of the currency up/down. They can be used for monitoring daily, weekly or monthly pattern. Every new day week or month numbers are added to the average and the oldest are discarded so that the average "moves over time. Generally, the shorter the time frame used, it will be more volatile prices show. For example, line 10-day moving average will move up and down more than a line of 100- MA. Moving average is used to help us predict future prices. Looking at the moving averages, you can make general predictions of where the price will go.
A buy signal is determined by the parameters. In this moment, the price chart has to be above the moving average, which has already entered the chart. Opening position for shopping should always be practiced at the beginning of the next candle, and directly behind the generated signal. Protective positions SL (stop loss) is usually placed under the nearest adjacent minimum, a TP (take profit) is projected according to one of the rules of money management. A sell signal is generated because the price chart found below the moving average. SL position is set above the nearest neighboring maximum, a TP is projected according to the conventional method in accordance with the amount of capital in your account.
It can see in the picture below buying signal. 20MA crosses over 50MA. The signal for buying position EUR/USD above 1.09900 with target 1.10200 exit points.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.