Types of technical analysis...

Technical analysis tools are a set of methods and techniques aimed at determining the current state of the market and forecasting future movements in the prices of securities, currencies or commodities. These include, m.in, price charts, volume behavior and LOPs (for futures markets), trend lines, supports, resistances, and technical patterns, as well as indicators including moving averages and oscillators. According to technical analysts, charts can be used to indicate some graphical patterns in the development of stock prices in the past. They are called technical formations that tend to repeat themselves. Indicators, on the other hand, characterize the current state of the stock market – based on its diagnosis, a forecast for the future is created. Detailed information about this type can be found in the Webinar Universe trainings.

Types – Moving Average

A moving average is an indicator that follows the trend based on past prices. This average is calculated by selecting a specific period and dividing it by the number of periods. The tool helps smooth out price behavior and is used not only to identify the direction of the market, but also to determine where to take a position. Simple Moving Averages (SMAs) and Exponential Moving Averages (EMAs) are the most popular. The first ones are used most often and are created by calculating the average price of a given financial instrument from a selected period. Information about the right tools for technical analysis is provided by the training platform. In addition to choosing the type of moving average, the trader also needs to answer the questions of how many days to be included in the average, whether the short-term or long-term average will be more useful for him, and whether it is better to use one or several averages.

Types – RSI and Stochastic RSI

The RSI is a type of oscillator reflecting the relative strength of bullish movements versus downward movements. It is used by traders to measure the strength of a trend and identify signals for its end. It shows the ratio of upward to downward price movements and normalizes the calculation so that the chart ranges from 0 to 100. The StochRSI indicator is formed from the regular RSI, however, the Stochastic Oscillator formula is applied to it. The result of the equation is a single numerical value that revolves around the centerline (0.5), in the range 0-1. The RSI oscillator must be interpreted accordingly. If it is 70 or higher, it is assumed that the instrument will be overbought. It also tells you that prices don't have cumulative relative strength. If the index remains at 30 or lower, it is a signal that the instrument may have been oversold and that prices have accumulated relative strength. A level around 50 indicates that there is no trend in the market. The signal to place a trade is when the levels 30, 50 and 70 are crossed. Compared to the Stochastic RSI, the standard RSI indicator is a relatively slow gauge. The StochRSI shows higher volatility, sensitivity to changes and at the same time can generate more false signals.

Types – Bollinger Bands

The Bollinger Bands is used to determine the area where the price action should hold. If the price line moves outside this area, there is a moment of a short-term trend reversal. A buy signal is when the price line falls below the lower limit of the band. A sell signal, on the other hand, is generated when the price breaks through the upper limit of the band. Unlike many other indicators, the Bollinger Bands is not a static indicator and changes its shape based on recent prices and an accurate measurement of momentum and volatility. During strong trends, the price stays close to the outer band. Weakening momentum occurs during a pullback from the outer band as the trend continues. The lack of reaching of the repetitive thrusts to the outer band indicates a lack of force. The end of the trend can be found after the moving average breakout. In addition to learning about the types of technical analysis, you should also check out Webinar Universe to understand this issue thoroughly.

Types – MACD

The MACD is one of the indicators based on momentum. It is used to study the convergence and divergence of moving averages. It was created by Gerald Appel in 1979. It indicates the difference between two exponential moving averages. It is calculated by subtracting the 12-period average (EMA) from the 26-period exponential average (EMA). The signal line is formed by the 9 period EMA. If the MACD line crosses the signal line from below, a buy signal is generated, and a sell signal is generated if the MACD line crosses the signal line from above. It is important to keep in mind that the MACD tends to generate false signals. In order to mitigate such risk, it is worth using the indicator along with other tools. If they all point in the same direction, there is a higher probability that the trade will be profitable. Traders often fluctuate between using the MACD and RSI. The answer to this question is not clear-cut, however, the MACD is recommended more often for beginner traders and the RSI is recommended for more experienced traders. The two MACD lines provide more information and are therefore easier to read. The chart is also easier to interpret. This will be facilitated by, m.in, rankings, thanks to which everyone will choose the broker that best suits their individual needs.

Technical analysis is a must be read by every aspiring trader. Although this method is considered to be simpler than fundamental analysis, it also uses different types of tools. Different charts and indicators are different, provide different information, and have different levels of performance.