The method of technical analysis in financial markets depends on making investment decisions according to price behavior or by relying on different technical indicators. Over time, the number of technical indicators that help the trader to achieve his investment objectives has increased. Technical indicators are different and the investor may not always give the same signal. Looking for an ideal technical indicator is not easy so it is important that the trader examines these indicators on previous moves and builds a trading strategy that increases the chance of capturing opportunities in the money markets. Since the technical indicators do not always give a correct signal, it is important that the trader uses several indicators at the same time to enhance the profit opportunities in the investment world. Using indicators trading together may not be enough alone, but it is important to know the disadvantages of each indicator in order to benefit from them and develop strategy.
There are several technical indicators to predict price action. It can be said that it is important that the trader selects the appropriate trading method in order to rely on these indicators. What are the most prominent technical indicators available?
Moving averages: Indicators of moving averages calculate the average price for each time period and thus change the momentum and predict the direction of the financial asset. For example, at the intersection of moving averages with each other may be a sign of momentum change compared to past movements.
Relative Strength Index (RSI): The index measures the momentum of the price of a financial asset compared to the last period. The indicator displays a value of 0 to 100, moving the pointer over the 50 may indicate a positive momentum and below the 50 is classified as a negative momentum. The indicator also refers to excessive price levels (overbought or oversold). It is also possible to use the classical divergence in order to predict price reversal and hidden divergence in order to expect prices to be completed in the same direction.
Market sentiment: This indicator is used by speculators to reverse the general trend of investors. For example, when traders speculate on price reflection and change of direction, market tendencies may not always be correct and therefore bias may be a source of opportunity and thus favor a minority of investors.
The technical indicators are not limited to the above indicators but there are a large number of them. It is worth mentioning that the trader must study the effectiveness of each indicator and try to rely on several indicators at the same time to enhance trading opportunities. In contrast, this does not mean that the use of a large number of indicators ensures the success of the strategy always, but can be a source of a complex system far from ideal. Therefore, it is important to know the strengths and weaknesses of each index and try to build a homogenous system that increases trading opportunities.