Ever since the beginning of the development of financial markets, each participant in the exchange trading has been developing his vision and understanding of the assets movement. Various combinations were created for forecasting the future assets value, fundamental factors that determined the course, as well as the first trading strategies. However, the market did not stand still, and its structure and specifics also changed, but the basic principles remained the same.
In the age of computer technology, it is difficult to imagine any process of activity without the use of automatic tools. The financial market is not an exception, too. During the 80’s and 90’s, most fix api traders developed their own mathematical models, as well as a number of auxiliary tools that could help in trading and which informed the managers about the current market situation. These tools were called technical indicators.
In its essence, technical indicators are a set of specific mathematical operators that analyze the price value and display the value of the indicator in the form of histograms, lines or other figures. Thanks to these values, the fix api trader can relatively navigate to the position of the financial instrument and predict the further movement. More details about the specifics of technical indicators can be read here –http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators. And today, we will consider the most widely known classic indicators.
I highlight several key technical indicators:
- Moving Average
- Bollinger Bands
- Awesome Oscillator
Today, we will not look at the indicator code or consider on the basis of which operators it is built. We will consider exactly how these indicators are interpreted by the market participants in their fix api trading.
This is a classical indicator, which displays the presence of a trend on the chart. If the quotes are above its values, it is a signal for an uptrend. If they are below–it is a signal for a descending trend. When the quotes cross the MA line, you should open the purchase/sale depending on the breakdown direction. It should be noted that all the market players use this or that MA combination with different parameters. However, this indicator, in my opinion, does not work well as a signal forpurchases/sales, because at the time of crossing, the price significantly goes away. I use this indicator as a filter to determine the trend’s strength.
This indicator also applies to the trend indicators group, but it is more advanced than MA. MACD displays simultaneously several trading signals: divergence, the presence of a trend, an overbought/oversold zone. The first signal indicates possible corrections within the trend based on the divergence of quotations with the value of indicator histograms. So, when the value of the asset grows, and the histograms are reduced – a divergence occurs, which signals about correction of quotations down. The signal for purchases (asset growth) operates exactly opposite. Similarly, when the histograms show significant growth or decline – this is a signal for the asset overbought/oversold. In turn, the signal for buying or selling the asset is crossing the signal line value MACD.
This technical indicator is a calculation of the standard deviation based on quotations with a step of 20 bars. This allows you to determine when the trend begins, when the indicator blades begin to expand, and when they return to the regulatory zone, they indicate the end of the trend. Also, this indicator is used to work inside the BB channel: when the quotes of the currency pair on the fix apiforexmarket fend off the indicator’s border, it is worth to open a speculative position in the opposite direction.
This is one of the most popular indicators of oscillators, which demonstrates the zones in which quotes reach the maximum value and you can expect a corrective turn. This indicator acts as a filter for closing positions or trading on small turns. I will also note the fact that Stochastic demonstrates a buy signal when the values of both lines are in the bottom of the indicator, and also the lines intersection is shown in this zone. For sale, the signal appears when the value of the indicator is in the upper area and also the lines intersect from top to bottom.
Indicator from the group of Bill Williams trading strategy. It is also an oscillator that indicates the signals we considered above: divergence, overbought and oversold, and the current market situation. Personally, I use this indicator to find the Elliott waves. The peak along the AO points to the third wave, and the fourth should always be brought down in the opposite direction.