Technical indicators are used widely when trading the market. Learn more about them. These are used to judge the direction of the security and the strength of the security. It is important to know that the technical indicators are lagging and thus they should not be used for making decisions but to support your trading signal.
Smoothed rate of change
This is a tool that compares the exponential moving average of today to the consensus on average at some time in the past. This is used to determine whether the attitude of the market is bearish or bullish.
Williams %R (Wm%R)
This tool uses the closing price of the security to compare it with a range of values or closing prices. TheWm%R will have a positive signal when the bulls are able to pull the market to the top of the recent range. TheWm%Rhas a negative signal when the bears are capable of pushing the market to the bottom of the range.
The stochastic technical indicator is used to measure the closing price with a range. If the bulls push the price of the security up during the day but are unable to close near the top then the stochastic will turn downwards and this will indicate a sell signal. The same happens when the bears push the price down but the close does not happen near the low of the day. A buy signal is then issued when this happens.
Relative strength index or RSI
The RSI is measured over a range of days around seven or nine days. This gives a result between 0 and 100. The 0 indicates an oversold position and 100 indicates an overbought position. Thus the RSI gives a bullish or a bearish signal to the traders.
Volume is an important technical indicator and this is used to judge the psychology of the market. This is used to measure the emotional state of the investor. Ahugevolumeindicateswinners and low volume do not show any significant response.
The longer-term trends happen when the emotions are low. When the volume is low then there is no roller coaster ride and the trend is thus likely to continue. This is the emotions in the market change.
Ina long-term trend any small change in price does not give rise to emotions. Even if there are a series of changes this will not cause any emotional reactions.