In your research on Technical Analysis, I am sure that you have chanced upon many indicators and you might ask yourself the question of: What do I do with these indicators and how do all of these fit in together?
To help you in understanding technical analysis, I would like to share with you that there are basically 3 main categories of technical studies.They are:
1. TREND FOLLOWING INDICATORS
i) Moving Averages
ii) Moving Average Convergence-Divergence (MACD)
iii) Directional Movement Index (ADX)
Some popularly used ones include:
ii) Relative Strength Index
iii) Williams % R
iv) Commodity Channel Index
3. SENTIMENT INDICATORS
i) Put-Call Ratio
ii) Commitment of Traders Report Data
Technical Indicators that have been outline above is being used by countless traders. However, these indicators might be able to tell you that yes, certain oversold and overbought situations using RSI and Stochastic. Indicators such as the MACD and the Moving Averages can also tell you the trend, whether the trend is up or the trend is down. However, these indicators are not able to tell you, whether the trend that has been set in place is a new trend or an old trend. It also can’t tell you where the uptrend is going to end or where it will most likely be met with strong support or resistance.
That is why, I use Elliot Wave, Fibonacci and Pivot Points to guide me along in my trading. These tools help me to gauge where I should put my stop loss and take profit positions. Sometimes, I trade off pivot points as prices react to these levels. I too trade off the Fibonacci levels as it is apparent that prices react to these levels and they could act as turning points or reversal points.
I use simple Elliot wave principles to guide me. I know that not all traders are comfortable with using the Elliot Wave principles and find them too complex.
In my opinion however, Elliot wave in its most simple form does help in my trading. Fibonacci and Pivot points too have also allowed me to make quite a number of pips.
In order to be a successful trader, you need to continue to hone your skills and also pick up more things as you go along. Do not just dismiss these tools just because you can’t make sense out of it. What I suggest is that you put the more complex stuff aside and look for more information that is more simplified and that can help you understand these tools and trading principles better. Once you are more confident of the terminology used to describe these tools, you will begin to appreciate them better and even use them in your trading.
Singapore Forex Trader’s Blog