Moving Averages
If the Moving average is smoother, we can expect that future price variations will be slower.
The more their route is oscillating, the more we can expect the price to vary more in the future.

If the Moving average is determined for a big number of periods, its path will be smoother and vice-versa.

Main types of Moving Averages
1. Simple Moving Average - SMA = arithmetic mean of closing prices in the target timeframes. It presents some delays.
2. Exponential Moving Average - EMA - puts more emphasis on recent changes. Helps us to identify new trends more quickly. It may create confusion between a new trend and a simple consolidations.

Use
1. To identify the trend

• As a rule: during ascending trend - the price is above the Moving Average / during descending trend - the price moves below the Moving Average.
• As a rule: during ascending trend - EMA is above SMA / during descending trend - EMA is below SMA.

2. To Identify counter-trends and entry points
If EMA crosses SMA - a potential trend reverse - generally this rule is not valid for a sideways trend.

3. As Dynamic Support / Resistance

• The area between two Moving Averages is a potential support / resistance area.
• If the price goes down and tests the Moving Average → Buy
• If the price goes up and tests Moving Average → Sell

For lower risk, entry can be made when the price has reached between the two Moving Averages.

Bollinger bands

• Measure the Market Volatility measurement - widen ↔ high volatility, narrow (Bollinger Squeeze) ↔ low volatility
• Serve as Dynamic Supports and Resistances. After rejection from one band, the price has the tendency to move in the middle of the bands.
• Breakout signal: Bollinger Squeeze + candle body exceeds the upper band (upward breakout) / lower band (downward breakout)

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MACD - Moving Average Convergence Divergence
Used to identify new trends.
Works on the basis of a fast Moving Average, a slow Moving Average, and a Moving Average of the difference between the fast and the slow Moving Average.
Its default pre-set values ​​are 12, 26, and 9, defining the number of periods used to determine the above listed elements.
The difference between two Moving Averages is presented by vertical bars, called histogram:

• Big difference - indicator lines are separating (Divergence)
• Small difference - indicator lines are approaching (Convergence)

If the fast average crosses the slow average and then diverges from it - signal of a potential new trend.

Parabolic SAR
It is used to predict the price direction, appearing as points below the price during an ascending trend and over the price during a descending trend.
The formula to determine its value in advance:

! The recommended acceleration factor is 0.02.
If the points change their position towards the price - reverse signal.
The first SAR value for a new trend is set to the last PE recorded on the previous trend.

Stochastic / Momentum
It measures the speed of the impulse with the help of a slow Mobile Media and a fast Moving Average, being used to identify overbought (there are many Buyers in the market) and oversold (there are many Sells in the market) conditions.
Values ​​→ 0 - 100:

• > 80 ↔ Supplement → opportunity Sell
• < 20 ↔ Overproduction → Buy opportunity

RSI - Relative Strength Index
Signals overbought market conditions if it is > 70, and oversold market conditions if it is <30. Helps us to helping to identify highs, lows and new trends:

• > 50, confirmation for the ascending trend
• < 50, confirmation for the descending trend.

 

IKH indicator - Ichimoku Kinko Hyo
It features 5 lines, each with a different utility:
The 2 orange lines - supports / resistances:

•  if the price is above these lines: upper line ↔ S1, lower line ↔ S2.
• if the price below these lines: lower line ↔ R1, upper line ↔ R2.

Base line - signal of price evolution

• if the price is above it - potential growth
• if the price is below it - potential fall

Return line - trend indicator

• oscillation - there is a tend
• is horizontal, no oscillations - there is no trend.

Lagging line - buy / sell signal

• pierces the price upwards ↔ buy signal
• pierces the price downwards ↔ Sell signal

Combining Indicators

• Bollinger Bands + Stochastic: price near upper Bollinger band + overbought Stochastic - Sell opportunity/price near lower Bollinger band + oversold Stochastic - Buy opportunity
• RSI + MACD: overbought RSI + downwards MACD crossover - Sell opportunity/oversold RSI + upwards MACD crossover -  Buy opportunity

Indicators Classification

Leading Indicators - provide signals before a trend or a counter trend occurs:

• Stochastic (Momentum)
• Parabolic SAR
• RSI

Advantage: The trend can be capitalized on from its very beginning.
Disadvantage: Sometimes the signals may be wrong.

Lagging indicators - provide signals after a clear outline of the new trend:

• MACD
• Moving Averages.

Advantage: The risk is lower.
Disadvantage – Late entries ↔ the potential profit is smaller.