Ihab Salloum[ad_1]
The Layman’s Guide to Technical Indicators
The layman cannot run away from financial jargon if he wants to make money. There are so many technical indicators out there but for the layman, he only needs to know a few. After all, he is very new to trading and has never been exposed to financial jargon in his life.
One reason why the layman shuns technical analysis is because he cannot digest the definitions of so many indicators. So to make things simple for the layman, here’s the lowdown. The layman will only need to know 8 technical indicators. And guess what? 8 is a very, very lucky number indeed!
1. Moving average
Definition: In statistics, a moving average, also called rolling average, rolling mean or running average, is a type of finite impulse response filter used to analyze a set of data points by creating a series of averages of different subsets of the full data set.
2. MACD
Definition: MACD, which stands for Moving Average Convergence / Divergence, is a technical analysis indicator created by Gerald Appel in the 1960s
3. Brolinger band
Definition: Bollinger Bands are a technical analysis tool invented by John Bollinger in the 1980s. Having evolved from the concept of trading bands, Bollinger Bands can be used to measure the highness or lowness of the price relative to previous trades.
4. Stochastic
Definition: The stochastic oscillator is a momentum indicator used in technical analysis, introduced by George Lane in the 1950s, to compare the closing price of a commodity or currency pair to its price range over a given time span.
5. Parabolic SAR
Definition: In the field of technical analysis, Parabolic SAR (SAR – stop and reverse) is a method devised by J. Welles Wilder, Jr, to find trends in market prices or securities. It may be used as a trailing stop loss based on prices tending to stay within a parabolic curve during a strong trend.
6. RSI
Definition: The Relative Strength Index (RSI) is a financial technical analysis momentum oscillator measuring the velocity and magnitude of directional price movement by comparing upward and downward close-to-close movements.
7. CCI
Definition: The Commodity Channel Index (CCI) is an oscillator originally introduced by Donald Lambert in an article published in the October 1980 issue of Commodities magazine (now known as Futures magazine).
Since its introduction, the indicator has grown in popularity and is now a very common tool for traders in identifying cyclical trends not only in commodities, but also equities and currencies. The CCI can be adjusted to the timeframe of the market traded on by changing the averaging period
8. ADX
Definition: The ADX measures the strength of directional movement (trend) in a security. It is one of the three components of Directional Movement Indicator.
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