Trend indicators and oscillators
Trend indicators can be used to spot reversals of the trend or can be used to spot support and resistance. Oscillator indicators move around a specific level or move between upper and lower level. Traders make use of these technical indicators to determine whether the market is overbought or oversold. This can enable the trader to get a good signal when the divergence is drawn between the price action and the oscillator.
The popular trend indicators include:
- Bollinger bands,
- channel,
- Ichimoku Kinko Hyo,
- moving average and
- parabolic SAR.
Popular oscillator indicators include:
- MACD (moving average convergence divergence),
- momentum,
- RSI (relative strength index),
- RVI (relative vigor index) and
- stochastic oscillator.
Mistakes to avoid in using technical indicators
One of the biggest mistakes that traders make when they are using technical indicators to trade is that they use too many of them and this can be confusing. Each technical indicator gives specific trading signal.
If for example the trader uses four trading indicators they can get four different trading signals. If these different signals do not appear at the same time it can lead to a lot of confusion and the trader many make wrong entry points. This can result in loss making trades.
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