When we talk about technical analysis, we are not going to find any kind of magic formulas or infallible strategies, no matter how much the newcomers pretend to search at full speed for profit. You will learn about technical analysis with a lot of study, patience and a lot of discipline.
As proposed in the Investment Room, there are five indicators that are usually used by the most successful operators. The strategies that we are going to show you next, should not be used randomly or independently, but you should combine them so that you can have much clearer signals.
The 5 most important Indicators
The simplest strategy of all is a Simple Mobile Media. In this company, the operators will seek to position themselves in any way with short positions so that when the price falls below the MM they can rise from much longer positions.
The MACD (Convergence Divergence of the Moving Average) is a more sophisticated tool, which is based on the Exponential Moving Averages or EMAs.
The MACD generates many signals and that is an important point. Its most appropriate use is to indicate when a trend is weakening, since the MACD will be high and will fall below the signal line.
The Stochastic Oscillators are basic in any successful negotiation strategy. The Stochastic reflects the momentum, and its operation consists in registering the closing price of a currency against its price range during the period.
Mean Directional Index or Directional Movement Index
The ADX is an extremely useful indicator that registers the strength of positive or negative trends. Their presentation can vary between different platforms, but in many cases, many of them show a negative directional index (-DI) and in other opportunities they present a positive directional index (+ DI), and in other random cases a third line can be presented, which is the average of both.
The ADX can be used in many ways, but the simplest is to look for crosses between the + DI and the -DI, and to be placed in short positions when the -DI is placed above, and in long positions, when the + DI is place above.
After the four previous technical indicators, the fifth and last, is the divergence. The divergence is to use one of the four previous indicators, and compare it with the market (something that must be done anyway).
For example, when the market is rising, but the DI is falling (suggesting a weakening trend) we have a divergence, which is usually a sign that the trend is running out, or that it is about to be reversed. Successful operators pay close attention to divergence, since it is usually considered one of the four strongest indicators that exist.