Investing in stocks, forex, commodities, or other investment mediums is a serious business that requires a lot of knowledge and the handy tools for the trade. Now, after one has learned how to make a trade, how to look for support and resistance zones, and how to see pattern, one must now use indicators to know what to trade and when to enter. Here are a few of the most popular day trading tools that one can make use of.
The RSI, or the relative strength index, is an indicator that measures the level of people buying and selling. It follows the concept of supply and demand. Basically, the RSI will tell when to enter a trade based on whether the medium is oversold or overbought. If the RSI shows that it is overbought, then one can enter a sell trade but if it is shown to be oversold, then he can enter a buy trade.
The 200 EMA is a very useful tool that one can use to see the overall trend of an investment medium. The 200 EMA is a line that runs through the chart and smoothens either upward and downward. If the line points upward, then the trend is an uptrend while if the line points downward, then it is a downtrend.
Also, one will be able to determine what kind of trades to look for by looking at the EMA 200. If the price is above the EMA 200, traders usually just focus on looking for buy signals. If the price is below, then the traders will look for sell signals.
The MACD is also very useful when one wants to know whether to enter or exit a trade, especially in stocks. Basically, the MACD has two moving average lines with a histogram found in the center. The way to use this is to see what direction the moving averages cross and make a buy trade when they are moving from down to up or make a sell trade when they are moving up to down.
The Bollinger Bands are a set of lines that would tell the trader how much noise the market is making. The Bollinger Band also serves as an exit strategy for those who are already in a trade. As a general rule, if the graph touches either the upper Bollinger Band or the lower Bollinger Band, then it is time to get out of the trade.
The BB can also be paired together with the EMA 5 to determine when to enter a trade. Generally, one will buy if the EMA 5 and the BB cross together in an upward direction with the EMA 5 above the BB. If the reverse happens though, then it is a clear sell indication.
As one can see, these basic tools are extremely easy to use and are also very effective. If one wants to make it as a trader, then he has to know how to use at least these basic indicators to know when to enter or exit a trade. The entry and exits are the most important parts of the the trade and will be determined through these indicators.
The RSI, or the relative strength index, is an indicator that measures the level of people buying and selling. It follows the concept of supply and demand. Basically, the RSI will tell when to enter a trade based on whether the medium is oversold or overbought. If the RSI shows that it is overbought, then one can enter a sell trade but if it is shown to be oversold, then he can enter a buy trade.
The 200 EMA is a very useful tool that one can use to see the overall trend of an investment medium. The 200 EMA is a line that runs through the chart and smoothens either upward and downward. If the line points upward, then the trend is an uptrend while if the line points downward, then it is a downtrend.
Also, one will be able to determine what kind of trades to look for by looking at the EMA 200. If the price is above the EMA 200, traders usually just focus on looking for buy signals. If the price is below, then the traders will look for sell signals.
The MACD is also very useful when one wants to know whether to enter or exit a trade, especially in stocks. Basically, the MACD has two moving average lines with a histogram found in the center. The way to use this is to see what direction the moving averages cross and make a buy trade when they are moving from down to up or make a sell trade when they are moving up to down.
The Bollinger Bands are a set of lines that would tell the trader how much noise the market is making. The Bollinger Band also serves as an exit strategy for those who are already in a trade. As a general rule, if the graph touches either the upper Bollinger Band or the lower Bollinger Band, then it is time to get out of the trade.
The BB can also be paired together with the EMA 5 to determine when to enter a trade. Generally, one will buy if the EMA 5 and the BB cross together in an upward direction with the EMA 5 above the BB. If the reverse happens though, then it is a clear sell indication.
As one can see, these basic tools are extremely easy to use and are also very effective. If one wants to make it as a trader, then he has to know how to use at least these basic indicators to know when to enter or exit a trade. The entry and exits are the most important parts of the the trade and will be determined through these indicators.
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