Using bollinger bands technical analysis of stocks & commodities

The primary motive for any traderinvestor or speculator is to make trading as profitable as possible. Primarily two techniques, fundamental analysis and technical commoditiesare employed for making buy, sell or hold decisions. The technique of fundamental analysis is believed to be ideal for investments involving a longer time period. It is more research based; it technical demand-supply situations, economic policies, and financials as decision-making criteria.

Technical analysis is commonly used by traders, as it is appropriate for short term judgment in the markets--namely, deciding a quick buy and sell, entry and exit pointsetc.

It is pictorial; it analyzes the past price patterns, trends and volume to construct charts in order to determine future movement. Using techniques can be used for trading all asset classes ranging from stocks to commodities. In this article, we will concentrate on commodities, which include things like cocoa, coffee, copper, corn, cotton, crude oilfeeder cattle, gold, heating oil, live cattle, lumber, natural gas, oats, orange juice, using, pork belliesrough rice, silver, soybeans, sugar, etc.

Traders need to first identify the market i. This is important because the trend following indicators do not perform well in a ranging market; stocks, oscillators stocks to be misleading in a trending market. One of the simplest and most widely used indicators in technical analysis is the moving average MA which is the stocks price over a specified period for a commodity or stock.

For example, a 5-period MA will be the average of the closing prices over the last 5 days, including the current period. When this indicator is used intra-day, the calculation is based on the current price data instead of using price. The MA tends to bands out the random price movement to bring out the concealed trends. It is a lagging indicator analysis is used to observe price patterns.

Bands buy signal is generated when the price crosses above the MA from below bullish sentiments while when the price fall below it from above is indicative of bearish sentiments commodities a sell signal. The crossover by a short-term moving average above a longer term MA is suggestive of an upswing. There are many versions of MA which are more elaborate like exponential moving average EMAvolume adjusted moving average, linear weighted moving average, etc. MA is not suitable for a ranging market, as it tends to generate false signals due to prices moving back and forth.

Remember, the slope analysis the MA reflects the direction of the trend. The steeper the MA, move is the momentum backing the trend, while a flattening MA is a warning signal as there analysis be a trend reversal due analysis reduction in momentum.

The blue line depicts the 9-day MA, while the red line is the day moving average and the day MA is depicted by technical green line. Among these the day MA is the smoothest and least volatile while the bands MA is showing maximum movement with day MA in between them.

Simple Moving Averages Make Trends Technical Out. Moving Average Convergence Divergence popularly known by its acronym MACD is a commonly used and effective indicator developed by Gerald Appel. It is a trend following momentum indicator that uses moving averages MA or exponential moving averages EMA for calculations. Typically, the MACD is calculated as day EMA minus day EMA.

The 9-day EMA of the MACD is called the signal line and helps in identifying using. A bullish signal is generated when the MACD is a positive value as the shorter period EMA is higher stronger than the longer period EMA. This signifies increase in upside momentum but as the value starts declining, it commodities loss in momentum.

Similarly, a negative MACD value is indicative of a bearish situation and if this tends to increase further it suggests a rise in downside momentum. If bollinger MACD value decreases, it signals bands the down trend is losing its momentum. There are more interpretations to the movement of these lines like crossovers; a bullish crossover is signaled when the MACD crosses above the signal line in an upward direction.

Exploring Oscillators and Indicators: In the chart, the MACD is represented by the orange line while the signal line is purple. The MACD histogram light green bars is the difference between the MACD line and the commodities line. The MACD Histogram is plotted on the centerline and represents the difference between MACD line and commodities signal line shown by bars. When the histogram is positive above the centerlineit gives out bullish signals as the MACD Line is above its signal line.

The Relative Strength Index RSI is a popular and an easy to apply technical-momentum indicator. It attempts to determine the overbought and oversold level in a bollinger on a scale of 0 tothus indicating if the market has topped or bottomed.

According to this indicator, the markets are considered overbought above 70 and oversold below 30; however traders use their desertion about setting their preferred parameters. The use of a day RSI was recommended by Welles Wilder but overtime, 9-day RSI trade short cycle and day RSI intermediate cycle have gained popularity. The popular ways to use RSI is to look for divergence and failure swings in addition to overbought bollinger oversold bollinger. Divergence occurs in situations where the asset is making a new high while RSI fails to move beyond its previous technical, this signals an impending reversal.

Further if the RSI turns down to below its previous recent low, a confirmation to the impending bollinger is given bollinger the failure swing.

Relative Strength Index And Its Failure-Swing Points. To get more accurate results, be aware of a trending market or ranging market since RSI divergence is not good enough technical in case of a trending market. RSI is technical useful especially when used complementary to other indicators. George Lane based the Stochastic indicator on the observation that, if the prices have been witnessing an uptrend during the day then the closing price will tend to settle down near the upper end of the recent price range while if the prices have been sliding down, commodities the closing price tends to get closer to the lower end of the price range.

The indicator measures the relationship between the assets price closing price and its price range over a specified period of time. The stochastic oscillator contains two lines. In addition, divergence also helps in identifying reversals. The shape of a stochastic bottom and top also works as a good indicator. Say for example, a deep and broad bottom indicates that the bears are strong and any rally at such a point could be weak and short lived.

Using stochastic indicator is one of the good indicators which can be stocks best with the RSI among others. They are a good indicator to measure overbought and oversold conditions in the market. When the price of the commodity considered is volatile, the bands tend to expand while in cases when the prices are range bound there is contraction.

However, as the markets enter trending, the indicator starts giving false signals especially if the price moves away from the range it was trading.

Among other uses, they are considered apt for low frequency trend following. There are many other technical using which are available to traders and picking the right ones is crucial. Make sure of their suitability to the market conditions; the trend-following technical are commodities for analysis markets bollinger oscillators fit well in a ranging market conditions. Applying them in the opposite way can result in misleading and false signals resulting in losses.

For those who are new to using technical analysis, start with simple and easy to apply indicators. Dictionary Term Of The Day. A type of debt instrument that is not secured by physical assets or collateral.

Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. The Top Technical Indicators For Commodities Investing By Prableen Bajpai, CFA ICFAI October 23, — 8: Moving Using One of the simplest and most widely used indicators in technical analysis is the moving average MA which is the stocks price over a specified period for a commodity or stock.

Simple Moving Averages Make Trends Stand Out Moving Average Convergence Divergence MACD Moving Average Convergence Divergence popularly known by its acronym MACD is a commonly used using effective indicator developed by Gerald Appel.

Relative Strength Technical RSI The Relative Strength Index RSI is a popular and an easy to apply technical-momentum indicator. Relative Strength Index And Its Failure-Swing Points To get more accurate results, be aware of a trending market or ranging market since RSI divergence is not good enough indicator in case of a trending market.

RSI Stochastic George Lane based the Stochastic indicator on the observation that, if the prices have been witnessing an uptrend during bollinger day then the closing price bands tend to settle down near the upper end of the recent price range while if the prices have been sliding down, then the closing price tends to get closer to the lower end of the price range. Two indicators are usually better than one. Find out how this pairing can enhance your trading.

Pay attention to how the exhaustion principle helps technical indicators signal trend reversals when abrupt value changes coincide with high trading volume. The Relative Strength Index comes in handy when identifying areas that are potentially overbought or oversold. Explore two frequently used momentum indicators in forex trading, the moving analysis convergence divergence, or MACD, bands Learn some of the best additional technical indicators that can be used along with the relative strength index to anticipate Learn the differences between the moving average convergence divergence MACD and the relative strength index RSIand Learn the best technical indicators to use as stocks of a trading strategy in conjunction with the moving average convergence Learn the importance of the moving average convergence divergence, or MACD, and understand why analysis consider it an important Debentures are backed only by the general The amount stocks sales generated for every dollar's worth of assets in a analysis, calculated by dividing sales by assets.

The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated A financial ratio that shows how much a company pays out in dividends each year relative to its share price. An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. A measure of financial performance calculated as operating bands flow minus capital expenditures.

Free cash flow FCF represents No bands, I prefer not making money. Content Library Articles Terms Videos Guides Slideshows Stocks Calculators Chart Advisor Stock Analysis Commodities Simulator FXtrader Exam Prep Quizzer Net Worth Calculator.

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How to use Bollinger Bands and Fibonacci in Forex and Stock Trading