In this article, I will explain four indicators that are considered essential and fundamental:
1. RSI indicator
2. MACD indicator
3. TD9 indicator
4. Bollinger bands
□ The RSI indicator is an oscillator that reflects the relative strength between
- Uptrend 🪜
- Downward trend. 🛬
● RSI near 30: reflects an oversold condition.
● RSI near 70: reflects an overbought condition.
● RSI near 50: means the market lacks a clear trend.
To draw an uptrend line on the indicator, you need to connect two, three or more RSI peaks with higher highs (HH) points.
On the other hand, a downtrend is drawn by connecting three or more peaks with the points gradually declining.
When the RSI indicator shows an opposite direction to the price movement, it can mean two things:
Price momentum is weakening, so a correction may occur in either direction.
The end of the trend is near.
Bullish Divergence: Occurs when the price forms a series of lower highs (LH), while the indicator forms higher horizontal dots.
Bearish Divergence: Occurs when the price forms a series of rising highs, while the indicator records falling horizontal highs.
2. MACD indicator:
The MACD indicator measures the convergence and divergence over time between two moving averages of a particular asset's price.
MACD indicates the difference between two moving averages with different calculation periods.
When the MACD line crosses the signal line from bottom to top and the MACD crosses the signal line, the trend will be bullish.
When the crossover occurs from top to bottom and the signal line crosses above the MACD, the trend will be down.
RSI + MACD indicators:
The MACD and RSI indicators complement each other perfectly, as they both seek to identify an emerging uptrend or downtrend early on.
This is to alert the trader whether he should buy or sell a particular position.
Therefore, analyzing just one indicator may not be enough.
MACD Summary:
The MACD indicator is a technical tool that measures the strength of price movement.
To confirm MACD signals, it is recommended to use it in conjunction with another technical indicator.
Such as RSI, Stochastic, or Volume.
3. TD9 indicator
The TD Sequential indicator indicates when a trend is about to end and reach turning points, and provides accurate signals regarding when to enter the market with a new trade or close an existing one.
Buy signal: If 9 consecutive columns are recorded where the closing price of each column is lower than the closing price of the fourth column before it.
Sell signal: If 9 consecutive columns are recorded where the closing price of each column is higher than the closing price of the fourth column before it.
4. Bollinger bands
Bollinger Bands are one of the most widely used trading indicators.
It is used to compare changes in the price value of an asset with the relative value of its price over a period of time.
Bollinger Bands are also used in technical analysis as a complement to studying reversal patterns:
• W-shape or double bottom, a pattern that indicates a shift from a downtrend to an uptrend.
• M-shape or double top, which is a shape that indicates a shift from an uptrend to a downtrend.
"Compression" occurs when the bands come so close together that they almost appear to meet or overlap.
If the price converges with the upper band, it indicates an upward breakout.
If the price converges with the lower band, this indicates a bearish breakout.
The longer the pressure, the stronger the breakout.
If the Bollinger Bands widen significantly, it may indicate that the price is breaking out of consolidation and heading towards a new trend.