Technical indicators are one more set of additional reinforcements in technical analysis.
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Hi,
Read the below information for more detail about technical indicator
Fibonacci retracement – The Fibonacci sequence is one of the most famous formulas in mathematics. Each number in the sequence is the sum of the two numbers that precede it. So, the sequence goes: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, and so on. Traders believe the Fibonacci series has its application in stock charts as it identified potential retracement levels. Fibonacci retracements are levels (61.8%, 38.2%, and 23.6%) up to which a stock can possibly retrace before it resumes the original directional move.
Golden Mean is 1.618 Logic behind the golden mean is the ratio of two consecutive numbers in the Fibonacci series is the same for all the two consecutive numbers.
Example 1: 21/13=1.618 Example 2: 144/89=1.618
How to use it while trading stocks
First, find the recent significant Swing Highs and Swings Lows. For downtrends, click on the Swing High and drag the cursor to the most recent Swing Low. While for uptrends, do the opposite. Click on the Swing Low and drag the cursor to the most recent Swing High. When you applying the tool, the software shows you the retracement levels automatically.
RSI Indicator- The most popular technical indicators are computed on the basis of the speed and direction of a stock’s price movement. which means that the RSI indicator only measures the stock’s internal strength. RSI oscillates between zero and 100. Which is considered overbought when above 70 and oversold when below 30.
How to spot bullish momentum using RSI
Most of the traders while using RSI for creating long position make a big mistake of creating long position when the RSI levels falls to 30 levels but it is not the correct way of creating long positions because when the RSI levels falls below 30 it just indicates that, the sellers are aggressive in nature. The correct level for creating long position is when the RSI falls below 30 level and it starts to move above 30 level. The point from where it moves upwards from 30 level is the entry point for creating long positions. Only during the upside movement of RSI, we should create long position and not during downside movement.
How to spot bearish momentum using RSI
Here also most of the traders using RSI for creating short position make a mistake of creating short position while the RSI levels reaches to 70 levels but it is not the correct way of creating short positions because when the RSI levels moves above 70 levels it just indicates that the buyers are aggressive in nature. The correct level for creating short position is when the RSI falls reaches 70 level and it starts to move below 70 level. The point from where it moves downwards from 70 level is the entry point for creating short positions. Only during the downside movement of RSI, we should create short position and not during upside movement.
@naresh Very nice and elaborate explanation sir. Thanks.