A technical indicator is a series of data points that are derived by applying a formula to the price data of a stock. Price data includes any combination of the open, high, low or close over a period of time. For analysis purposes, technical indicators are usually shown in a graphical form above or below a stock’s price chart. Once shown in graphical form, an indicator can then be compared with the corresponding price chart of the stock. Generally, Moving averages (MA), Relative strength index (RSI), Moving average convergence divergence (MACD) are using to predict trends of the market. However, one can’t depend on above indicators fully, some time with smaller period of time indicators shown false noises and given wrong indication for Buy/Sell.
Fibonacci Retracements are based on the idea that markets will retrace a PREDICTABLE portion of prior move. A bounce is expected to retrace a portion of the prior decline, while a correction is expected to retrace a portion of the prior advance. Once a pullback starts, we can identify specific Fibonacci retracement levels for monitoring vice versa on when correction approaches. Retracement levels alert traders or investors of a potential trend reversal, SUPPORT or RESISTANCE area. The most popular Fibonacci Retracements are 61.8% and 38.2%. The golden mean Fibonacci ratio is 61.8%.
