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Moving Average is one type of technical Indicator which is used to predict the future price movements. This indicator will take the past prices and find the average price, and a line on a chart which will be used as future price direction.
1. It is depicted as BULLISH if the current price candle is above MA line. The far above it goes the strong the trend is.
2. It is depicted as BEARISH if the current price candle is below MA line. The far below it goes the strong the trend is.
3. It is depicted as NEUTRAL if the current price candle is along with MA line.
There are different variety of MA available in the market.
Technical Indicators are just a proven theories to forecast future price movements based on past historical price actions. It is not based on the assessing instrument’s fundamental factors. Since the future prices are predicted using some technical tools (based on past prices), the influence of future plans about the stocks is missing in technical indicators, where as fundamental analysis would cover the future actions of the company to predict the price movement.
RSI is called as Relative Strength Index which is actually a Momentum Oscillator. This is used to identify the momentum of the stock which is trading.
Using this oscillator we can identify the overbought and oversold conditions. This oscillator would oscillate in between 0 and 100 range where above 70 or 80 is generally called as OVERBOUGHT signal and below 30 or 20 is called as OVERSOLD signal.
The OVERBOUGHT and OVERSOLD signals can be combined with other indicators to find the BUY and SELL signals.
RSI > 70 or 80 -> OVERBOUGHT (SELL)
RSI < 30 or 20 -> OVERSELL (BUY)
RSI = 50 -> NEUTRAL or RESISTANCE
RSI can be used as in two different ways.
1. Overbought/Oversold – to take BUY or SELL decisions.
2. Divergence to predict the market direction during non trending market.
Doji is simply called as an indecision in the market by both buyers and sellers. It may not have any body or have a smaller body in either red or green.It gives an early indication of any possible trend reversal.
It is used to identify the trend reversal and current trend’s strength.
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