Technical indicators are ready made analysis tools that support decision making in the trade. They must be used in conjunction with demand-supply and other analysis methods.
Two most fundamental and widely used indicators are MA and RSI.

MA works best in trending market and displays a smoothened out trend of the stock. The stock invariably gets attracted to the MA and is repelled causing the zig-zag movement of the stock. While the stock is above MA it’s considered in uptrend and when it moves below MA it’s considered in downtrend. The MA is not suitable for sideways moving stocks.

RSI works best in the sideways moving market. The RSI can be used to identify overbought and oversold conditions to take appropriate position. RSI is a oscillating indicator and does not work in a trending market.

2 Comments
  1. Naresh 5 years ago

    Hi,
    Fibonacci Series and Fibonacci retracement
    Fibonacci series is the sequence of numbers in which each number is the sum of the previous two numbers in the sequence. Fibonacci Series is 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144,………….
    Golden Mean is 1.618 Logic behind golden mean is the ratio of two consecutive numbers in fibonacci series is same for all the two consecutive numbers.
    Example 1: 21/13=1.618 Example 2: 144/89=1.618

    Fibonacci Retracements are ratios used to identify potential reversal levels. The most popular Fibonacci Retracements ratios are 23.6%, 38.2% and 61.8%.
    These ratios are found using the Fibonacci sequence
    1. 61.8% – dividing one number in the series by the number that follows it. For example: 8/13 = 0.6153
    2. 38.2% – ratio is found by dividing one number in the series by the number that is found two places to the right.
    3. 23.6% ratio is found by dividing one number in the series by the number that is three places to the right.

    Fibonacci Retracements used to identify support and resistance zones during the correction of the trend

    In bullish retracement
    Use the Fibonacci retracement tool to connect the trends bottom & top, by doing this Fibonacci retracement levels will be plotted in the chart.
    When the price retraces from the peak then fibonacci retracement levels will act as a support zone.

  2. Author
    Aditya Gadgil 5 years ago

    Hi Naresh, thanks for explaining the Fibbonacci levels here.

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