Transforming Techniques into Trades
In This Chapter
Identifying moving averages and momentum
Discovering that volatility won't bite you
Using combinations of indicators to make trading decisions
Chapter 4 in Book X reviews patterns and lines, emphasizing the key concepts of support, resistance, and breakouts of support and resistance. This chapter takes a look at the math-based indicators that make up the bulk of technical indicators and help you fine-tune your trading. Don't panic at the word “math.” Although some chartists do use advanced math, you have plenty of choices among indicators that use simple arithmetic — addition, subtraction, division, and multiplication.
Math-based indicators fall roughly into three categories:
- Trend: Direction of the trend
- Volatility: Reliability of the trend
- Momentum: Strength of the trend
Volume may be added as a confirming indicator to all of the price-based indicators. Whether it can stand alone as the sole criterion for buy/sell trading decisions is debatable.
This chapter also covers ways in which you can combine ...