Chapter 5

Transforming Techniques into Trades

In This Chapter

arrow Surveying channels

arrow Identifying moving averages and momentum

arrow Discovering that volatility won't bite you

arrow 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 ...

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