October 2012
Intermediate to advanced
250 pages
6h 3m
English
book
Timing Solutions for Swing Traders: A Novel Approach to Successful Trading Using Technical Analysis and Financial Astrology
by Robert Lee, Peter Tryde
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CONCLUSION
This chapter discusses five key indicators: momentum, moving averages, MACD, ADX, and protective stops, which will help traders to understand the purpose and use of indicators in a trading strategy. In planning a chart layout, traders should ensure that the layout covers different aspects of the market. A good layout should not be cluttered with indicators but should be neat and simple. Yet it should be meaningful and complete. Basically, the chart will have a trend indicator to show the probable direction of the trend, a momentum indicator to measure the speed at which price is changing, and a volume indicator to measure stock activities. Traders should avoid using multiple indicators that show the same type of information in the chart.
Momentum measures the speed of price change and is used in identifying price strength by the variance of the change in speed of price. It is the basic concept applied in most indicators. MACD is also a momentum indicator. It consists of three plots. The first MACD line is derived from the difference of two different periods of exponential moving averages. Standard parameters are a 12-day period and a 26-day period. The second line, the signal line, is a 9-day exponential moving average of the first line. The third line is plotted as a histogram. The histogram is the difference between the MACD line and the signal line. The slopes of the histogram will often diverge with the price directional movement to alert traders to probable turning ...
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