Markets characteristically have the penchant to trade or trend, which is how they move up, go sideways or go down. A trending stock market is one in which prices move strongly and particularly in one direction; either upwards or downwards. Additional trait of the trending market is the steady move to higher lows and new highs.
Likewise, in a down trending circumstance, the market price is prone towards lower highs and lower lows. Hence, the trend traders seek to set apart and extract productivity from following trends. Some indicators are popular among traders as they have resisted the testing.
A flowing single line which produces a smooth price data in place of the average price of the stock over a period of time. The choice of the moving average a trader decides to follow is determined by the timeframe. The most required after moving averages for long term trend followers and other investors are 50day, 100 day or a 200 day simple moving averages.
Moving Average Convergence Divergence (MACD)
Any surplus funds you have such as a surprising bonus or money obtained as gifts, that will not make a hollow on your financial position should you lose it in the market, can be used for investment purposes.
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This indicates the association between two moving averages of prices and is a trend following momentum indicator. MACD is generally used for trend trading. There are three ways to be aware of MACD namely 1) Crossovers 2) Divergence 3) Dramatic Rise
Relative Strength Index (RSI)
RSI is a technical indicator which detains momentum and does a assessment of the magnitude of ‘recent gains’ to ‘recent losses’ with an aim to find the overbought and over sold conditions of trades in the stock market. It measures the magnitude and velocity of directional movements in price.
On Balance Volume (OBV)
Volume is a big indicator. The OBV accumulates the volume information into a signal ‘one line indicator. In general, the volume confirms trends and a rise in price should follow a rise in OBV and similarly a fall in price should follow a drop in OBV.