For those who are serious about trading, one has to make sure that he has the essential knowledge and tools to become profitable in the long run. These tools are the indicators that one can use in order to see the price action of a commodity, stock, or currency pair. For those who are beginners, here are a few day trading tools that one can add to his arsenal as a trader.
The RSI, or the relative strength index, is an indicator that measures the level of people buying and selling. It follows the concept of supply and demand. Basically, the RSI will tell when to enter a trade based on whether the medium is oversold or overbought. If the RSI shows that it is overbought, then one can enter a sell trade but if it is shown to be oversold, then he can enter a buy trade.
Another tool that one can add to his arsenal would be the 200 EMA which is a trend indicator. Basically, the EMA 200 will tell a trader if the trend is going in an uptrend or is in a downtrend. When the 200 EMA points upward, it is an uptrend but if it goes down, then it is a downtrend.
Another way to use the 200 EMA is to look where the chart is. If the candlesticks are above the 200 EMA, then generally one will only look for buy trades. However, if the candlesticks are below the 200 EMA, then the traders will usually look only for sell trades.
One may also make use of the MACD in order to know when to enter and to exist. The basic structure of the MACD is a histogram in the middle and two moving averages. In a nutshell, if these moving averages cross going from up to down, then it is an indication of a sell but if the moving averages cross going from down to up, then it is an indication of a buy.
Bollinger bands are also really helpful in telling when exit a trade. The general rule to follow when using the Bollinger band as an exit strategy is to make sure to exit when the price hits either the north Bollinger band or the south Bollinger band. Once the candlestick hits, the tendency for the price is to fall back into the middle Bollinger band.
Other than an exit strategy, the Bollinger Bands can be used as an entry strategy if used together with an EMA 5. If the EMA 5 crosses the middle Bollinger Band and is moving downward, then it is a sell signal. If the EMA 5 crosses the Bollinger Band going upward, then it is a buy signal.
As one can see, these basic tools are extremely easy to use and are also very effective. If one wants to make it as a trader, then he has to know how to use at least these basic indicators to know when to enter or exit a trade. The entry and exits are the most important parts of the the trade and will be determined through these indicators.
The RSI, or the relative strength index, is an indicator that measures the level of people buying and selling. It follows the concept of supply and demand. Basically, the RSI will tell when to enter a trade based on whether the medium is oversold or overbought. If the RSI shows that it is overbought, then one can enter a sell trade but if it is shown to be oversold, then he can enter a buy trade.
Another tool that one can add to his arsenal would be the 200 EMA which is a trend indicator. Basically, the EMA 200 will tell a trader if the trend is going in an uptrend or is in a downtrend. When the 200 EMA points upward, it is an uptrend but if it goes down, then it is a downtrend.
Another way to use the 200 EMA is to look where the chart is. If the candlesticks are above the 200 EMA, then generally one will only look for buy trades. However, if the candlesticks are below the 200 EMA, then the traders will usually look only for sell trades.
One may also make use of the MACD in order to know when to enter and to exist. The basic structure of the MACD is a histogram in the middle and two moving averages. In a nutshell, if these moving averages cross going from up to down, then it is an indication of a sell but if the moving averages cross going from down to up, then it is an indication of a buy.
Bollinger bands are also really helpful in telling when exit a trade. The general rule to follow when using the Bollinger band as an exit strategy is to make sure to exit when the price hits either the north Bollinger band or the south Bollinger band. Once the candlestick hits, the tendency for the price is to fall back into the middle Bollinger band.
Other than an exit strategy, the Bollinger Bands can be used as an entry strategy if used together with an EMA 5. If the EMA 5 crosses the middle Bollinger Band and is moving downward, then it is a sell signal. If the EMA 5 crosses the Bollinger Band going upward, then it is a buy signal.
As one can see, these basic tools are extremely easy to use and are also very effective. If one wants to make it as a trader, then he has to know how to use at least these basic indicators to know when to enter or exit a trade. The entry and exits are the most important parts of the the trade and will be determined through these indicators.
About the Author:
Get a summary of the factors to consider when choosing day trading tools and more information about excellent tools at http://www.bearbulltraders.com/tradingtools now.
No comments:
Post a Comment