SIX METRICS OF TECHNICAL ANALYSIS: EASY TO GET STARTED WITH TECHNICAL ANALYSIS!
To make a profit in an upswing in price fluctuations, investment benchmarks must be analyzed in order to make a profit. There are many ways to analyze, and one of the quick and effective ways is to use technical analysis methods to analyze price movements through various technical indicators to establish an investment strategy. So, what are technical indicators? How should we use them again? This article will introduce six common technical indicators and their basic uses to help you master the basics of technical analysis!
What are technical indicators?
Meaning and Application of Technical Indicators
Technical indicators are the sum of the tools used in technical analysis to assess market movements. Technical indicators refer to data such as market prices, volume of transactions or other publicly available values, calculated in mathematical formulas and presented to investors in quantitative or graphical form, to help us analyze and judge market movements. Although technical indicators are widely used in stock market analysis, since they are mostly based on past market information, technical indicators can be used to judge market movements as long as there are prices and short-term fluctuations, such as futures, forex, and cryptocurrencies.In simple terms, technical indicators are how investors evaluate future investment strategies based on past values.However, technical indicators only represent past values, and the future direction of the market will be influenced not only by trading prices, but also by real information such as policies, special events. So when making investment decisions, we also need to consider other information to determine market trends more accurately.
Types of technical indicators
There are many types of technical indicators, but based on the trends that each indicator is tracked, we can roughly divide it into two categories: 1. Momentum indicator A momentum indicator is an indicator used to determine the direction of a market trend and whether the trend continues or changes. We can use these indicators to determine whether the price is following the trend and whether there are possible signs of a change. Common homeostatic indicators such as MA, MACD, Boolean channels, etc. 2. A contrarian indicator A countertrend indicator is an indicator used to determine the volatility and deviation of market prices over a period of time. They can help us determine whether the price has deviated from the overall trend and whether there is a possibility of a reversal. Common bearish indicators are KD, RSI, BIAS, etc. In addition to homeostasis and reversal patterns, there are other classifications, such as Overlays and Oscillators, etc. And some indicators may have both the characteristics of a homeostatic and a bearish pattern. In any case,Learning to understand what metrics mean is an important step in technical analysis.For those of you who want to get started with technical analysis, you can start by starting with the six technical indicators presented in the next section. Next, let's get to know six common indicators in a nutshell!
Six key technical indicators
Since the actual content and usage of the metrics differ, here is just a simple overview of these metrics. We have written a separate introduction article for each indicator, and if you are interested in an indicator, you can click on the link below that indicator overview to learn more.
MA (Moving Average)
The moving average, also known as the straight line, is the most basic technical indicator.Represents the average trading price over a period of time。 We can determine trading costs and market trends through the interaction between the average line and price line, or the long-term average and the short-term average on the chart.
KD (Stochastic Oscillator; Random Oscillator Indicator)
A RANDOM OSCILLATION INDICATOR IS AN INDICATOR CONSISTING OF TWO NUMERICAL VALUES OF THE K VALUE AND THE D VALUE. Here, “random” refers to the high and low range in which the price fluctuates over a period of time. KD value can beUsed to determine whether the current price is in a relatively high or relatively low position relative to the price over the past period of time.We can determine whether a reversal of market price movements is imminent by the magnitude and interaction between the K-value and D-value, or the relationship between the KD line chart and the market price movement.
RSI (Relative Strength Index)
RSI is one of theTechnical Indicators Used to Assess the Weakness of Both Parties in Recent Trading in Stocks。 We can use RSI values to see if the market is currently in an overbought or oversold situation in an overheated market or an oversold situation. Like the KD value, it can be used to determine short-term market price movements.
MACD (Moving Average Convergence & Divergence; Index Smooth Heterogeneous Moving Average)
The MACD is a technical indicator composed of a fast line (Taiwan called DIF line; foreign called MACD line), slow line (Taiwan called MACD or DEM line; foreign called Sianal or Trigger line), and a column chart. The MACD indicator can be used by the intersecting relationship between the fast and slow lines, as well as the change in the direction of the column chartSignals to determine the movement of the medium-long range and the timing of buying and selling。
Bollinger Band
A Boolean channel, also known as a Boolean Belt, a Boolean Belt, is a band-shaped indicator line drawn from the concept of a statistical normal distribution, consisting of up, middle (equalized), and down lines. It usually also appears overlapping the price line. According to the statistical normal distribution model, there is a high probability that market prices will fall within the band range between the up-and-down lines. And by determining the interaction between the price line and the Boolean channel chart,The Boolean channel can be used to see information such as the direction of the market and signal points to buy or sell。
BIAS (Bias Ratio)
Deviation rate refers to the deviation ratio of the price to the average price。 Also, since the average line represents the average price over a recent period of time, the divergence rate can also be considered the average rate of return over a period of time. In addition to being used to calculate the rate of return, it can also be used to see deviations from the market consensus price (i.e. the average price) and determine if there is a possibility of a price reversal in the short term.
Conclusions - Precautions for the use of technical indicators
We've covered six common technical indicators before, but there are actually a lot of different technical indicators. We should note that the data, data, and calculation methods are different for each indicator, so there is no advantage or disadvantage. We can not only look at one indicator, but should refer to several indicators and then judge for a better grasp! As for how to choose the metrics to reference, look at our own investing habits and ways, and adjust and learn as we invest, choosing the way to analyze that suits you! However, we must also remember that the factors that influence market prices vary. Technical indicators are only a reference tool and do not guarantee accurate forecasts every time. Therefore, before making investment decisions, we also need to consider other aspects of information, such as fundamental analysis of the project, etc. This will reduce risk and increase profits!
