Sharing on the application of technical indicators in trading
It is not difficult to know, but it is not easy to do. For investment in the secondary market, everyone knows that you cannot be greedy, nor can you chase the rise and sell the fall, but how many people can control their hands to achieve unity of knowledge and action? In the Tao Te Ching, Lao Tzu mentioned Tao, law, and art. Tao refers to rules, natural laws, and core concepts, law refers to methods, legal principles, and systems, and art refers to behavior and operating methods. Tao, law, and art are combined and regarded as important principles and criteria for guiding people's lives and social development.
For the secondary market, we can also divide investment into Tao, Fa and Shu, and none of the three can be missing.
Tao: represents investment philosophy and investment beliefs, that is, the direction, goals and values of investment. Including analysis of long-term market trends, macro conditions and fundamentals.
Law: represents the laws and rules of investment, including investment strategy, risk management, and asset allocation.
Techniques: Technical analysis, quantitative analysis, and trading psychology of investment
Today, this report will focus on the "art" of trading. Its purpose is to share the application of technical indicators and technical analysis in actual combat. For most people, there is no need to learn many unconventional technical indicators, because technical indicators are lagging and cannot directly make profits. This report will share commonly used technical indicator methods to let more people know the significance of technical analysis.
1. Explanation and application of MA moving average indicator
MA indicator, also known as Moving Average, calculates the average price within a number. For example, MA5 represents the average price of candlesticks in 5 time periods (including the current one), whether it is minute level, hour level, or day level. The smaller the MA number, the more sensitive the fluctuation is, and the more focused it is on short-term fluctuations. On the contrary, the larger the MA number, the slower the fluctuation is, and the more focused it is on long-term fluctuations.
The MA numbers are set according to the user's preferences. Here I share two sets of MA trading methods that I often use, namely Vegas Channel and Force Channel.
Vegas Pass
The simplified explanation of Vegas Channel is to use the 144 and 169 moving averages to judge the medium and long-term trends. This method is not suitable for periods below 15 minutes, but is suitable for periods above 1 hour.
Why use these two moving averages?
If we observe carefully, we can see that 144 and 169 are the squares of 12 and 13 respectively. The principle implies Gann's square theory and Fibonacci sequence. That is, the number 144 comes from Gann's square theory, and the number 169 is the square of Fibonacci sequence number 13. The combination of the two can achieve better application effect in actual combat.
MACD (Moving Average Convergence Divergence)
MACD (Moving Average Convergence and Divergence) is the most commonly used technical indicator in trading. The core of the indicator is to analyze the changes in price momentum by comparing the moving averages of different periods, thereby providing buy and sell signals. MACD is mainly divided into zero line, MACD line and signal line. At the same time, it mainly looks at one change:
Three variations of MACD:
1. MACD line and signal line crossover:
Buy signal: When the MACD line (blue) crosses the signal line (yellow) from below, it means that the market momentum has turned positive and you can consider buying long positions.
Sell signal: When the MACD line (blue) crosses the signal line (yellow) from above, it means that the market momentum turns negative and you can consider selling.
2. The relationship between the MACD line and the zero line
Above the zero line: When the MACD line is above the zero line, it means that the short-term average is higher than the long-term average and the market is in an upward trend.
Below the zero line: When the MACD line is below the zero line, it means that the short-term average is lower than the long-term average and the market is in a downtrend.
3. Changes in the histogram:
The bar chart changes from negative to positive: When the bar chart changes from negative to positive, it means that the MACD line is above the signal line, the momentum is increasing, and it is a buy signal
The bar chart changes from positive to negative: When the bar chart changes from positive to negative, it means that the MACD line is below the signal line, the momentum is weakening, and it is a sell signal
2. Interpretation and application of BOLL and RSI indicators
BOLL(Bollinger Bands)
BOLL is a very simple and practical technical analysis indicator designed by John Bollinger, a US stock analyst, based on the principle of standard deviation in statistics. I personally think it is very useful in the secondary trading of blockchain. BOLL is composed of three lines: upper, middle and lower, also called upper rail, middle rail and lower rail. The upper, middle and lower lines of the Bollinger Bands respectively mean pressure and support. When several reach the upper rail of the Bollinger Bands, they will be pulled back due to pressure. When they reach the lower rail of the Bollinger Bands, they will be pulled up due to support. When the stock price rises above the upper rail of the Bollinger Bands, it means overbought, there is a possibility of a pullback, and it also means that the current stock is very strong. On the contrary, when the stock price falls below the lower rail of the Bollinger Bands, it means oversold, and it also means that the market is extremely weak. When the stock price falls from the upper rail of the Bollinger Bands to the middle rail, the middle rail plays a supporting role. If it falls through the middle rail, it becomes a pressure level. When the stock price rises from the lower rail of the Bollinger Bands to the middle rail, it also faces pressure. Breaking through the middle rail and standing firm means that the pressure level turns into a support level.
Here are 10 golden rules of Bollinger Bands that are important to know:
1. When the price breaks out of the upper track, beware of a pullback. 2. When the price falls out of the lower track, beware of a pullback. 3. Strong market conditions are always above the middle track.
4. Weak market conditions are always below the middle track 5. Narrowing of the upper and lower tracks hides sudden changes 6. The larger the opening, the greater the market momentum
7. The middle line indicates the trend direction 8. The sudden closing of the channel indicates a reversal 9. The sudden opening of the channel indicates that consolidation is no longer
10. The longer the channel narrows, the smaller the opening will be, and the more obvious and drastic the changes in the future market will be.
Summarize
As the saying goes, Tao, Method and Art are all indispensable in trading. This report only focuses on the "art" in the trading process. It is far from enough to just learn and master the use of technical indicators. There are many pitfalls in the market, and the market trends and rising and falling methods will be updated every three months or so. Therefore, you need to keep looking and summarizing and observe the subtle changes in the market.
People are alive, but indicators are dead. The existence of technical indicators is to help us judge transactions after sufficient understanding and risk control, and cannot be used directly to make profits. After all, all technical indicators are lagging and cannot be 100% accurate. Only after we have sufficient understanding and risk control can we assist investment, otherwise it is gambling.
At the same time, all technical indicators are not as simple as described in the report. Each indicator has different variations and methodologies. If you study carefully, you can study each indicator for several years, so the article does not mention all the variations and methods. At the same time, everyone has different styles, and the use of indicators is also different. You need to gradually adjust according to your own trading style.
The process of enlightenment through trading is the same, from seven losses to two draws and then to one profit. It is nothing more than being able to focus on one thing and not coveting various profit models: firmly stick to this trading system, and over time this system will become your ATM.
If you are still feeling lost and don’t know where to start in this market, please comment 333 and get on board!
