• Moving averages are one of the simplest but most powerful indicators. Moving averages help to smooth out price data and identify trends over a period of time.

Types of Moving Averages

  • Simple Moving Average (SMA): the average price over a period of time. For example, a 50-day SMA calculates the average of the closing prices over the last 50 days.

  • Exponential Moving Average (EMA): gives more weight to the most recent price and is more sensitive to price fluctuations.

  • How to use moving averages.

  • If the price is above the moving average, it is a buying opportunity. Conversely, if the price falls below the moving average, it is a sell signal. A "Golden Cross" occurs when the short-term MA (e. g. 50-day MA) exceeds the long-term MA (e. g. 200-day MA), indicating a bullish trend. A "death cross" occurs when the short-term MA falls below the long-term MA, indicating a bearish trend.

  • RSI measures the speed and changes in price movement; RSI ranges from 0 to 100 and is mainly used to identify overbought and oversold conditions.

  • How to use RSI

  • the RSI index above 70 indicates an overbought condition. In this case, the stock may be bought.

  • An RSI below 30 indicates an oversold condition. The stock may be undervalued, indicating a buying opportunity.

  • MACD is a momentum indicator that follows a trend. It shows the relationship between two moving averages of a stock's price.

  • MACD Components: MACD line: the difference between the 12-day EMA and the 26-day EMA.

  • Signal line: the 9-day EMA of the MACD line.

  • Histogram: the difference between the MACD line and the signal line.

  • Usage of

  • MACD line above the signal line is a buy signal; the MACD line below the signal line is a sell signal. A gap between the lines indicates the strength of the impulse; a larger gap indicates a stronger impulse.

  • Bollinger Bands consist of three lines: the middle #band (SMA), the upper band and the lower band. The bands widen and narrow depending on market volatility.

  • How to use Bollinger Bands

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