In this THREAD, I'll break down four fundamental indicators that every trader should know. These tools help you make informed decisions in the volatile world of trading.🧵
1. RSI (Relative Strength Index) 📊
What it Does: Reflects the strength between uptrends and downtrends.
Key Levels:
- 30: Indicates oversold conditions.
- 70: Indicates overbought conditions.
- 50: Signals a lack of trend.
Trend Lines:
- Uptrend Line: Connect two or more peaks for a rising trend.
- Downtrend Line: Connect three or more peaks for a descending trend.
Divergence:
- Bullish Divergence: Price forms lower highs, but RSI shows horizontal or higher points.
- Bearish Divergence: Price forms higher highs, but RSI shows lower points.
2. MACD (Moving Average Convergence Divergence) 📈
What it Does: Measures the convergence and divergence of two moving averages.
Signals:
- Bullish: When the MACD line crosses above the Signal line.
- Bearish: When the MACD line crosses below the Signal line.
MACD Histogram (MACDh): Visual tool showing the distance between the MACD curves; indicates buying or selling pressure.
3. TD9 Indicator 🔄
Purpose: Identifies trend exhaustion and turning points.
Signals:
- Buy Signal: 9 consecutive bars close lower than the 4th previous bar.
- Sell Signal: 9 consecutive bars close higher than the 4th previous bar.
4. Bollinger Bands 📉
What it Does: Compares price changes over time.
Key Concepts:
- Squeezing: Bands narrow, indicating a potential breakout.
- Widening: Indicates the start of a new trend.
- Breakouts:
- Upper Band Convergence: Bullish breakout.
- Lower Band Convergence: Bearish breakout.
This thread offers a quick overview of four of the most commonly used trading indicators. Each of these tools provides valuable insights into market trends and price movements, helping you make better trading decisions.
💡 Next up: How to draw a 0 chart.
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