Hi, Michael! The MACD technical indicator is based on the strategy of convergence/divergence of moving averages. It is applied by traders in order to estimate and forecast future fluctuations of quotes. In other words, this indicator defines the direction and strength of a trend as well as points of reversal. On the chart, the indicator demonstrates convergence and divergence of two moving averages: the fast and the slow ones. The fast MA provides a short-term outlook for a trend while the slow MA gives a longer-term forecast. The distance between these two lines shows strength of either bullish or bearish trend.
The CCI is used for identifying favorable entry and exit points on the chart. This is an oscillating line that fluctuates between levels +/- 200, so during trading it is necessary to pay attention to the crossing point of the indicator curve at +/- 100. If the curve rises above the level of +100, it is time to open a long position because the trend is strengthening at this point. It is better to close the deal when the CCI curve passes the level of +100 down. When the trend is weak, we act similarly, only we are guided by the crossing of the indicator curve at -100. When the curve passes the level -100 down, it is better to open a short order. When the CCI curve moves through this point from below, we close the position.
ATR, which is short for Average True Range, is a technical indicator that was developed to help traders to calculate the current market volatility. Most traders prefer to use ATR to estimate the average range where price fluctuates. There are three ways to calculate this range. 1. High minus low within the given period. 2. Absolute high minus the closing price in the preceding period. 3. Absolute low minus the closing price in the preceding period. Once this is done, we calculate the average value on the basis of the obtained data. The result shows when to enter or exit the market.
ATR (Average True Range) is a technical indicator to measure volatility of a trading instrument. Based on bars’ values, this indicator gives clues to a market dynamic. A series of factors determine a degree of market volatility such as the number of traders in the market at a particular time, the number of executed trades, time of transactions, and macroeconomic news. ATR helps to exclude periods of low volatility. This time-tested tool of technical analysis is incorporated into every trading platform. ATR enables traders to make a more precise outlook for a currency pair. If the indicator’s value goes upward, the market is trading with higher volatility. In case the indicator’s value goes downward, volatility gets lower. Importantly, ATR cannot be used to predict a direction of a trend line. For this forecast, a trader should use an additional tool – a moving average.
The Parabolic SAR indicator identifies possible points of a trend reversal. The outstanding feature of this indicator is that it shows the exit point but not the entry points. The indicator is added to a price chart and looks like a parabola. Besides, it has some similarities to a moving average, but differs in that it moves faster and changes its position relating to the price. If the Parabolic values are below the price level, then the trend is bullish, while the Parabolic values above the price level indicate the bearish trend. For example, if the euro-dollar pair is in the upward trend, the price goes below the Parabolic line, the indicator reverses, and its following values are found above the price line. Thus, the indicator provides a signal about deceleration of a trend, suggesting that traders fix profits on their buy trades. When the trend is downwards, the price moves above the Parabolic line, the indicator reverses, and the trend slows down, signaling that it is time to fix profits on sell trades. This technical indicator can also be used as a trailing stop. For example, a trader opens a buy deal, and both prices and profits rise along with the Parabolic. At that moment, the indicator shows at what distance a stop loss should be shifted. With the buy deals it works in the same way.
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