Technical Indicators
A Guide To Technical Indicators
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Bollinger Bands

Developed by John Bollinger, Bollinger Bands are an indicator that allows users to compare volatility and relative prices levels over a period of time. The indicator consists of three bands designed to encompass the majority of a currency's price action.

A simple moving average ("SMA") in the middle

An upper band (SMA plus 2 standard deviations)

A lower band (SMA minus 2 standard deviations)

tandard deviation is a statistical term that provides a good indication of volatility. Using the standard deviation ensures that the bands will react quickly to price movements and reflect periods of high and low volatility. When there is a decrease in market volatility, the upper and lower Bollinger bands move closer to the simple moving average line. When there is an increase in market volatility, the upper and lower Bollinger bands move away from the simple moving average. Bollinger Bands are designed to capture the majority of price movement. When prices move beyond the upper or lower band, they are considered high (overbought) or low (oversold) on a relative basis.

Interpretation:

Bullish When prices close above the upper Bollinger band, it is a signal of potential market strength and potential buying activity.

Bearish:When prices close below the lower Bollinger band, it is a signal of potential market weakness and potential selling activity

Fibonacci Retracement Levels

Retracement levels are an indicator used to identify potential levels of support and resistance. A retracement is price activity of a certain magnitude in the opposite direction of the preceding price activity. Elliott wave analysis is a technical analysis technique that is based on repetitive wave patterns and the Fibonacci numbers sequence. Fibonacci numbers are numbers that are equal to the sum of the preceding two numbers (1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.). The ratio of any number to the next larger number in the sequence is approximately 61.8%, an important Fibonacci value. The difference between 100% and 61.8% is 38.2%, an important Fibonacci value.

Interpretation:

IBullish:When the closing price is above a Fibonacci retracement level, it is a signal of potential market strength and potential buying activity.

IBearish: When the closing price is below a Fibonacci retracement level, it is a signal of potential market weakness and potential selling activity.

Bullish: When the low is below a Fibonacci retracement level and the close is above the Fibonacci retracement level, it is a signal of potential market strength and potential buying activity.

Bearish: When the high is above a Fibonacci retracement level and the close is below the Fibonacci retracement level, it is a signal of potential market weakness and potential buying activity.

Moving Average Convergence Divergence (MACD)

Moving Average Convergence Divergence, also called MACD, is an indicator that utilizes moving averages to identify possible trends and an oscillator to determine when a trend is overbought or oversold. MACD utilizes three moving averages although only two are typically plotted. The first line is called the MACD line and is the difference between two exponentially-smoothed moving averages, typically 12 and 26 bars. The second line is called the signal line and is a 9-bar moving average of the MACD line. A third line plots the difference between the MACD lines and signal lines, usually in the form of a histogram. The histogram is utilized to highlight crossovers between the two lines and is useful in identifying possible divergence - the phenomenon of momentum moving in the opposite direction of price activity. There are three techniques commonly used to interpret the MACD:

Divergence:When MACD moves counter to the direction of the currency itself, it is a warning that the currency's trend may change.

Centerline Crossover:Some analysts choose to buy or sell when the MACD goes above or below zero (the centerline).

Trigger line: When the MACD crosses above the slower trigger line, this is a bullish signal. When the MACD goes below the trigger line, it's a bearish signal.

Interpretation:

Bullish: When the MACD line crosses above the signal line, it is a signal of potential market strength and potential buying activity.

Bearish: When the MACD line crosses below the signal line, it is a signal of potential market weakness and potential selling activity.

Bullish: When the MACD line is below the signal line and the histogram establishes a higher low - bullish divergence - it is a signal of potential market weakness and potential buying activity.

Bearish: When the MACD line is above the signal line and the histogram establishes a lower high - bearish divergence - it is a signal of potential market weakness and potential selling activity

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