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 exponentiallysmoothed moving averages, typically 12 and
26 bars. The second line is called the signal line and is a 9bar 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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