1. The Commodity Channel Index CCI:
The Commodity Channel was created by Donald Lambert, over thirty years ago. It is a rarely used indicator that works by Oscillating. It measures the diversion of the price of your asset, away from its moving average. It uses the normal moving average as a reference point. Even though the name suggests a focus on commodity, CCI can actually be used in all trades, including forex and stocks.
You can use CCI by observing its value. Its value is directly proportional to the price deviation from the moving average. The greater the distance between the price and moving average. the larger the value of CCI. When the direction of the diversion is upwards, and the price is above the moving average, it signifies overbuying. The opposite applies as well.
- The indicator remains within the -100 to 100 mark 75 percent of the time. The algorithm is designed that way for ease of use. If you catch your CCI indicator leaving its margins, expect extreme changes in your asset price.
- The most effective strategy you can use with CCI is to enter long positions when the indicator moves above 100 and enter short positions when it moves below -100.
MACD, created by Gerald Appel, is an abbreviation for Moving Average Convergence Divergence, and it is a one-of-a-kind tool for determining the drive of a subject market.
MACD first subtracts the lower Moving Average from the higher one and then draws an average of the difference as data for forecasting. The final average result appears in the form of a histogram.
There are two strategies to trade using MACD.
- The first strategy is called the Cross. It is a reading method where you open a sell position when the indicator passes the 0-line and moves to the positive. And you open a buy position when the indicator passes the zero line and moves to the negative.
- The second strategy is called the Turn. When the indicator changes direction while on the positive side it signifies an early forecast into a downward trend, which means it’s time to sell and vice versa.
3. Momentum Indicator:
Momentum Indicator MI is an oscillating indicator that compares the current closing price with a closing price from a period of your choice. The value of your MI will show positive results if the current closing price is higher than in the past. Inversely, you will receive a negative outcome if the closing price is lower than the previous closing price.
The indicator comes in two versions. The first shows the difference between the two closing prices in direct figures, while the second presents the data in percentages.
- The distance from the zero line depends on the difference between the two closing prices.
- A simple strategy you can use when utilizing MI is to sell when the indicator is above the 100-point line and buy when it is below.
4. Trend Master:
Trend Master takes the current trend trajectory to determine the overall direction of your asset. It is easy to use with its two arrows pointing you in the right direction. There is no need for the hassle of scrolling back and forth like with many indicators, as the arrows always remain centered.
The arrows come in two colors. It has a red, bearish line for when the trend is de-escalating and a blue, bullish line when the trend is going up.
It works by measuring the price of your asset over a fixed period.
5. Parabolic SAR:
The SAR in Parabolic SAR is an abbreviation for ‘stop and reverse’. This indicator is rare because it works based on time and price. It follows price over a given period and displays data in two separate dotted lines above and below the price line.
The specificity of this particular indicator makes it a tool that identifies working trends to stick with them for the long term, even when they fluctuate to some extent.
This tool works at its finest when applied to trending markets. It gives precise signals concerning assets that go up or down for long periods. The indicator might mislead you if you use it for flaky security with a fluctuating price.
You can use this tool only for persevering trends with extended moves over time. It is wise to watch other indicators side-by-side with Parabolic SAR as a precaution for turbulent times and not lose when the climate is less trendy.
- The indicator can be utilized by putting together the highest and lowest prices of the given asset and observing them as reference points within a specific period to determine the direction of the assets.
- A feature unique to Parabolic SAR is the introduction of the acceleration factor that helps you assess the upcoming trend.
6. Pivot Point:
Pivot Point focuses on the equilibrium of the demand and supply of a given currency. The specific pivot point indicates that supply and demand are equal.
- Equilibrium happens very rarely.
- You can use this indicator by observing its divergence from the pivot point. When the indicator line moves up from the pivot point, that means demand is higher than supply. Inversely when it moves down from the pivot point, it signifies oversell and a surplus of supply.
7. Average True Range:
Another J. Welles Wilder invention, Average True Range ATR, measures how volatile a subject market is by subtracting the present low from the high.
ATR usually works by designating 14 points and analyzing data within a predetermined frame. The tool works in any timeframe, and forex traders use it to figure out their stop loss placement.
- To use ATR, you must first calculate the true range by subtracting the lows from the highs.
- Then you average the true range over a chosen time frame. You are all set.
Remember: that ATR only shows you volatility and not when to go long or short.