Earlier in the lessons we talked about the usage of technical indicators that can help us determine whether the breakout is happening and what strength it is going to be. Well, today we are going to look at the actual example of such behavior of some of the oscillators.
We are going to start with the MACD – moving average convergence/divergence.
MACD is one indicator that is most commonly used by forex traders. And with good reason – we can depend on them to show us whether or not we are going into the momentum phase and whether or not our trades are going to successful with the coming breakout of the price.
And here we need to look on the difference between the slow and fast MACD lines. The higher the indicator goes, the stronger a momentum is.
The lower the indicators are, the slower and weaker the momentum is.
What does that mean for us? Well, that the stronger are the indicators, the stronger is the momentum, the more likely it is that the trend is going to breakout.
The lower everything is, the closer trend to the end and that means that trading is going to die out on the asset.
Remember that the climb of the price does not necessarily mean that the momentum is growing. Indicators and price can easily move a divergence and the climb can be a sign of the trend dying out and that we are going to see a reversal real soon.
Another indicator that can come in useful is RSI – relative strength index.
Those who have mastered divergences are better off using RSI as it is an indicator that can tell us a lot by forming a divergence with the chart. It is easy – you spot a divergence and that is your clue that the change in price and possibly trend is going to occur.
Those who have mastered divergences are better off using RSI as it is an indicator that can tell us a lot by forming a divergence with the chart. It is easy – you spot a divergence and that is your clue that the change in price and possibly trend is going to occur.
