Technical Indicators
1. Moving averages:
This is one of the most basic technical indicators. It helps traders to identify trends in the price of a stock by smoothing out the fluctuations in the price over a given period of time.
2. Relative strength index (RSI):
This is another popular technical indicator that is used to determine whether a stock is overbought or oversold. It compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions.
3. Bollinger Bands:
This technical indicator consists of a set of three lines that are plotted on top of the price of a stock. It is used to determine the volatility of a stock and to identify potential price breakouts.
4. Moving average convergence divergence (MACD):
This is a popular technical indicator that is used to identify changes in momentum. It consists of two moving averages that oscillate around a zero line.
5. Fibonacci retracements:
This technical analysis skill involves using Fibonacci ratios to identify potential levels of support and resistance in a stock's price.
6. Candlestick charts:
This type of charting is used to identify price patterns in a stock's price. It is based on the premise that the price action of a stock can be predicted by studying the shapes of candlesticks.
7. Stochastic oscillator:
This is a momentum indicator that compares the closing price of a stock to its price range over a given period of time.
8. Average directional index (ADX):
This technical indicator is used to determine the strength of a trend in a stock's price.
9. Relative volatility index (RVI):
This technical indicator is used to measure the direction and magnitude of a stock's volatility.
10. Ichimoku cloud:
This is a technical indicator that is used to identify potential levels of support and resistance in a stock's price. It is based on five different lines that are plotted on top of the price of a stock.
TRADING PATTERNS & INDICATORS
20 Most Used and Powerful Trading Patterns
Reversal Patterns
1. Head and Shoulders
- A bearish reversal pattern characterized by three peaks: a higher peak (head) between two lower peaks (shoulders). The neckline connects the low points of the pattern.
2. Inverse Head and Shoulders
- A bullish reversal pattern with three troughs: a lower trough (head) between two higher troughs (shoulders). The neckline connects the high points of the pattern.
3. Double Top
- A bearish reversal pattern where the price reaches a peak, retraces, rises again to a similar level, and then declines.
4. Double Bottom
- A bullish reversal pattern where the price falls to a low, rises, falls again to a similar low, and then rises again.
5. Triple Top
- A bearish reversal pattern with three peaks at roughly the same level, indicating a strong resistance level.
6. Triple Bottom
- A bullish reversal pattern with three troughs at roughly the same level, indicating a strong support level.
7. Rounding Bottom
- A long-term bullish reversal pattern where the price gradually changes direction from a downtrend to an uptrend, forming a U-shape.
8. Rounding Top
- A long-term bearish reversal pattern where the price gradually changes direction from an uptrend to a downtrend, forming an inverted U-shape.
9. Falling Wedge
- A bullish reversal pattern that occurs in a downtrend, characterized by converging trend lines that slope downward. It indicates a potential breakout to the upside.
10. Rising Wedge
- A bearish reversal pattern that occurs in an uptrend, characterized by converging trend lines that slope upward. It indicates a potential breakout to the downside.
Continuation Patterns
11. Bullish Flag
- A continuation pattern that forms after a strong upward movement, followed by a consolidation period with parallel lines sloping downward.
12. Bearish Flag
- A continuation pattern that forms after a strong downward movement, followed by a consolidation period with parallel lines sloping upward.
13. Bullish Pennant
- A continuation pattern that forms after a strong upward movement, characterized by a small symmetrical triangle. It indicates a potential continuation of the uptrend.
14. Bearish Pennant
- A continuation pattern that forms after a strong downward movement, characterized by a small symmetrical triangle. It indicates a potential continuation of the downtrend.
15. Ascending Triangle
- A bullish continuation pattern characterized by a horizontal resistance line and an ascending support line. It indicates a potential breakout to the upside.
16. Descending Triangle
- A bearish continuation pattern characterized by a horizontal support line and a descending resistance line. It indicates a potential breakout to the downside.
17. Symmetrical Triangle
- A neutral continuation pattern where the trend lines converge, forming a triangle. The breakout can occur in either direction, depending on the preceding trend.
18. Cup and Handle
- A bullish continuation pattern where the price forms a rounded bottom (the cup) followed by a smaller consolidation period (the handle). It typically signals a bullish breakout.
19. Rectangle (Bullish and Bearish)
- A continuation pattern where the price moves sideways between parallel support and resistance levels. A bullish rectangle indicates a continuation of the uptrend, while a bearish rectangle suggests a continuation of the downtrend.
20. Measured Move
- A continuation pattern that consists of three parts: an initial strong move, a consolidation or correction, and a second strong move in the same direction. It provides a target for the continuation phase.
These patterns are widely used by traders and analysts to predict future price movements and identify potential entry and exit points in the market. Understanding and recognizing these patterns can be an essential part of technical analysis and trading strategy development.
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