Options University Courses

This article focuses on technical analysis and indicators and option market indicators. It can be said that all wealthy traders use the scheme of technical analysis, but all people using it are not wealthy.  It is considered the easy way to forex market.Technical analysis is considered powerful because of the following reasons:-

• Helps in predicting trends in the foreign market.
• Represents number. Currency price represents all information and its impact on the market.
• It helps us to see chart patterns as they are reliable, consistent and repeating.

In technical analysis, prices move in a trend. Researches have shown that profitable trade is the outcome of trades with trend. This trend helps you in knowing about the market direction. To learn what the market is doing is decided by the “tools of the trade” or the technical analysis and indicators and their applications.

Moving averages
It tells you the price at a particular point of time over definite interval. The word moving indicates that they provide you the latest price while calculating average over the selected time period.

They are lagging in the market, which shows that there is change in trend. With the help of longer term and shorter term multiple averages, a buy signal is detected when short term crosses the long term of moving average in upward direction. Similarly, a sell signal is detected if it moves in a downward direction. For example, you can use 40 days vs. 200 days moving average or 5 day when compared with 20 day moving average. There is linear weighted average scale that takes exponentially weighted or recent prices into consideration. The linear weighted scale is more superior to multiple averages as it lay more emphasis on recent changes in the price. Some option market indicators are as follows:-

MACD
this system is based on difference between 12 exponential moving averages and 26 exponential moving averages with the trigger line of 9 days. The buy signal is indicated when there is sharp drop in the market but positive MACD and vice versa.

Bollinger Bands (with the sound of an elastic band)
Prices are kept between lower and upper bands. They might become narrow or widen depending upon market volatility at specific time. A buy signal would be when moving averages is below the Bollinger brand and converse for sell signal. It is also used in conjunction with rate of change, MACD, CCI, and RSI.

Fibonacci Retrenchment
it is the description of cycles found in the nature. When it is applied to technical analysis, the shift in market trends is observed. After the climb price, sometime the entire original move can be retraced. Resistance level and support occur in proximity to the level of Fibonacci retrenchment.

RSI
RSI (relative strength index) is the measure of market activity. It expresses whether the market activity is oversold or overbought. It is the most important indicator that decides what the market is going to do. A lower RSI number indicates oversold and a higher RSI number indicates overbought.

It is generally recommended to use 3 or 4 optional market indicators before deciding or entering into a trade. Finally, technical analysis and indicators help to measure the money at risk in trade.