Summary of Chart Indicators.

Let’s continue with our summary of chart indicators.

Parabolic SAR

They make this indicator to spot trend reversals, hence the name Parabolic Stop And Reversal (SAR).

This is the easiest indicator to interpret because it only gives bullish and bearish signals.

• When the dots are above the candles, it is a sell signal.
• When the dots are below the candles, it is a buy signal.
• These are best used in trending markets that consist of long rallies and downturns.

Stochastic

• Used to indicate overbought and oversold conditions.
• When the moving average lines are above 80, it means that the market is overbought and we should look to sell.
• When the moving average lines are below 20, it means that the market is oversold and we should look to buy.

Relative Strength Index (RSI)

• Similar to the stochastic in that it indicates overbought and oversold conditions.
• When RSI is above 70, it means that the market is overbought and we should look to sell.
• When RSI is below 30, it means that the market is oversold and we should look to buy.
• RSI can also be used to confirm trend formations. If you think a trend is forming, wait for RSI to go above or below 50 (depending on if you’re looking at an uptrend or downtrend) before you enter a trade.

Average Directional Index (ADX)

• The ADX calculates the potential strength of a trend.
• It fluctuates from 0 to 100, with readings below 20 indicating a weak trend and readings above 50 signaling a strong trend.
• ADX can be used as confirmation of whether the pair could continue in its current trend or not.
• ADX can also be used to determine when one should close a trade early. For instance, when ADX starts to slide below 50, it indicates that the current trend is possibly losing steam.

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