Beyond calculations on indicators, this latter can also provide information by themselves, just as stock prices. Trends and figures can thus be identified. Indicators can also bump under resistances or land on supports. This aspect is also interesting as trend ruptures on oscillators often precede that on stock prices. Within this framework, the neutrality zone (corresponding to the middle of the boundaries for indicators with boundaries) is especially overseen, as it often constitutes a major support or resistance.
Moreover, it is possible to use filters. For example, it is often wise to compare oscillators with their moving average on a certain number of days to eliminate punctual and non-significant variations. It then becomes possible to set up a systematic method, based on the fundamental principle of indicators: not going against the trend. This rule consists in buying as the oscillator breaks up the zero level, while it stands above its moving average, and to sell as this level is crossed down, with the indicators turning around and crossing down the zero level.
This set of counter-trend indicators is based on a simple observation: when stock prices stand in a bullish trend, closes stand at higher and higher levels from day to day while, when stock prices stand in a bearish trend, closes stand at lower and lower levels. Combining both conclusions, it becomes possible to forecast reversals as soon as new tops appear but with closes on the downside.
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