Page 55 - Trading #101 Course – Part One: Trading Basics

TRADING #101 COURSE – PART ONE: TRADING BASICS /2017-10-06

Technical Analysis Tools & Signals

There are a variety of technical analysis tools that can generate signals for you to carry
out your trading rules with. There are hundreds if not thousands of choices you will be
faced with in the marketplace.

One word of caution is that you must match your personality and mind-set with the type
of tool or tools that you decide to work with. Not every set of signals works for everyone,
so testing will reveal what works for you, and that is all that matters.

Technical analysis signals and tools that can be the basis for your trading rules:
• Trend lines for identifying trends.

• Channel lines for identifying channels.

• Price oscillator histogram.
• Relative strength index, (RSI).

• Average true range, (ATR).
• Bollinger bands.

• Elliott wave for forecasting.
• Fibonacci studies.

• Dow Theory.

• Japanese candlesticks.
• On balance volume, (OBV).

• Moving averages.

There are two primary types of indicators:
1. Leading Indicators. Leading indicators precede price movements and try to
predict the future. These indicators are most helpful during periods of sideways
or non-trending price movements since they can help identify breakouts or
breakdowns.

2. Lagging Indicators. Lagging indicators follow price movements and act as a
confirmation tool. These indicators are most useful during trending periods where
they can be used to confirm that a trend is still in placing or if it’s weakening.

Indicators can be further divided into two categories based on how they’re built:

1. Oscillator. Oscillators are the most common type of technical indicator and are
generally bound within a range. For example, an oscillator may have a low of 0
and a high of 100 where zero represents oversold conditions and 100 represents
overbought conditions.

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