Using Indicators For Buy and sell Signals Contd.

Oscillating Trending

Understanding what type of indicators that you can use for price movement prediction requires that you understand certain things about indicators.
There are Trend Following Indicators; these you use with shares that are doing long trending moves and there are Oscillating Indicators that you use with shares that are oscillating up and down.

RSI (Relative Strength Index) is a good indicator to use on a share price that is doing fairly large trending moves, although it can also show when an oscillating share looks ready to break out and start trending.

Moving Averages are another trend following indicator. With this indicator, we get a long (buy signal) when the two indicator lines cross to go up, and a sell signal when they cross to go down. For short to medium term trading (up to 6 months) good settings are 10 and 20 and for long term 100 and 200 (days).

A good Indicator for Oscillating shares is Stochastics. For a short to medium term trading the setting are 12,3,3 (fast stochastics) and for long term trading 20,12,9 (slow stochastics). You get a buy signal when the two stochastic lines cross each other to start going up and a sell signal when they cross to start going down.

Note that the further down the buy signal appears, the stronger it is, and the higher up the page the sell signal appears the stronger it is.

as long as you have a general understanding on what time frame you are looking at with respect to the trade you are about to enter, your charting software will normally input the above parameters on default.