forex®
Price indicators
Relative Strength Index (RSI):
The RSI measures the ratio of up-moves to down-moves and normalizes the
calculation, so that the index is expressed in a range of 0-100. If the RSI is
70 or greater, then the instrument is assumed to be overbought (a situation in
which prices have risen more than market expectations). An RSI of 30 or less is
taken as a signal that the instrument may be oversold (a situation in which
prices have fallen more than the market expectations).
Stochastic oscillator:
This is used to indicate overbought/oversold conditions on a scale of 0-100%. The indicator is based on the observation that in a strong up-trend, period closing prices tend to concentrate in the higher part of the period's range. Conversely, as prices fall in a strong down-trend, closing prices tend to be near the extreme low of the period range. Stochastic calculations produce two lines, %K and %D, that are used to indicate overbought/oversold areas of a chart. Divergence between the stochastic lines and the price action of the underlying instrument gives a powerful trading signal.Moving Average Convergence/Divergence (MACD):
This indicator involves plotting two momentum lines. The MACD line is the difference between two exponential moving averages and the signal or trigger line, which is an exponential moving average of the difference. If the MACD and trigger lines cross, then this is taken as a signal that a change in the trend is likely.
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