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Using Technical Indicators In Futures Trading

Technical indicators consist of metrics which are derived from price activity of an asset. They are created by individuals who observe the financial markets over a period of time up to hundreds of years.

The aim of using technical indicators is to forecast the direction of prices by using past data, mainly using price and volume.

We have written some articles on using technical indicators to assist you better in trading.

Below are some technical indicators which you can incorporate in your trading strategies.

Average True Range (ATR)

The Average True Range (ATR) is an indicator used to measure price volatility. The creator J. Welles Wilder created this indicator specifically for commodities in mind due to commodity prices are more volatile than stocks, and that they are subject to price gap moves – a significant price movement between two trading sessions.

Click here to read more on Average True Range (ATR)

Bollinger Bands

The Bollinger Bands is a technical indicator proclaimed by some traders to have played a key part in successful trading strategies.

Similar to the Average True Range (ATR), the Bollinger Bands also measures the volatility of the market and is not used as a Leading Indicator or Trend Reversal Indicator.

Click here to read more on Bollinger Bands

William %R

The William %R indicator was developed by a famous trader and author Larry Williams. This indicator attempts to measure market conditions and prices which are overbought or oversold.

The William %R line always falls between a value of 100 and 0. In a chart where the William %R is shown, there are two horizontal lines that represent 20% and 80% – an indication of overbought and oversold levels.

Click here to read more on William %R

Moving Average Convergence Divergence (MACD)

The Moving Average Convergence Divergence or known as MACD in short, is one of the most popular indicators used by technical traders today. It is developed by Gerald Appel in the 1960s and is deemed as a one of the simplest yet reliable indicators for traders today.

In referring to the charts, there are two lines which represent the MACD. The first line is called the MACD line and the second is known as the MACD signal line.

Click here to read more on Moving Average Convergence Divergence (MACD)

Relative Strength Index (RSI)

The Relative Strength Index (RSI) is a technical indicator classified as a momentum oscillator that measures the speed of price movements.

The RSI is typically used on a 14-day time frame and measured on a scale of 0 to 100. Within that scale there will a high level marked at 70 and a low level marked at 30. The RSI is one of the most simple and straightforward technical indicator to read.

Click here to read more on Relative Strength Index (RSI)

Commodity Channel Index (CCI)

The Commodity Channel Index (CCI) is developed by Donald Lambert in 1980, which is an indicator used to identify a new trend, price extremes and trend strength in trading commodities. Presently, the CCI has grown to be used and applied to indices, ETFs, stocks as well as other securities such as currencies.

Click here to read more on Commodity Channel Index (CCI)

Fibonacci Fan

The Fibonacci fan is a charting technique that constructs the support and resistance levels by creating three diagonal lines that follow the Fibonacci ratios of 38.2%, 50% and 61.8% respectively.

Click here to read more on Fibonacci Fan

Moving Averages

The moving averages are lagging indicators that most traders both professional and novice, will have probably used at one time or another.

Although there are a number of moving averages indicators, the most common used are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA).

Click here to read more on Moving Averages

Retracements and Trend Reversal

Retracements are temporary price reversals that take place within a stronger trend.

Some traders and investors also refer to them as correction.

In using technical analysis, it is critical to identify whether the trend is undergoing a retracement or a complete reversal.

Click here to read more on Retracements and Trend Reversal

Support and Resistance

Support and resistance is a concept in technical analysis whereby the price movement will stop and reverse its trend.

In technical analysis, it is important to identify the support and resistance lines to gauge where the prices may reverse as well as to gauge the limits of a trend.

The more times the prices bounce off either the support or resistance lines, the stronger the support or resistance levels become.

Click here to read more on Support and Resistance

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