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Forex Bond
The 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.
Technical Indicator
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.
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Product Information and Prices Stored: May 16, 2011 11:32:35 |
The William %R is a leading indicator. This means the William %R line either touches the top of 20% or the bottom at 80% before the price moves. At anytime the William %R line crosses the 20% or 80% levels, it is an indicator to either enter into a long or short position.
On the other hand, at anytime the line crosses the 80% bottom level, it is an indicator to enter into a long position.
The seemingly simple indicator is one of the most used indicators by traders due to it being consistent indicator in forecasting the market price movements.
The 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.
When the RSI rises above 70, it is considered overbought and the trend will likely to be bearish. When the RSI dips below 30 it is considered oversold and the trend of the market will likely to be bullish.
Some traders use different time periods for the RSI. For example, shorter term traders will use the 9-day period RSI instead of the 14-day period and longer term traders may use the 12-day or 28-day RSI.
The 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.
Similar to the Relative Strength Index (RSI), the CCI is also a momentum oscillator, which is used to identify overbought or oversold levels.
There are two levels in which the CCI uses:
• The +100 Level
• The -100 Level
The majority of CCI movement occurs between the +100 and the -100 level. Readings above the +100 level indicates an overbought condition and if the CCI crosses below the -100 level, it indicates an oversold condition.
A move that exceeds any of these levels shows an unusual strength or weakness of the market prices, thus being able to forecast the direction of a trend.
Once the CCI rises above the +100 level, it is a signal that the market will tend to be bullish; therefore traders will enter in a long position.
If the CCI dips below the -100 level, it is a signal that the market will tend to be bearish, thus, traders will enter into a short position.
Because CCI is a leading indicator, it is a preferred indicator by traders to identify bullish or bearish runs as well as key trend reversals.
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.
This indicator is used to identify changes and movements of the asset price direction, momentum and strength within certain duration.
Because the MACD is based on moving averages, it is known as a lagging indicator.
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.
The MACD line is calculated by taking the 26-day period Exponential Moving Average and then subtracting the 12-day period Exponential Moving Average, for example, 26 EMA - 12 EMA.
The MACD signal line is a 9-day period Exponential Moving Average (9 EMA). When the MACD line crosses above the MACD signal line, it is often assumed that the trend will have a bullish tendency. When the MACD line crosses below the MACD signal line, it is assumed that the trend will tend to be bearish.
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