For those who are serious about trading, one has to make sure that he has the essential knowledge and tools to become profitable in the long run. These tools are the indicators that one can use in order to see the price action of a commodity, stock, or currency pair. For those who are beginners, here are a few day trading tools that one can add to his arsenal as a trader.
The RSI, or the relative strength index is the first tool that will be mentioned here. The RSI bases its movement on the volume of trades to see whether the medium is overbought or oversold. As a general rule, overbought mediums tend to go down in price and oversold ones go up. Knowing this, one will know when he will enter or exit a trade.
Another tool that one can add to his arsenal would be the 200 EMA which is a trend indicator. Basically, the EMA 200 will tell a trader if the trend is going in an uptrend or is in a downtrend. When the 200 EMA points upward, it is an uptrend but if it goes down, then it is a downtrend.
Also, one will be able to determine what kind of trades to look for by looking at the EMA 200. If the price is above the EMA 200, traders usually just focus on looking for buy signals. If the price is below, then the traders will look for sell signals.
The MACD is also very useful when one wants to know whether to enter or exit a trade, especially in stocks. Basically, the MACD has two moving average lines with a histogram found in the center. The way to use this is to see what direction the moving averages cross and make a buy trade when they are moving from down to up or make a sell trade when they are moving up to down.
The Bollinger Bands are a set of lines that would tell the trader how much noise the market is making. The Bollinger Band also serves as an exit strategy for those who are already in a trade. As a general rule, if the graph touches either the upper Bollinger Band or the lower Bollinger Band, then it is time to get out of the trade.
Other than an exit strategy, the Bollinger Bands can be used as an entry strategy if used together with an EMA 5. If the EMA 5 crosses the middle Bollinger Band and is moving downward, then it is a sell signal. If the EMA 5 crosses the Bollinger Band going upward, then it is a buy signal.
As one can see, these basic tools are extremely easy to use and are also very effective. If one wants to make it as a trader, then he has to know how to use at least these basic indicators to know when to enter or exit a trade. The entry and exits are the most important parts of the the trade and will be determined through these indicators.
The RSI, or the relative strength index is the first tool that will be mentioned here. The RSI bases its movement on the volume of trades to see whether the medium is overbought or oversold. As a general rule, overbought mediums tend to go down in price and oversold ones go up. Knowing this, one will know when he will enter or exit a trade.
Another tool that one can add to his arsenal would be the 200 EMA which is a trend indicator. Basically, the EMA 200 will tell a trader if the trend is going in an uptrend or is in a downtrend. When the 200 EMA points upward, it is an uptrend but if it goes down, then it is a downtrend.
Also, one will be able to determine what kind of trades to look for by looking at the EMA 200. If the price is above the EMA 200, traders usually just focus on looking for buy signals. If the price is below, then the traders will look for sell signals.
The MACD is also very useful when one wants to know whether to enter or exit a trade, especially in stocks. Basically, the MACD has two moving average lines with a histogram found in the center. The way to use this is to see what direction the moving averages cross and make a buy trade when they are moving from down to up or make a sell trade when they are moving up to down.
The Bollinger Bands are a set of lines that would tell the trader how much noise the market is making. The Bollinger Band also serves as an exit strategy for those who are already in a trade. As a general rule, if the graph touches either the upper Bollinger Band or the lower Bollinger Band, then it is time to get out of the trade.
Other than an exit strategy, the Bollinger Bands can be used as an entry strategy if used together with an EMA 5. If the EMA 5 crosses the middle Bollinger Band and is moving downward, then it is a sell signal. If the EMA 5 crosses the Bollinger Band going upward, then it is a buy signal.
As one can see, these basic tools are extremely easy to use and are also very effective. If one wants to make it as a trader, then he has to know how to use at least these basic indicators to know when to enter or exit a trade. The entry and exits are the most important parts of the the trade and will be determined through these indicators.
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