Monday, June 8, 2009
RSI Relative Strength Index
As quite a powerful indicator, the Relative Strength Index, or simply the RSI, measures the price momentum of the current trend of a currency pair. This indicator, instead of highlighting an existing trend, gauges the strength of the momentum of the current trend. Which means, whether the trend is still powerful or not.
The middle line is 50. These situations exist:
1. Uptrend.
If the RSI is above 50, the trend is still strong. Else, the trend will be ending soon or has ended.
2. Downtrend
If the RSI is below 50, the trend is still strong. Else, the trend will be ending soon or has ended.
Pretty easy but powerful.
Bollinger Bands
The Bollinger Bands indicator comprises of 3 lines. Those lines work by comparing the volatility and relative price levels over a specified past period of time. The 3 lines are the upper, middle and lower bands.
I am personally not a big fan of Bollinger Bands but then as they respond real quickly to price volatility, they can be good to use when trading breakouts. Let me explain. As the Bollinger Bands start to widen, we know that the price movement will start to go fast. As a result, there might possibly be a sharp spike upward or downward and it maybe a good time to trade.
Accelerator Oscillator
The Accelerator Oscillator has green and red bars pointing upwards and downwards. What they do basically is measure the acceleration and deceleration of the momentum of the price.
There are 2 directions for the accelerator oscillator: up and down. Before the price changes direction the oscillator will change direction first, indicating the predicted direction that the price will move.
If the AC indicator is above the middle 0 line, it means the price is moving upward, and the longer the bars get, the higher up the price is going to move. However, if the indicator is above the middle line but the bars are red but are getting lower, it means that the upward movement is slowing down and is preparing to drop. So if the indicator is below the 0 line, the price is currently moving downward and if it gets longer downward, it means that it is accelerating its drop fast!
The Accelerator Oscillator is often used as a buy and sell signal, especially when the bars crossover the middle and when the bars start getting longer or shorter…
