Tuesday, February 1, 2011

Importance Of Technical Indicators

Trading is done to gain profits. This means that the plan of trading is to work in such a way that our trades generate maximum profits and minimum losses. Now for this there will be the necessity of certain rules and principles which needs to be followed so that trading becomes easier. Trading cannot be based on sheer intuition or gut feeling; neither it can be a process of continuous hit & trials.

Then what is the path which a novice trader has to follow to become a successful trader? The answer to this is Technical Analysis. Technical Analysis is the root of trading where after skillful scanning of various trading possibilities a trader makes a decision and takes a call on his/her trade.

Fortunately in our era the work of technical analysis has been immensely simplified through means of various high performing Trading Softwares. Such automated softwares just need the data to analyse and within fraction of seconds they will provide the clear picture of the current scenario regarding the stocks, indices, stock market as a whole. Trading Analysis is based on various Technical Indicators which are made up of various mathematical formulas. These indicators can be understood and technical analysis becomes lot easier. The trading softwares come with various integrated indicators.

Various intellectual people with their long trading experience have provided various technical indicators which when applied and used correctly helps a trader to make timely and right decisions. To name a few technical indicators which are very popular among the trading community are Relative Strength Indicator[RSI], Stochastic Oscillator, Pivot Points, Moving Average Convergence Divergence[MACD], Average True Range[ATR], Williams%, Accumulation/Distribution etc., the list is long and continuously new indicators are being added as further research is being done by various expert traders.

A trader has to be very precise in using these indicators as analysis is at personal level through the support of these indicators. Indicators are like guidelines and the path has to be carved by the trader. Trading is quite difficult in real terms but made quite understandable with aid of technical indicators.

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