Trading Tips – When To Buy Or Sell

Divergence indicators are a mean of predicting behavior on the market according to the difference between price and oscillator graphs. Divergence itself is a disagreement between movement of the price and indicators. It is displayed on a histogram where price and oscillator minimums and maximums connected with lines represent a trend.

Divergence occurs when there are changes in customers’ behavior: buyers become more or less aggressive due to some factors, which in its turn influences on the price macd histogram on the market. Some of these factors may refer to seasonal prevalence, some are caused by fetish (a situation on the market when everybody starts buying one product which ends in quite a short period of time and does not have consequent repeating) or fashion trends. As you know some factors can be predicted without any special tools, but sometimes it becomes a necessity: the world never stops and unexpected changes happen every minute.

Divergence indicators are usually used for analyzing purposes as they allow foreseeing future changes on the market and planning the right reaction on time.
Divergence can be classified as bullish and bearish.

A bullish divergence appears in case when (MACD – Moving Average Convergence Divergence, Stochastic, RSI, Momentum, Bollinger Bands, PowerRVI – Relative Vigor Index, OBV – On Balance Volume) is getting on new highs while prices do not reach new highs.

Whether you’re a Forex trading novice or an expert, you’ll almost certainly have heard of currency trading indicators. There are many different indicators, so which ones will suit you best and increase your chances of getting currency trading profits?

Stochastics

These are mathematical formulae that smooth out the fluctuations in the currency markets. These indicators work over different time periods but as a general rule they will give you an idea as to whether the underlying trends show that a market has been over bought or over sold. These indications come at the extremes of the stochastic graphs and the market is generally considered overbought at 75 and over whereas it is considered oversold at 25 and under. You can use this to determine whether the market is likely to change direction. Stochastics are considered to be leading indicators in that they are designed to give you warning in advance of a possible market move. Obviously these mathematical equations don’t have a crystal ball, so you need to use them in conjunction with other currency trading indicators to give yourself the best possible chance of making money.

Lagging Indicators

As their name suggests, these indicators lag behind what has happened in the market. So they show you what has happened recently in the particular currency pair that you are watching. Typical examples of lagging indicators are moving averages and the MACD indicator.

Moving averages can be “simple” or “exponential”. A simple moving average just adds up all the figures in the relevant time period and divides it by the number of figures it had. An exponential moving average (EMA) gives more weight to recent figures which means that it won’t be lagging behind the market trends as much as a simple moving average.

The MACD indicator takes things further by showing convergence or divergence between moving averages. This is done by calculating the difference between two moving averages. The MACD shows these differences as a histogram which is usually coloured green or red depending on how the market is moving. It also shows the two moving averages it is using as lines. Many traders use the crossover of these lines as an indication of a possible new trend in the market.

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