Knowledge of stocks and the fundamentals of the market are not enough to make it as a day trader. You’re going to need to understand technical analysis and how to utilize technical indicators to execute your trading strategy. Below are some of the most common technical indicators that you’ll need to understand before trading on sites, like HFTrading:
- Resistance Levels: This term refers to the price that a stock fails to exceed for a certain amount of time. When the stock stops increasing it reaches its resistance level because the sellers have outnumbered the buyers.
- Support Levels: The support level is the inverse of the resistance level; it’s the price that a stock won’t fall below. This is an important indicator to understand because when a stock reaches its support level, it’s a test for the stock. If buyers reengage, the stock is reconfirmed. If buyers stay away, the stock is “wiped out”.
- Moving Average Convergence Divergence – MACD: The MACD is a momentum indicator that shows the relationship between two moving price averages. The MACD helps produce a “signal line” that functions as a trigger for buying and selling signals.
- Volatility: The statistical measure of the range of returns for a particular security or market index. Oftentimes the more volatility a stock has, the higher the risk.
- Price Oscillators: This indicator seeks to identify which stocks are overbought or oversold. Oscillators are most valuable when charts don’t show a clear trading trend in a company’s stock.
- Bollinger Bands: This term refers to a band that is located two standard deviations from a moving average. When the price moves closer to the upper Bollinger band, the stock is considered overbought; when the price moves closer to the lower band it’s considered oversold.
Learning how these indicators work is essential to developing your own personal day trading style.