Using technical indicators 2

Another indicatoe we will talk about is the Stochastics and the Relative Strength Index. These tow indicators are also very helpful in market forecast.

1. Stochastics
This indicator helps fores traders to determine and monitor a trend's sustainability. Forex trader can determine the closing price of a current trade with relationship to the performance of the previous indicator that was analysed. In the use of stochastics, two measured and represented lines %K and %D are drawn on a scale from range 0 to 100.

If you get an indication above 80, it means that there will be a very strong upward movement of price, and if your indications show less than 20, it means there is also a strong movement downwards.


You simply do not need the mathematical calculations, all you need is what you are told by the stochastics.

The fast line and fast indicator is the %K, while the slow line is the %D. When there is about to be a reverse direction in the market prices, the %K line crosses over the %D line.


Take note that sometimes there could be several crossing of both lines in a choppy market, when prices are flunctuating, so you don't have to bother about it. It actually means no market directions at this point.

The use of stochastics is very helpful in the determination of trend strength, and the possibility of a reversal in market prices.


2. Relative Strength Index
The use of the RSI is mainly to measure the momentum of a market direction. Just like the stochastics, it is plotted on a range scale of 0 - 100. If you get a measurement of more than 80, then you buy into the market, and a measurement of less than 20, you need to sell out of the market.

With this you simply understand that prices do not go in one direction forever, when the go up, at a point it must surely come down, and RSI will help you determine that time. You can also act on divergence as a forex trader using RSI, but you have to be patient enough to wait for conformations before diving to open a position.

These two indicators explained in part 2 are for your to master and get tem to work in your favor.