Ideal Forex technical indicator

According to Andrew Cardwell Junior the ideal technical indicator is one that provides the ability to identify and monitor a current trend, identify the areas of extreme overbought and oversold and provide early warnings about a turnaround.

According to Andrew Cardwell Junior, this indicator is the RSI or Relative Strength Index, which in his opinion the one that offers the best of all these worlds. In fact, the RSI (Relative Strength Index) is the cornerstone of the trading model of this expert investor, which constantly provides conferences related to the technical analysis applied to the financial markets.

41Andrew Cardwell Junior says that in all the readings and lectures he has given, has always shown that RSI (Relative Strength Index) can be used both as an important element of a trading strategy based on the technical analysis as an independent trading model alone. Where appropriate, Andrew Cardwell Junior uses RSI (Relative Strength Index) as an independent model to identify the trend, support and resistance, overbought levels and oversold, divergence, trend changes, reversals and target prices for the profit taking.

Most traders use the RSI (Relative Strength Index) focus their attention on trying to identify the bullish and the bearish divergences. The basic price and the momentum divergence can be of great help in identifying the extreme oversold and the overbought market.

However, most of the traders are victims of the concept of divergence and think it is just the end or change of a prevailing trend in the market. Everything would be extremely simple in the world of the financial markets if a trend change with each divergence occurred in them. However they are not few occasions when sentiment and momentum that are so strong that the market continues the trend and makes the new high or low, which keeps the RSI (Relative Strength Index) at overbought levels or oversold for extended periods of time. Both the momentum and the price corrections, when they occur, are usually strong and fast.

After those brief respites, the market is again ready to resume its previous trend, either the bullish or the bearish. With each new high or low thereafter and with each new formed divergence, the anxious and inexperienced operators generally show more than ready to assume they are before the ceiling or bottom of a trend and therefore believe that it is the precursor of a change of direction in the market.

However, in the markets with strong trends, it is not uncommon for multiple differences that only lead to slight corrections of the overbought condition or the oversold market occur. Therefore, if an operator tries to take positions based solely on differences probably soon see their capital substantially diminished and will always be trying to guess if you’re at the ceiling or the bottom of a trend.

At this point Andrew Cardwell Junior says that while noting the differences, these are only an indication that the market is overextended and needs a correction condition overbought or oversold. Although the RSI (Relative Strength Index) is considered a momentum oscillator, for Andrew Cardwell Junior has more value as an indicator of the trend following.

One of the guidelines when Andrew Cardwell Junior operate is to identify a range for both rising and falling trends. As the market tends to rise or fall, is adjusting the normal range of RSI (70-30) to take account of the change in the market momentum and the bullish or the bearish sentiment from other operators. The fact that these adjustments need to be made in the range of RSI (Relative Strength Index), is known as one of the first indications that the market is experiencing a turnaround.

42The ability of an operator to recognize a trend change quickly open a position and operate in the direction of the next trend is the ability that any operator must develop to be successful. By having a position that is in accordance with the trend, the operator will have the opportunity to participate in the biggest market movements, which are those that produce the higher profits.

To be successful when the trading in financial markets there are:

  1. To having a trading strategy. A trading plan is always a required step.
  2. To have patience. With work and an analysis to the market always give off.
  3. Be disciplined. If time is spent to develop this trading plan it should include the outputs for the emergencies, without changing the strategy prior to an analysis is not an option or when trying to succeed in this market.

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