Illustrations - Oscillators and Momentum Indicators

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In th cashback forex lesson, we will sort out these graphical indicators that you have studied We want you to have a deep underst forexrebatenetworking of the strengths and weaknesses of each tool so that you can determine, which one will guide your trading better and which one will not trend where? Lets start by talking about some concepts indicators can be of two types: leading indicators (oscillators) and lagging indicators (momentum indicators) Leading indicators signal before a new trend or reversal pattern occurs while lagging indicators signal after the trend has started, generally it alerts you, "Hey man, pay attention, the trend has started and you are missing the best time to trade Youre missing the best time to trade," and youre probably thinking, "Well, by using the leading indicator, Im going to be rich!" Because you were able to start taking profits just as the trend was starting you were right you should have been able to capture the entire trend on every trade, but only if the leading indicator was sending the right signal every time, which is not the case when you are using the leading indicator, you will encounter numerous false market bestforexrebate. "These signals will eventually mislead your trading, understand? The alternative to using lagging indicators, which do not easily give false signals, is to use lagging indicators, which only give trading signals after the price has clearly formed a trend. The downside is that you may enter a little late, usually, we make the most profit by entering at the beginning of a new trend, so by using lagging indicators, you may miss a lot of profit opportunities as a result, which is not a The purpose of this lesson is to divide the technical indicators we have studied into two categories: 1) Leadingindicator or oscillator and 2) lagging indicator, trend following indicator, or momentumindicator, although when we use these indicators to guide our trading. We are not saying that we should use one or the other indicator alone, but you should understand the potential shortcomings of each indicator. They can remain at an extreme level (oversold or overbought) for a long period of time, but they do not stay on trend and do not change direction RSI, Parabolic and Stochastic are all oscillators Each indicator can signal a potential reversal, which could signal the end of a previous trend and a change in price direction Now, lets look at some examples where we have used all three indicators on the daily chart of GBP/USD. Now lets look at some examples where we use all three indicators on the GBP/USD daily chart. Remember what we said earlier about how to use the RSI, Parabolic Turn and Follow-Through indicators? If youve forgotten it by now, you should go back to 5th grade. As you can see in the chart below, all three indicators issued a buy signal at the end of December, and if you took this trade, you would have made about 400 pips. In mid-April, the three indicators then issued another sell signal, after which the exchange rate fell rapidly again. Now, lets look at another example where the three leading indicators are used together, and this time, as you will see, the signals given by these indicators are not perfect. For example, in this case, the Parabolic Turn indicator is giving a sell signal in mid-February, while the Stochastic indicator is giving the opposite signal Which signal should you follow to trade? Of course, at this point the RSI indicator is just as clueless as you are, because it does not give any signals to buy or sell. As you can easily see in the chart above, the above indicators give quite a lot of false signals. If you choose to go short at this point, you may have lost a lot of money if you only do more from the buy signals sent by the stochastic and RSI indicators and ignore the sell signals sent by the parabolic steering indicator, you may also suffer losses again in mid-May What is wrong with such indicators? The answer is to be found in the method of calculating the above indicators: Stochastic is based on the highest and lowest prices over a period of time; RSI is based on the closing price of the price; Parabolic Turning has its own unique calculation method, which may lead to more confusing signals This is the characteristic of oscillators that assume that a particular price movement always leads to the same reversal Of course, this is not possible except to recognize that the leading indicators may give wrong trading signals, but there is nothing we can do to prevent these indicators from giving wrong trading signals. How do we identify the beginning of a trend? Indicators that can help us in this crucial task we have already studied, such as the MACD and moving averages, will signal the start of a trend once it has formed, although the timing of entry may be delayed by the time these indicators send a valid signal, however, the advantage of these indicators is that they have a much lower chance of sending a wrong signal as shown on the daily chart of GBP/USD above As shown in the daily chart of GBP/USD above, we have used here the 10EMA (blue line in the chart), 20EMA (red line in the chart) and the MACD indicator. On or around October 15, the 10EMA broke above the 20EMA, signaling a golden cross. Then, the MACD indicator and the moving averages both signaled a sell signal and in the strong downtrend that followed, investors who chose to go short would have made huge profits and we could see the money shining before your eyes. If you had traded on the basis of a buy signal from the MACD indicator alone, man, you would have suffered a lot of losses. PS: Leading and lagging indicators: Leading indicators send trading signals before a new trend or reversal pattern appears Lagging indicators send trading signals after a new trend or reversal pattern appears We will quickly review what we have discussed before in this lesson There are two types of graphical indicators: leading and lagging indicators 1, leading indicators send trading signals before a new trend or reversal pattern appears. 2. Lagging indicators give trading signals after the appearance of a new trend or reversal pattern If you are able to identify the trend category of the market when trading, you have the ability to determine which indicator may give an accurate trading signal and which indicator may give a signal that has no reference value So how do you determine when to use oscillators, when to use momentum indicators, or both? How do you determine when to use oscillators, when to use momentum, or both? This is another million dollar question! After all, we know they dont always send consistent trading signals at the same time and well give you a million dollars in a minute... Oh wait, we mean the way to make millions of dollars. As of now, you just understand that once you can identify the type of market you are trading, you will know which indicators will give precise trading signals and which indicators will be worthless. Identify the market environment you are trading in so that you can use these indicators better

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