THE 3 BEST
TECHNICAL INDICATORS ON EARTH
“Those who cannot remember the past
are condemned to repeat it.”
And by watching price and volume, you can interpret the emotions
driving the market. Some believe that technical analysis is simply about
drawing lines on a chart – and that it’s essentially the equivalent of
financial astrology.
Hogwash!
Granted, some methods have failed to produce real returns. And I agree
that not all technical indicators are worthy of your attention.
That’s why it’s important to focus only on the key indicators that have
proven successful – time after time.
Lucky for you, we’ve found the top three, best of breed, technical
indicators that you can use to maximize your profits. Here’s a brief
rundown of each…
INDICATOR #1:
MOVING AVERAGE CONVERGENCE/
DIVERGENCE (OR MACD)
The MACD indicator is a great introduction to technical analysis
because it’s based on one of the easiest, most powerful concepts:
the moving average.
Calculating and drawing a moving average line is simple. It’s just the
average price of a stock over a number of days, usually 50 or 200.
Take a look at the chart for Under Armour (UA) to see what I mean.
When the 50-day moving average crosses above the 200-day moving
average, it means the stock is likely going to see a big move higher.
Basically, MACD takes moving averages, fine tunes them and combines
them into a single indicator. It just takes a few more steps…
1)
First, instead of a 50- or 200-day moving average, MACD uses 12 and
26 days. It also focuses specifically on the “exponential moving
average,” which means more weight (and importance) is given to the
most recent stock prices.
If this sounds complicated, keep in mind that you don’t really need to
know how the lines are created. The important part is how they interact.
1)
When the MACD line jumps above zero, it shows that the current
momentum is positive. And when it drops below zero, momentum
is negative.
2)
Most important, you can identify when these shifts in trajectory are
likely to occur. It’s all about watching when the lines cross over each
other.
INDICATOR #2:
PARABOLIC SAR
Don’t let the imposing name fool you. Parabolic SAR is dead simple
to interpret.
SAR stands for “stop and reverse,” meaning that it’s designed to find
turning points in stock trends.
When the dots are below the price, the momentum is positive, like
the dots are pushing the stock up. When the dots are above the price,
momentum is negative.
In simplest terms, when the dots switch from above the stock price to
below, that’s a clear “Buy” signal. On the flip side, when they switch from
below the price to above, it’s a “Sell.”
You’ll also notice that the dots tend to converge with the stock price right
before they switch sides. So the closer the dots get to the share price line,
the sooner the current share price direction is likely to reverse.
So not only does Parabolic SAR identify the turning point, it shows how
much time you have to invest accordingly.
Simple, right?
You see, if a stock is trading within a narrow range, the dots will give off
multiple “Buy and “Sell” signals in rapid succession. That’s not a formula
for making money.
The Symantec (SYMC) chart on the next page shows what I mean.
When the stock traded in a tight range between June and August, there
was a flurry of signals that wouldn’t have been profitable. But between
January and March, the signal worked well.
INDICATOR #3:
CHAIKIN MONEY FLOW
We already know there are two sides to every stock trade
– the buyer and seller.
When Money Flow is high, it means the stock has more buying pressure
than selling pressure – and vice versa.
Now, you may be tempted to use this as a trend indicator. So you’d buy
when there’s a lot of buying pressure.
(An indicator called the Money Flow Index is very similar to Chaikin ditions. We believe the advice presented
to subscribers in our published resources
Money Flow, with only a slight change in the calculations. You can and at our seminars is the best and most
useful to global investors today. The rec-
interpret the signals the same way.) ommendations and analysis presented
is for the exclusive use of subscribers.
Subscribers should be aware that invest-
Bottom line: Combining these three simple indicators can create a ment markets have inherent risks and
there can be no guarantee of future profits.
powerful system for identifying when stocks are likely to rise or fall. Likewise, past performance does not se-
cure future results. Recommendations are
You don’t need a math degree. Heck, you don’t even need to subject to change at any time, so subscrib-
ers are encouraged to make regular use of
understand the formulas to use these indicators to boost your our website, www.WSDInsider.com.
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repeating themselves. After all, that’s the basis of technical analysis. States and international treaties. This pub-
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