These indicators are fundamentally characterized because they almost never guarantee complete success in operations, but they do unless decisions on the stock market are made under more objective and reliable criteria. Because among other reasons they give more tracks which small and medium investors can expect from the beginning. To the point that at some price levels it can give the entry or exit positions of any financial asset and that are of great help for decisions in the different financial markets.
From this general approach, there is no doubt that these indicators that we are going to talk about from now on are more than just information. If not, on the contrary, these are investment instruments whose main contribution lies in detecting trend changes to enter or exit the financial markets. Not surprisingly, this is its main and it can even be said that its only objective. It is the added value that it can provide you from any kind of investment strategy.
Not surprisingly, you can use them every time you go to make your money profitable in the main financial assets. Not only in the purchase and sale of shares on the stock market, but in other types of alternative investments. As for example, raw materials, precious metals and the best known currency market. Therefore, you have before you a new source to give something more solidity to your investments. Regardless of which model you select from these precise moments.
Indicators to develop strategies
There are no secret recipes to earn money on the stock market. But one of the tools available to investors to operate in equity markets is made up of technical indicators. Not only to execute the purchase orders, but to know what is the most opportune moment to exit the financial markets. The only downside to their application is that they require a very deep knowledge that necessarily goes through an apprenticeship in technical analysis. So that in this way, the movements are adjusted according to the trend presented by the selected values.
Making an investment strategy based on technical indicators does not guarantee any success in operations. But of course it will substantially improve expectations so that making savings can be more than just a wish. However, the class of indicators is practically unlimited and of all kinds. In any case, in order not to abuse this kind of stock market parameters, the best solution lies in importing the most relevant ones that can be used more easily in investment. In particular, those that detect the trend or strength of the quotes.
Moving average: the most used
Due to its simplicity, the moving average is one of the most used by less experienced investors. Not surprisingly, it is accessible to practically all user profiles because it is based on taking positions when the average is exceeded by the price of the shares. As in the opposite movement, that is, leave the market when prices are below that level. In addition, it contemplates an important advantage over other indicators and that is that it is a valid system to operate in any market trend.
A little more complex, but on the contrary very effective, is the MACD (convergence or divergence of the moving average). Precisely because of its reliability to follow a trend, whatever it may be. Although its best result is generated by the change of direction of a security, sector or index in the financial markets. Its practicality lies in the fact that the divergences shown on the charts can be taken to buy or sell depending on whether they are positive or negative, respectively. As in the previous indicator, when the MACD crosses the reference signal it is a warning to open bullish positions, while if it crosses it below, it will be to sell.
Relative strength
Another technical indicator that should not be missing on any investor's chart is the so-called RSI (Relative Strength Index). Especially because it is very valuable for measuring the price force of the selected financial assets. From this perspective, it is a very effective tool to verify the degree of validity of the rises or falls in the stock market. The ease of detecting it makes it one of the most accessible references for users. Its mechanics are based on the fact that as the closures are higher, the value of this indicator will increase and vice versa. To the point of discovering whether a security is overbought (above 70) or oversold (below 30).
Within this list, the ADX indicator (strength of directional movement) should not be missing on the agenda of any investor. Especially because it is linked to the power of a trend, whatever it was at that time. Not instead of its address that is open to other kinds of indicators. It is a very easy process to interpret since, if for example the price of a security is rising and the ADX is falling, there is no other translation than the Uptrend is very relevant. Quite the opposite of the opposite scenario. By not addressing the trend, it is especially aimed at traders that operate with all kinds of financial instruments: stocks, futures or derivatives.
The famous stochastic
On the other hand, the stochastic also stands out, which is characterized by forming a quote in relation to its maximum and minimum price. It is made up of two lines that intersect under ranges that usually oscillate between levels 20 and 80. So that if they approach these parameters they will be inviting to replicate them with a buy or sell order, respectively.
They do not guarantee complete success in operations, but they do, unless decisions on the stock market are made under more objective and reliable criteria.
It cannot be forgotten that stochastic is one of most followed figure by any experienced investor worth his salt. Beyond other technical considerations and maybe also from the point of view of fundamental analysis. From this approach to investment, there is no doubt that the stochastic is a figure that is very reliable above all else. Not surprisingly, he almost always anticipates the movements that stocks, sectors and stock indices are going to take. Serving of a great help to carry out any kind of investment strategy. That is, after all, what it is about, as you yourself will know well through the operations carried out under this very effective system.
Advantages in its use
On the other hand, it is undeniable that the contribution of these indicators that we have exposed to you and other similar ones is very important for the proper development of investments. Not only because it will improve performance in operations, but also because it will protect investors from the worst scenarios for equity markets. In this sense, there are many and diverse benefits that you can find from now on with these important stock market indicators. As for example those that we point out below:
- They can give you powerful signals about the values where you must invest your savings and on the contrary those that you should avoid at all costs. In this sense, it is a very selective filter to initiate any kind of operations on the stock market.
- With a little learning you will be able to use these tools with great efficiency. So that in this way, the profitability of your savings is increasing. Not without a bit of effort until you can debug this technique and are a perfect expert in its correct application.
- You do not doubt that it will help you to perform safer operations, from all points of view. Where the money you invest will be more protected against possible adversities in the financial markets and that will undoubtedly appear at any time in your life as a small and medium investor.
- Through this investment strategy you can expand operations to other sectors that perhaps until now you had not thought about taking positions in them. Ultimately, business opportunities will expand beyond other technical considerations.
Conclusions on these indicators
Finally, you should not forget that these indicators are above all a clear support on what you have to do in the financial markets. Neither more nor less, because at the end of the day it is their objective. On the other hand, it is also necessary that you know that it is not an infallible system and at some point in time it may generate a problem when carrying out operations on any financial asset. It is much better that you complement it with other investment systems so that the guarantees are much clearer. So that in the end you are the beneficiary of the movements you make in the financial markets.