Technical indicators are mathematical representations of price action which can greatly aid traders in their buying and selling decisions. Indicators are however, not the perfect solution to profit. We believe that the key to profit in the capital markets is found in identifying and trading with the trend while employing strict money management.
It is essential for the individual using technical indicators to place them in context. Indicators exist to help traders see a quick overview of the market. In other words, indicators can be used to show either the direction of the trend or the probability of price reverting to the mean. Chart overlays such as moving averages can help define the trend while oscillators such as the stochastic oscillator can show the likelihood of price experiencing a correction back towards the mean.
On the following pages we will present several of the most common technical indicators as well as some simple trading strategies and systems which employ these indicators. We would like to caution the reader once again that technical indicators are not the complete answer to success in the financial markets.