Indicators cause and consequences can not be questioned. When they are placed on the graph, they produce results with certain mathematical calculations and display them by adding graphics. Indicators are produced in the historical process of price movements in the sense that they are always predisposed to produce the same result under certain pressures and relate the current situation with the strict price movements.
In doing so, it does not generate random or intuitive focused results, it obtains figures with purely exact mathematical values treated and displays them appropriately in the graph. This can sometimes be a way of moving on the price, sometimes a volumetric representation in the lower region, and sometimes in the form of boundary markers. Regardless of the presentation, not all the indicators are subjective, but mathematics creates realistic bases.
We will call this group, which is also called Indicator in foreign sources and also in Turkey, in the form of “indicators” with the generally accepted name in Turkish. At present, the indicator group is mentioned in the same way on Turkish processing platforms. Indicators have been placed in the relevant menu in a ready-to-use format with a wide variety of features and names. It is as easy as pressing a key to reflect any defined indicator on the price graph you are working with. In order to obtain satisfactory results, you should test the indicator groups over time and use them appropriately according to your investment preferences. Because the indicators produce clear results from a subjective point of view, they can provide a good basis for estimating price movements.
The indispensable helpers of technical analysis methods can be collected in different groups for the purpose of serving the indicators. However, it is located in the same menu on the trading platform. There is practically no great benefit here except for the literature requirements to define in which groups each individual indicator is located. However, we would also like to briefly mention some of the differences.
The indicator group, which tries to inform the change of direction in the market before events take place, is generally given the name “leading indicators”. Such indicators can use many volumes that relate to demand with prices, make use of volume, and try to predict the change in the market’s buying or selling intensity, that is, the direction of price. On the other hand, “aftershocks” tries to confirm the changing direction of the fiyata. It tries to find out whether the current price change is a temporary situation or a long-term new start with a wide variety of methods, such as the relation between various price averages and short-term long-term comparison.
“Trend indicators” that try to change the direction of the trend and trend when viewed from the operating point of view, and “oscillators” that try to determine the trading points by generating the results from the oscillations of the price can be grouped together. As a matter of fact, you can see these titles as grouped on platforms.
Another type of grouping can be defined in terms of generating a buy-sell signal. Some of the indicators serve strictly accepted interpretations such as “make a sale if the current value is above the 70 line”. It tries to describe the point where the investor will enter the transaction. Some indicators do not generate a buy-sell signal, only the current situation visually sticks to the mathematical realities and interprets and helps the investor to assess the current situation. Whatever the reason, waiting for a single indicator to generate a buying and selling signal and determining an investment strategy accordingly may not produce satisfactory results for the investor. For this reason, it will be a very important choice for the investor to determine which indicators will use which indicators. In the light of current economic developments, using technical analysis methods faithfully to basic analysis methods will produce the most successful results. Successful investors use the basic analysis knowledge to determine the investment direction, and use the technical analysis tools to determine the point at which to invest. However, it is extremely possible to produce results with only technical analysis data and to sign successful positions. What is important is to be able to successfully determine the investment system and remain faithful to the system in the long run.
We have a lot of ready-to-use displays on our trading platform and let us briefly introduce some of the most used displays on the market to help you develop ideas. We will not fit in these pages and we recommend you to experiment with other displays over time.
MA – Moving Average
The price is the most basic indicator used to get the price averages for the last X period it is in. The chart takes averages of past price data and marks them at the current price level. Thus, it is possible to determine how far away the current price is from the past average, and the convergence of the deviation from the average and the different key data leads to the idea of position.
Moving averages are divided into several different types in themselves. There are methods such as more emphasis on price movements in the last days, more emphasis on days with intense volatility, or equal weighted calculation of all days for moving average types that vary according to the calculation method.
Moving averages are one of the most used indicators on price graphs. The period value can be changed from the display properties depending on the user’s desire, and accurate proportional sensitivity can be obtained by the number of past-made samples. Many investors prefer to use multiple moving averages with different periods on the graph to get results from the intersection points of the average lines and use this as the base data.
Moving averages for whatever purpose is one of the best ways to figure out how far the price movement is deviating from its usual course.
MACD – Moving Average Convergence Divergence
The MACD indicator is a display that compares the short-term price trend with the long-term price trend in general terms and visually reflects the recent market change. As a standard, the result obtained by subtracting the 12-day average from the 26-day average is depicted on the zero line by positive and negative ascending bars. The ascending bars, which move in the positive direction, show the power of the bull market, while the ascending bars, which move in the negative direction, show the strength of the bear market. At a glance, MACD is one of the indispensable indicators for presenting the sensitivity of market change visually.
MACD shows the 9-day exponential average as the same visual field histogram, except for these two comparisons. Therefore, it serves as an early indicator in terms of showing the market change in a very short period. For this reason, it is highly preferred in the selection of position entry points.
The MACD, which is recommended in terms of associating three different averages in a readable format in a single visual field and producing results, is drawn with 12, 26, 9 periodic averages but the user can change all three average periods as desired.
RSI – Relative Strength Index
In 1978, Wells Wilder’s RSI, which he described in his New Concepts in Technical Investment Systems book, can be translated into relative power index in Turkish. RSI has evolved widely since its publication date and has become a frequent indicator on many investment platforms.
The RSI, which calculates mathematical calculations based on the internal power of the instrument concerned and evaluates the period in which it is based, is shown as a histogram in the lower section when added to the chart. The vertical axis has two boundaries at the price level of 30 and 70 for the indicator moving on a scale between 0 and 100. Under RSI at level 30, the over-selling demand, which does not comply with the price, is described. It tries to give pioneering information on the direction that price movement will change direction.
When RSI calculates this, it compares the monthly decreases and increases of the individual days within the specified period, compares the average, and compares it with the current price level. In this way, the investment vehicle tries to understand whether it can meet the demand with its inner power. The price response in response to past demand is the most important issue for RSI and the underlying basis is based on this stated inner strength. As you would expect, it is unlikely that each investment vehicle will respond to purchase or sale requests made to it by price movements of different sizes. The RSI’s main purpose is to understand this price response of the medium of investment as a means of understanding the past, and to predict the effect that current demands will have. Therefore, while RSI sees the ability to meet the demand for the current price within certain limits, it is anticipated that the demand that goes beyond these limits will be excessive and the price will not be able to meet it after a while. This is indicated by the above 70, below 30 border lines. The value outside these limits is considered to be an indication of change in the shortest course.
RSI also has a number of possibilities for use other than those specified in the above paragraph. For example, if a purchase amount of x is a price point y, then a few days after reaching the price y point, it is assumed that there is a “negative incompatibility” name if there is a price point y + 1 at x-1. Despite the two hills rising one after another on this formation price graph, two hills fall on the RSI indicator. This inconsistent appearance is a sign that prices can not meet the demand.
When attached to the RSI price chart, it is positioned as a standard with a 14-period average account. However, the user can set the desired average from the display properties.
CCI – Commodity Channel Index
Thanks to the approach of the American analyst Donald R. Lambert regarding the CCI demonstration calculation system developed for commodity markets, it has been found convenient to use on many investment vehicles. By trying to figure out the average and variance of the price movements of the system based on the past period, it is trying to find out how far this current price is.
CCI collects the highest, lowest, and closing prices of the days and divides the cost of the retrospective period for the selected period. In other words, the price is taken to the middle value in the relevant period. Then all the prices in the relevant period have the simple arithmetic mean of the total. This value is used as a deviation indicator for each period, and the absolute values of all the periods are found one by one from this average value. When the average of the deviation values finally obtained is taken, a good key is formed for the average deviation of the relevant period sum. It becomes more possible to understand the tendency of the investment vehicle to deviate from this maximum.
The CCI multiplies this value by a constant coefficient, evaluating it with the current price and positioning it on the relevant area. A CCI indicator that is outside these limits is an indicator that the detector is high, while the area in the graphical display area between -100 and +100 is considered normal for deviation.
Lambert predicted that the CCI demonstration will produce better results at horizontal markets.
The simple price averaged in the middle of the display is usually 20 per cent. In this price range, upper and lower boundary lines are drawn by adding +2 and -2 deviation values. Thus, a channel is created that is likely to move within the range of possible deviations. In the middle of this channel, there is a simple moving average line as we mentioned.
The Bollinger band can be used to generate a buy / sell signal for the fiyata, which usually reaches the canal boundaries in laterally progressive markets. The price that has reached the limit of the channel means a deviation from the average value reaching the limits of forecasting. When the price can not go out of the channel and returns, it can be considered to return to the other end of the channel, or at least to the average level.
However, a new trend may be foreseen for the price that goes out of the channel on trendy markets. Significant amount of out-of-canal price is under serious pressure and movement can be expected to continue. Therefore, the Bollinger Band can be used as a tool for confirming the trend start.
During periods of uncertainty, the Bollinger Band can sharply narrow and inform the beginning of a new movement. The Bollinger Band starts to narrow when the market, which can not decide on its direction, starts to move in a decreasing triangle. The band, which is getting narrower and forming a throat, eventually leaps out and creates a new price direction by opening a wide range of motion to itself. In this case, the direction of the bounce can be expected to continue. Thus, an important indicator that confirms the start of the trend can also turn into a diagram.
The best way to show the percentage change in prices over a certain period of time is Momentum. The number of periods you can change from the properties is normally added to the graph as standard 14. In the historical calculation, the rate of price change is shown proportionally.
The base value for the indicator is 100%, which is the relative right of the center of the display. Moving away from this value, the indicator starts to cause motions in the opposite direction. It is thought that there is a buying and selling signal for the prices that make up the hill at the point far from the middle level area and return. This strong change is thought to be higher than the prices can afford. Therefore, it is foreseen that the position can be opened with the peak sales, the bottom sales. However, it is not wrong to wait for the position to move in the opposite direction for the position.
As with the RSI indicator, negative mismatch for Momentum can be used correctly. If the price formations show incompatibility with the momentum indicator, the direction of the current price movement may be expected to change.Stochastics
When the Stochastic Oscillator is added on the chart, two lines that depend on each other are visible. The base line is referred to as the% K curve and is drawn with a solid straight line. A second line, labeled% D, is shown with a dashed line. The% D line represents a more dynamic and responsive line while the% K line represents the decelerated change value.
The difference between the last closing price and the lowest price for the last five days is divided by the difference between the highest value and the lowest value. The result is multiplied by 100 to match the percentage value. The% K value is calculated in this way.
The% D curve depicts the moving average of the% K curve over the period.
Since the relationship between these two curves gives clues as to the tendency of the prices, try to establish trading signals. Intended trading signals can be described as follows:
• Stochastic crosses up +20
• Stochastic sells down +80 level
• If the Stochastic cuts up D%
• Stochastic sales down by% DVolumeThe volume indicator presents a table showing the difference between the two different averages of the trading volume of the respective investment instrument. When added to the graph, it creates the appearance of bars rising in the lower part. For a rising purchase volume, the red data bar for a rising sales volume takes its place below the price in proportion to the volume. The farther forward the data bar is from zero, it is understood that the short-term change is so much with the long-term change rate.
The volume indicator is one of the most commonly used instruments in the oscillator group. It supports the direction in direct proportion to the rate of progress of the prices and shows that development is healthy when it is in color and length. As the price increases, the sales volume weighted view of the volume bar indicates a negative relationship between prices and demand, and this reverse rate development may be the reporting of the price change for an unreliable development.
It is expected that the transaction volume, that is, the volume, will increase in the fast price movements that investors call rally. If the price movement is progressing without losing momentum, if the transaction volume is gradually decreasing, it means that the investor must question the market direction again. Because, at a healthy price move, transaction volume should be both quantitative and qualitative in support of prices.Parabolic SARAnother important work of Welles Wilder, who brings the RSI indicator to technical analysts, is the SAR indicator. It is also very easy to read the graph on the graph by combining the initials of Stop and Reversal. It is presumed that when the pointed expression line following the trend is above the price, the sales signal is output when it is above the price, and when it goes below the price when it is above it. Wilder designed this indicator as part of an ongoing automated trading system. Explaining that the indicator is displaced in the description, closing the previous position means that a new position has to be opened in the opposite direction. In other words, positions are closed and opened one after the other in a continuous trade cycle.
Although SAR indicators show relatively good results in trending markets, they can produce quite erroneous results in horizontal markets. For this reason, before applying the SAR indicator to the investment instrument, it may be useful to measure the presence and speed of the trend, especially with an indicator group measuring the power of the trend.
The calculation of the SAR value requires a relatively long calculation in itself.
The formula for SAR is calculated as follows:
SARn + 1 = SARn +? (EP-SARn)
SARn is the current price, and SARn + 1 is the price for the next period. The extreme point (EP) value is the farthest point that the current price stream can reach. The highest value for an emerging market, the lowest value for a falling market is the value assigned to the EP variable. The α value in the form is the key value of the step and is used to capture the acceleration of the trend. The step value you can change from adding or adding the indicator to its properties means how far the SAR will monitor the market. The lower the SAR value, the closer the SAR point is and the higher the displacement possibility. However, the likelihood of being affected by short-term market movements and giving false signals is also increasing. Wilder considered the 0.02 step value as the standard in his analysis work.