Technical analysis is used as a way of predicting future stock price movements by studying past trends. It’s based on the assumption that “history repeats itself”, so prices can be tracked and forecasted using mathematical models and charting techniques. Technical oscillators use the internal dynamics of market activity (prices, trading volume) to measure buying or selling pressure, or overall investor sentiment within a stock, thus identifying key turning points. RSI (Relative Strength Index) and Stochastics are the two most well-known examples. Let’s look at them in more detail: Relative strength index (RSI) As the name suggests, measures relative strength. When it’s near 30%-40%, that means overbought; when it’s near 0%-20%, that means oversold. The grey line represents the oscillator itself, an average percentage change in price from one period to another, so it varies with time. RSI is used mainly on intraday charts but can also be applied to weekly
Read more