Marko Veckov

BOOK FORWARD When committing oneself to the investment trading on a trading platform, one must look beyond usual tools for proper decision making. I learned this the hard way, as I was making my decisions while trading on insufficient number of indicators. As a result, I spent my initial investment quickly, as my decisions weren’t equipped with enough information for them to be what I wanted them to be. This is a trap most inexperienced traders easily fall into and later ask themselves: “Where did I go wrong?” This book is not here to tell you which indicators is best to use, as of course you can’t use them all due to their number. Instead, it can serve as an addition or a reminder to those overlooked indicators when it comes to technical analysis. Those of you who already have some experience in trading will find this guide, an useful upgrade of their current knowledge, while beginners might want to use it later, when they get more accustomed to use more famous technical tools. Stereotypical picture of the “ordinary trader”, is the one, of a stressed individual in front of his/her computer, trying to figure out the market sentiment. These days are thankfully over, as modern trading platforms provide more than enough tools for making a proper investment decision. Combined with more traditional one, this book can serve as a guide to enhancement of your trading decisions. All those famous tools might have been given to you on a silver plate already, and you know them well. However, for becoming a real trader you would need to dig deeper, into not so much explored territory, of indicators not used that often. Trading can be both fun, and educative, and why not in doing it, try to find best approach to your investment strategy. All these trading tools are used by traders for the purpose of achieving desired gains. However, before that happens it is desirable to study the market first. For that, fundamental analysis is not enough, and it best works when it is paired with technical analysis. What every trader must know, is that the success does not come over night and that he or she must equip with patience. I am not ashamed to admit that I occasionally forgot this and that early expectations turned into easy fallouts. The important thing is not to give up, as there is always something to learn, and they say that it is best to learn from failures. INTRODUCTION Are you planning to enroll into trading world and to test your knowledge of financial markets? If so, you will need to get familiar with one of two analytical tools, which will help you in your stock selection. Both are highly valuable when it comes to prediction of stock prices’ future movements. However, if you are already familiar with trading practice, you should by now be accustomed to use both (technical and fundamental analysis) for your investments. If you are long-term oriented investor, it is more probable that you will use fundamental analysis in the form of parameters like industry position, management structure, growth rate or growth potential. On the other hand, if you are interested in more shorter-term ups and downs of your stocks, it is more likely that you will choose technical side of investment analysis. Technical analysis is based on the belief that charts, which reflect past stock movement contain all the information that is publicly known about a specific company. If you are a trader already you possibly use some of its tools, but is that enough for your decision making and should you make it more efficient? In other words, what do you miss when you use technical analysis? Unlike, fundamental analysis where certain criteria regarding the selection of the parameters must be fulfilled for it to be performed correctly, with technical analysis it is easy to overlook some of its more underrated parameters. In this review we will point out to three technical indicators mostly overlooked by those investors, who rely on technical analysis for future investments. Technical analysis supplies investors with a huge number of indicators and it is easy for them to get lost, while searching for the right ones. Besides those well-known ones like Moving-Average Convergence/Divergence, Accumulation/Distribution Line or Head and Shoulder Patterns, there are those less known, which have the potential to shed a new light on traders’ trading strategies. Three ones presented here are: The Commodity Channel Index (CCI), The Momentum, and The ATR Indicator Over time new technical indicators have been developed, adding to the already long list of existing ones. The aim of all these is to get better results by studying historical data about stock movement in the form of charts. They tend to predict future movements of the prices of stocks by looking at patterns from its past. Chapter 1: The Commodity Channel Index (CCI) This indicator was developed by Donald Lambert in the 1980s and its goals is to measure the volatility of movement of price of the instrument against its moving average (MD) and normal deviation of moving average itself. It can be used for all types of securities, like stocks, currencies and indices. Due to its characteristic in measuring price movements of the stocks in comparison to its moving average, it increases when the price is above that average level and decreases when it is below. In this way, it is convenient to use it in order to find out which stocks are overbought, and which are oversold. CCI measures the current price relative to the moving average of the price -Colibri Trader- www.colibritrader.com Chart below shows the implementation of this indicator, which is situated below the price line, showing the movement of pound with relation to dollar. The common period used whenever this parameter in considered is 20-days and the same time frame is used here. This means that every 20 days new calculations are being undertaken. However, it is possible to adjust these calculations for longer periods, like 30 or 40 days, but the longer the periods are, more unlikely will CCI values fall outside limit values of -100 and 100. Close look at the chart, shows that CCI values in most cases fall inside the limit values. The developer of the indicator, Donald Lambert, in his calculations used 0.015 constant, for CCI values to fall within this range 75% of the time. Extreme values of CCI, over 100 or above -100 are the signs of unusual strength and weakness in the market. Sudden election announcement for one of the prior UK elections moved the value of CCI up to 395 on the chart following GBP/USD currency pair, as shown below. Useful tips There are several possible ways in which this indicator can be used. All of them are aimed at pointing out to potential signals to buy or sell the stock. As said before, it measures the relations between current price level and the average level for a certain time period. Whenever, this price level is above average level, CCI points to the buy signal and whenever this price is below average price, CCI points out to the sell signal. If CCI is above +100, new rising trend is starting and that is the signal to buy. However, relying only on this indicator, as with every other one is not enough, and it must be combined with other parameters. When CCI is below -100, new downward trend is starting, and it is the signal to sell. As with the previous example, usage of this indicator for making the right investment decision must be combined with the other technical parameters. By using CCI it is possible in this way to identify those stocks which are overbought or oversold. If a volatility of the stock is higher, limit values can be set in the way that the range between them is larger, from -200 to +200. CCI method is rather subjective one, as identification of overbought or oversold stocks relies on personal judgement. If a stock is oversold, that doesn’t mean that it cannot fall later in terms of its price. Likewise, overbought stocks can continue to climb later. Subjectivity of this indicator makes it reliable only when used with other indicators combined. Chart below shows what happens when the stock price hits certain levels, that are not confirmed by CCI and when its movement doesn’t reflect the movement of the stock price. This is exactly the reason why this indicator must be combined with a few other ones. There are two types of these divergences. One occurs when a stock reaches lower low and CCI shows higher low and that divergence is bullish. The other happens when a stock forms higher high and CCI records lower highs and that one is bearish. These events can be misleading in the upward trend, as it can show bearish divergences lot before the high end materializes. Likewise, bullish divergences occur a lot sooner in the bullish trend in relations to lows happening. Following chart shows the examples of these divergences and the circumstances during which they are occurring. It is possible to use these divergences as a sign of trend reversal. For instance, if CCI falls below zero like in the chart above it is a potential sign that bearish divergence is over and that the bullish one starts. Likewise, if CCI is above zero during these divergences, it is a sign of bullish trend’s decline. These trends and their endings are easily confirmed with CCI being below or above zero, but sometimes this does not happen. Chart above shows bearish divergence for a period August-September, which does not fall later into another bullish divergence category, like previous one, as CCI didn’t fall below zero. Calculation CCI value is calculated as a difference between mean price of the stock for a time period specified and average price of means of stock prices for that period. This difference is then compared with the average difference. This comparison tells the trader more about the volatility of the stock. The result is then multiplied by a constant in order to get the value within the mentioned range between -100 and +100. This can be written in the following way: CCI = (AveP -SMA_of_AveP) / (0.015 * Mean Deviation) SMA_of_AveP = AveP / P, where P is the number of periods for which CCI is calculated CCI is commodity channel index, while AveP is the average price of the commodity calculated the following way (High + Low + Close) / 3 and is also known as the typical price. Multiplication with 0.015 constant is done for the purpose of CCI value falling within given -/+ 100 range. In the formula High refers to the highest price level of the stock for a given period, Low refers to the lowest one and Close to the closing price. Conclusion CCI is an applicable indicator when it comes to identifying overbought or oversold stocks or their trend reversals. Placing it just below the price chart, makes it easy to compare its movement in comparison to the stock price movement. Usually, it is set for 20 periods, but longer ones can be set easily as well. Shorter time periods make this indicator more sensitive, while a longer time periods decrease this sensitivity. It is possible to add lines, showing overbought or oversold trends, which will make trading easier for any trader. These are the types of “advanced options” which trading platforms provide and which can be adjusted by adding numbers of limit values separated by commas. Chapter 2: The Momentum indicator Another indicator from the family of oscillators, which makes a comparison between the last closing price and the previous closing price. It gives a glimpse of where closing price at the end of the period is, in comparison to the one at the end of previous period. For instance, if a time frame is 10 periods, it compares the last closing price to the one at the end of previous 10 period time frame. If this last closing price is higher than the price n-periods ago, this indicator will be positive. If the difference is negative or if the last closing price is lower than the one n-periods ago, this indicators’ value will be negative. There are two types of this indicator: one which shows these differences between closing prices in absolute terms and the other which presents them in percentages. The chart below shows the implementation of this indicator for the same GBP/USD currency pair for a 10-day time frame period. Therefore, it compares the price at the end of the current 10-day period with the one at the end of previous 10-day period. If the last closing price is higher than the previous one, Momentum will move above line zero, which is set at the value of 100. Likewise, if this difference is negative, the indicator will move below line zero. The larger the difference is, the greater the move of the indicator from the closing line will be. However useful this parameter might look like, it has its negative sides, as well. One of the most common issues is the so-called “whipsaw moment”. It occurs when the price rises and then suddenly starts the trend down. The rule in this case is that if the stock trades above zero line and then falls below it, followed by another rally up, that is the signal to buy. If it continues the downward trend, it is a signal to sell. This also opens the chance of selling the stock and then buying it later at the lower price, while expecting it to rebound above the zero line. Useful Tips Simple strategy while using this indicator, is to buy whenever the Momentum is above zero line and to sell whenever it is below it. The example of this strategy is shown on the chart below: Changes in prices often happen right after the Momentum crosses the zero line. As with other indicators, false signals are present here, as well. Therefore, this parameter must be combined with one or few other ones, for making a right investment decision. For instance, it can be combined with Moving Average indicator, where a buy signal would occur when Momentum crosses the MA line from below and sell signal, when it does so from above. However, this combination also has its negative sides, the most famous being already mentioned “whipsaw moment”, which can be resolved by following strict trading signals. If a Momentum is above MA line and then suddenly drops below it, it is best to make a short sell move. Finally, short position should be abandoned, once Momentum rises above MA line. Divergences that occur here, happen when the price of the stock is moving lower, which isn’t followed by the Momentum lows, which are moving higher. This shows the tendency of the Momentum signal to slow down and if a buy signal occurs, this bullish discrepancies between the movement of the price of stock and this indicator, can help in confirming it. Bearish discrepancies occur when the price of the stock is moving higher, but Momentum highs are not following it and are instead moving lower. This shows that while the price is rising, Momentum behind buy signal is slowing down. If it finally gives a sell signal, and this divergence helps in confirming it. Another event that calls for caution, is when price rises and then starts to move sideways or starts suddenly to drop. Momentum shows what is already visible on the chart and that is that the stocks had higher volatility than usual. However, it does not mean that these rises are always followed by the downward trend, it just shows the turbulent history of the stock. All these insecurities are clear sign that this indicator must be combined with other investment strategies, no matter if it is clear situation or the case of these discrepancies. However, Momentum indicator can be a useful tool in identifying shifts in buy or sell signal, through usage of these discrepancies and in doing so it is best use to make a clear price action trading strategy, rather than finding trade signals on its own. Calculation As said before, there are two versions of this indicator and it is easy task to calculate it. First version is the absolute one, where n is the number of periods: Version 1: M = CP - CPn The second one is based on percentages and for the same number of periods it is calculated in the following way: Version 2: M = (CP/CPn) * 100 First version simply calculates the absolute difference between two closing prices, while the second one shows the change rate of the closing prices between these time intervals. M is used to tell the investor if the price is going upward or downward. If it is positive in the first version, last closing price is above previous one, which was determined n periods ago. If it is negative, the last closing price is below it. In the second version, if M value is positive, the last closing price is above the previous one and if it is negative, the last closing price is below previous one. The position of then indicator below or above zero line, tells then trader how fast stock prices are moving. For instance, if its value is 0.35, it tells that price is moving higher faster, than the M value of 0.15. For the second version, if M value is 98 % it shows that the stock price is moving down faster, than when the M value is 99 %. Conclusion The momentum indicator is most useful tool, when it is used alongside other technical indicators. All traders aiming at improving their trading skills will, therefore, combine it with other tools or choose them instead. As it also shows signs of weaknesses, it is best used when matched with other tools of the similar category, like Moving Average indicator. It won’t provide much insight into possible future movements of the stock, besides what is already seen on the chart. Movements of the stock prices, whether they are up or down, can be easily read from the chart and their volatility is reflected in the same way through M value calculations. It certainly has its advantages for traders who opt to use it, as it is easily identified. In most cases, it is presented as a straight line in a different part of the chart than price lines. Its most valuable contribution to the overall trading strategy of everyday trader, is figuring out how fast prices of stocks move, and this is easily identified by using Momentum indicator line in the price chart. Besides graphic side of it being very prectical, it is also easily calculated. Chapter 3: The ATR Indicator ATR indicator was developed by US mechanical engineer J. Welles Wilder in 1974 and is yet another simple-to-use technical indicator, alongside RSI, Parabolic SAR or ADX, which is Directional Moving Concept, also developed by the same author. Just like CCI, ATR indicator was initially designed for commodities, but it can be used for stocks, currencies, ETFs and other securities, as well. It is easily applicable for FOREX and is calculated as a difference between absolute highs and lows for a certain time frame, mostly 14-day period. Its values are higher for those instruments, which show higher volatility. On the other hand, its value is lower for those instruments, whose price moves sideways. It can be also used for confirmation of bearish and bullish signals based on divergence practice. For instance, its growing value at the beginning of the trend reversal, might be a signal of upcoming long or short positions. Chart below shows the usage of this indicator on well-known GBP/USD currency pair. It doesn’t point out on where the stock price will be in the future, but rather provides info about its volatility based on historical data. However, it is good for predicting reversals, where its extreme values are often followed by such scenarios. For this to be confirmed, it must, as previous indicators, be combined with other parameters. One other popular usage of ATR is to access the exit levels, by using volatility measures. Simple volatility ratio can be calculated by dividing its value with a current instrument price. Its higher value would refer to higher volatility or higher stop-loss range, as instrument’s price tends to move up and down more extremely. It is also worth mentioning that higher price instruments have a higher impact on ATR value than lower priced once, which makes comparison between their ATRs more difficult. Useful tips Following examples will show practical situations in trading, where trader relies on this indicator. First situation refers to the trader taking a long position. ATR value is used to determine the range of stop-loss values. If a trader opts for a specific currency pairs, his stop-loss is a multiple of its ATR. Chart below, which refers to this first example, shows the spot, where trader opts for a long position. Question each trader in this and similar position asks himself/herself is: “How and where to set up stop-loss range?” The answer is simple, ATR for this currency pair needs to be multiplied with certain multiplier in order to get a stop-loss range. This range is usually shown in the number of pips. In this case, shown on the above picture, current ATR is 240, while the multiplier is 1.5 and the resulting stop-loss range is 360 pips. Second situation refers to EUR/USD currency pair. Sometime in the past, trader opted for a trade, whose past ATR was 80 pips, as shown on the picture below. Note that this was a current ATR at the time of the trade, where trader opted for a long position. If, he or she applies the same multiplier as above, the resulting stop-loss range would be 120 pips. Finally, the third situation shows the implementation of ATR-related rule, when a trader takes a short position. This is shown on the picture below on the example of AUS/USD currency pair. Current position, where ATR is between 100 and 120 pips is circled. Now, if a trader wants to set up a short trading position, he/she will set it up somewhere between 155 and 175 pips, if he or she uses 1.5 multiplier, as in the examples above. In all three cases, a lot of experimentation is needed before proper stop-loss range is determined and set. Calculation ATR’s value calculation is based on the n-period moving average of true range values, mostly for a specific currency pair. It comes as highest value of the three following concepts: Current High price minus current Low price of the pair or any other instrument Absolute value of the current High price minus the previous Close price Absolute value of the current Low price minus the previous Close price Wilder introduced this concept, as he was mainly interested into instrument’s volatility. It was at first designed for commodities whose trading volumes were mostly low in those days and where the differences between current highs and lows were not enough for concluding more about commodity’s volatility. He applied True Ranges, which allow calculations based on previous Lows and Closing prices and which gave better results. Method one will be used when the current High is above previous Close and current Low is equal or below previous Close. However, if the current trading session opens with a gap or is outside the previous bar, then methods two or three will be used. This is shown on the chart below: First situation points out to the method number one being used. The second one shows a downside gap and therefore, one of the other two methods, most notably, third one, must be used. Similarly, the third pattern shows ups and downs outside the previous bar, and therefore again one of the other two methods (methods two or three) must be used. As previously stated, ATR is usually calculated for a 14-day period. General formula is the following: ATR t = ATR t-1 * (n-1) + TR t / n, where TR t is the current True Range Value and ATR t, the average sum of True Range Values for the given 14-day period. Close look at the table below, shows how ATR is calculated for a currency pair GBP/USD: True Range values in this table are calculated using one of the previously mentioned three methods, while ATR is calculated for the beginning of the 15th day, where values of currency relations are given for a previous 14-day period. ATR’s higher values pint out to higher instrument volatility and a wider stop-loss range. Usual stop-loss range is determined by the current ATR value level. If stop-loss is too wide, where ATR value is too low, that puts an unnecessary risk for the trader. Also, if it is too narrow, for an ATR, which is too high, it imposes a risk for the trader’s positions to be closed too soon. ATR is widely used for position-sizing. The greater the ATR for a currency pair the wider the stop-loss level should be -Colibri Trader- www.colibritrader.com Calculations of ATR are based on True Range Values, which are differences between prices, either current or previous, as explained on the three methods’ example. Therefore, ATR shows volatility in price movement of the instrument, but not in percentage points, but in absolute values. This also means, that for those currency pairs, like GBP/JPY, which have higher exchange rate, ATR will also be higher and that points to the higher volatility of this instrument. Also, those pairs, which have lower exchange rate will have higher ATR value and will generally be less volatile or will gravitate towards more steady movement on the trade chart. However, this also introduces one specific problem with this indicator’s implementation. Different currency pairs will have different ATRs and this makes a comparison between them almost impossible. ATR reflects the volatility of a price not in the percentage terms but in absolute price levels -Colibri Trader- www.colibritrader.com Conclusion ATR as an indicator is very useful, when it comes to measuring of price volatility. It does not, however, provides much insight into possible future movements of these prices, but can be useful tool for predictions of trend reversals. Its growing value, just after the start of the upward trend, might be a confirmation of it and a signal to buy. It is also used for position sizing, as trading instrument with higher ATR value requires wider stop-loss range, due to the possibility that a profitable position might be closed too soon. Chapter 4: Combined approach It is by now clear that multiple approach, when it comes to usage of technical indicators, is essential for developing the right investment strategy. Relying on only one indicator, might place you in the position, where there are some trends that you are missing. Combined approach is crucial, but not every one of these approaches will become beneficial for you, as a future trader. Redundancy trap is something inexperienced traders easily fall into, if they use those indicators, which point out to the same type of information. Our approach in selecting three mostly overlooked technical indicators avoids falling into this inconvenient situation. This is because, each of these indicators falls into one of three essential categories, when it comes to development of future investment strategy. CCI helps in identifying overbought or oversold instruments and is good in predicting future trends. The Momentum indicator tells us more about strengths and weaknesses of the current price trend. Finally, ATR explains the price-volume connection, where higher trading volume points to the price increase. In general, its advantage is that it enables easy development of positioning strategy, where setting a proper stop-loss range is crucial. Using indicators that fall into same category can be misleading, as signals from the market tend to be interpreted as stronger than they really are. The best way to avoid this situation, is to use indicators from different categories, which show different information about price movements in the future. All three indicators presented here aim at answering the question about future movement of the price of the instrument, but in doing so they take different approaches. Using them is, therefore the same as getting a diverse opinion about trading strategy from different advisors. Looking at the same goal from a different perspective, is both useful and necessary. I here recommend, before you take any steps further in applying this combined approach, to get familiar with the rules of all these three indicators or any other from the same categories. Choosing combined approach can protect you from the weaknesses of each of these indicators, as they all have negative sides, besides those positive ones. However, even with this approach in mind, it is possible that you will have confronting signals from the market, and it is then on you to decide, if you will be willing to take riskier or less risky positions. It will take time to learn what each indicator is offering and if you manage to confirm buy or sell signal based on the combined approach, you can be more certain into your investment strategy. Even then, when your strategy is approved with this multiple approach, the gain from it will not be 100 % guaranteed. FOREX market is like any other market, valuable (worth more than 6 trillion dollars) and unpredictable. However, confirmation of your strategy with this combined approach will certainly improve the chances of winning more often than losing and that is every trader’s goal. How to use it Before taking this approach and testing it, trader must answer few questions. They relate to the purpose of the usage of the approach. What are we trying to achieve with these indicators? Are we trying to find out more about current trend and define it or are we just trying to find an entry trigger? In most cases I would recommend using one indicator from the most relevant categories like: trend indicators, momentum indicators and volume indicators. Other combinations of indicators from different categories are also possible, depending on what are the questions you are asking and their answers. For instance, you can search into possible swings in the current price trends. CCI will help you in defying future buy or sell strategy, Momentum will help in setting the right time to enter the market and ATR will help in setting stop-loss range. Evidently, you might have other preferences, as well. If you are looking for, low volatility breakout trade, ATR is there to help, as it can tell us more about current volatility in the market. Combined with M indicator, it will be easy to tell when to enter the market. General rules in using this combined approach, therefore are the following: Make sure to clearly define what are you trying to answer with this approach Be aware that different indicators have different purposes Always choose one indicator from each category Make sure not to use too little of these indicators, but not too much, as well I would recommend for traders, who are beginners to follow these rules. However, when it comes to the last one, my suggestion would be to use not more than three indicators from relevant categories. That way you will be sure that your predictions are not too optimistic, but also not too pessimistic, as well. Further recommendations It is easy to dismiss technical analysis, as something subjected to debate. In general, if there is one single indicator or combination of them, which works in every market, it mostly owes this status to the subjectivity of the traders. Next issue is that there are so many of these indicators that methods become limitless, in how and when to use them. For those of you who are just thinking in becoming a trader on market like FOREX, I would at first suggest, to study the history of this method. That way you will become familiar to what technical analysis is and what it can do and what it isn’t. You will learn, with time, how to use it and one of the most important aspects of it, is to determine exit and entry levels. If used in a proper way, technical analysis, will help you in getting to know market sentiment and any assets’ trend. After all, as many experienced traders like to say: “Price is the king”. By using the combined indicators approach, you will become more persuaded in your trading strategy, where additional indicators will approve or disapprove the assumptions you made, based on the first indicator that you used. Finally, you can use technical analysis to determine the level of risk, which you will be exposed to if you take the desired position. This will let you set up your own risk/reward level and introduce you to the big market picture, the one you might miss if you rely only on fundamental analysis. What is very important in usage of technical analysis, is the understanding of what combined approach can do. It won’t help you in becoming rich quickly or to take shortcuts, before carefully studying the asset price history. Most beginners think that relying on one indicator will do the work. However, in most cases that is not what happens, as you must rely on multiple of them, for finding those who work for you most of the time. It is also desirable not to try to fight the trend, but instead make it work for you. Conclusion Technical analysis is a serious tool, that shouldn’t be underestimated, but at the same time expecting miracles from it might be too optimistic. It is a set of signals and it is up to trader to decide, which signals to use. Since, there are so many of them, it is easy to make mistakes. Trader must make the best out of them and this is usually done with the combination of several of these parameters. In this small e-book I presented a few, which traders, even those more experienced ones tend to overlook, as they rely on one specific technique only. Even they think that technical analysis will make them analyze the problem quickly and enroll into market easily. Approaching technical analysis in the right way is the key towards efficacy. In the end, it is not about software, newly learned methods or what is in your computer, but rather what is in your mind, that matters. Three indicators presented here are a part of much bigger picture, the one that consists of trends, levels and signals. This frame falls even deeper, as we dive in further, where trend is composed of entries, stops and exits. Technical analysis provides the best way to approach these complex issues. These indicators are chosen for a reason, as they fall into significant categories, that tend to answer important questions about the market. CCI is there to identify characteristics of the traded instrument. M indicator, although also from the family of oscillators answers the question about when and how to become part of the market. Finally, when it comes to instrument’s volatility and taking a proper risk, ATR seems irreplaceable. All three parameters are convenient and easy-to-use and are a good addition to the already used indicators. Too often, traders think on how they can beat the market, by becoming too dependent on technical analysis. The answer to their quest, is the perception of risk, which is way big traders or institutional investors have so few losses. They don’t understand that having losses is also the part of the game and that there are no exact things in trading world. We all like to control our environment, as much as we like to control our own lives. Just like in real life, where there are so many participants, movements of prices in the markets are impacted by the actions of many traders. This unpredictability of the market in the short term, is exactly where technical indicators step in, as they allow the most crucial aspects of any market: identification of trends, exit/entry points and trade positioning.