On the basis of the criteria discussed in the previous item, we must pick the appropriate technical tools for the chart we examine. If the market is trending, there’s little point to using the RSI. If it’s ranging, the moving averages are unlikely to be of much use. If the underlying currency pair is strongly cyclical (for example, if the currency is issued by a commodity exporting nation) the commodity channel index could be a good choice. If it is highly volatile, smoothing out the fluctuations with moving average crossovers could be very beneficial for identifying the trend.
Of course the list can be extended. The trader must refine his approach to trade over time by deciding on the kind of indicators which he understands best, and then combining them later to form a simple and concise method.
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Saturday, June 20, 2009
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