Bollinger Band

For bollinger band, the standard value is 20 with deviation of 2.0
When the bollinger band expand, that means there is a big change in price either uptrend or downtrend.
When bollinger band contract, that means it is going into consolidation.
When bollinger band contract until very tight. Take note of the change in price soon, uptrend or downtrend.

RSI - Relative Strength Index

What is Relative Strength Index?

This indicator measures the internal strength of the currency pair's market condition by comparing it's average gain against its average loss over a period of time.

Uses of RSI

1) Extreme Value
- RSI above 70 considered overbought and near a top. But that does not mean the price would not get higher. It may mean that it is time for the price to re-adjust before going up again.
- RSI below 30 is consider oversold and near a bottom. Similar concept goes for this.

2) Value 50 as Centerline
- If above 50 consider bullish
- If below 50 consider bearish

3) Divergence warning
- This is a very important in RSI as it signal an advance warning of the market sentiment.
As the picture shown below, At the price is showing a higher peak to peak but the RSI is showing
a lower peak to peak. We call this a bearish divergence. Which means downtrendis coming.

If the other way round, the price is showing a lower peak to peak but RSI is showing higher peak to peak.
We call that a bullish divergence. Which means uptrend is coming. The common value set for RSI is 14

MACD - Moving Average Convergence Divergence

What is MACD?

It make use of the Exponential Moving Average in its construction. There are 2 lines created and plotted against each other.

The MACD Line is the difference between the two exponential moving averages.
Recommended value is 12 , 26.

The Signal Line acts as a trigger. When the MACD line crosses the signal line it triggers a buy/sell signal.
Recommended value is 9.

MACD has 3 usages.
1) Signal Line Crossover
2) Zero Line Crossover
3) Divergence

See the picture for detail.

Moving Average

What is Moving Average?

Moving Average is a series of data added together and divided by the parameter to determine the average of data series. It helps to smooth the series of data points and reduce random movement. The Moving average gives us a more meanful result by taking out random data point.

There are 2 Basic Moving Averages widely used are:
1) Simple Moving Average (SMA)
2) Exponential Moving Average (EMA)

When we talking about Moving Average, the common question that was "What is the type of Moving Average used and what parameter value are you using?" The parameter value of the moving average is crucial. There are 3 types of parameter and the value take reference to number of days. Eg EMA5 take reference of the price of 5 day:

1) Fast parameter (Less than 20) - Most trader would use 5 or 20 as their fast parameter. Fast parameter is very sensitive to price changes, tends to have more false signal.

2) Medium parameter (From 20 to 50) - Most trader would use 26, 29 or 50 as their medium parameter. Medium parameter is less sensitive to price and more accurate. A good way to use the medium parameter as support/resistance to enter a trade.

3) Slow parameter (100 or 200)   - The signal that is generated is very reliable.


How to make use of Moving Average

For SMA & EMA:
- Some trader use Price and Moving Average Crossover:
If the candlestick moves above SMA29/EMA29 and gradually moving up and away from the line ,  Buy signal.
If the candlestick moves below SMA29/EMA29 and gradually moving down and away from the line,  Sell signal.
See the Picture below for understanding.

 











For EMA:
Dual Moving Average Crossover is another method used by traders.
When 2 moving average intersect , a signal is given. For the example below:
EMA5 - red
EMA26 - blue

When the Fast parameter (red) intersect the Medium parameter (blue), it generate a signal.
Click to Enlarge the picture to see more clearly 

Sites where you can learn more

http://www.babypips.com