Using an oscillator for trend indication — The direction of an oscillator’s movement generally provides an indication of the direction of the underlying market trend. Therefore, a reversal in the direction of an oscillator suggests a reversal in the underlying market trend. For example, an oscillator which is rising is generally regarded as bullish, as [...]

The market may sometimes create a series of highs that can also be connected with a straight line parallel to the trend line. The result is a channel within which prices oscillate between the top and bottom lines. The top line of the channel becomes a series of resistance levels and the trend line at [...]

The change in open interest is a measure of whether money is flowing into or out of the market. When the price is FALLING and open interest is increasing, this indicates that the price decrease is due to selling being done to create new short positions. This is considered bearish because it is an indication [...]

Using an oscillator as an overbought/oversold indicator — An oscillator can also be used to identify overbought and oversold conditions by watching its absolute value. A very high (positive) oscillator value indicates that the shorter-term moving average is much higher than the longer-term average and that the current price may therefore be “too high” and [...]

Commonly, a risk to reward ratio of 3 to 1 is suggested, i.e. risk $1 to make $3. The problem with this maxim is that it is hard to determine realistically what the objective is although sometimes it is possible to determine roughly from break-out patterns. If the objective is reached, the prudent thing may [...]

If resources are still to be committed to stock or commodity futures trading, it helps to have realistic expectations. Financial markets don’t exist to make the individual trader wealthy. A private trader will be competing against much more experienced and better informed traders with far deeper pockets in what is basically a zero sum game. [...]