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Friday, 14 July 2017

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How can RSI and MACD be Implemented Together

The technical indicators are the most essential tools that need to be implemented in order to generate intradaytips. Basically, a technical indicator is sequence of data points that are obtained by implementing certain formulae to the previous price data of any stock or security. In this definition, the price data implies any grouping of open, high, low or close over certain time period. Some of the indicators just use price of the stocks, while some use volume of the stocks over a period and few use both price and volume simultaneously. Price data of the stocks are the input of the formula used and the output produced by those formulae are data points. These data points help analysts to understand the market trend and the future expectation of the price of stock.

Technical analysts use indicators to gauge the market trend and price of the stocks and thus generate free intraday tips. There are number of technical indicators implemented to serve the different purposes in the field of trading. However, there are some technical analysts and even experienced traders implement two or more technical indicators at the same time. The reason for doing this is to generate the exclusive and best signals of buying and selling of stocks.

The most common combination of the indicators used together to generate the accurate tips and predict the market trend is RSI and MACD. Where, RSI is abbreviation used for relative strength index and MACD stands for Moving Average Convergence/ Divergence. Both the indicators are fundamental oscillating indicators.
In this article, the working of both the indicator simultaneously is explained. For some readers, execution of RSI and MACD indicator at the same time may sound strange. But the technical analysts implement this bizarre combination of technical indicators in order to generate intraday tips.
The formula used in RSI to evaluate is
RSI =  [100-(100/ 1+ (U/D))].
In this formula above, U stands for average upward change in price of stocks and D stands for average downward change in price of the stocks.


                
The values generated by the implementation of the formula lies between the ranges of 0 to 100. The standard time period set is usually 14 days. However, traders change the standard time period according to their approach of trading. For example, if trader is a day trader, then he will change the period to shorter term while, if the trader is willing to trade for long term trading, he will change the period to 21- 50 days. The RSI values plotted above 70 represents a position of overbought situation whereas, the values plotted below 30 shows the oversold position. Some of the traders assumes the peak RSI as buy and sell signals. As soon as they track the values going high or low, they make mentality of buying or selling. On the other hand, the traders or technical analysts wait for the values to cross 70 or 30 level to buy or sell the stocks.

This indicator demonstrates the internal strength of a stock. In the illustration above, the green arrows indicates the RSI moving towards 30, which is signaling to buy stock. The red arrows in the illustration show the selling signal as it is moving towards 70. Head and shoulders pattern is also formed indicating strict sell signals.
This indicator shows the difference between the two moving average of different lengths i.e., fast and slow moving average. Technical analysts believe that this indicator is best used in wide swing trading. While traders implement moving average, one line crosses above the other. As shown in illustration, the red line crosses over the black line, this is a buy signal.

The traders wish to have accurate freeintraday tips; hence they get in touch with the veteran technical analysts.

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