Technical Indicators
Technical analysis is the study of market action, primarily through the use of charts, for the purpose of forecasting future price trends. Technical analysis can be used to optimize buy/sell timing. There are a lot of different indicators or charts available, however, we focus only on those, that recommended by Phil Town in his book "Rule#1". Phil Town calls it "The Three Tools".
In general (oversimplified):
- Moving Average - When the price line crosses above the moving average line, buy. When the price line crosses below the moving average line, sell.
- Stochastics - Buy line crosses up, buy. Buy line crosses down, sell. When the Stochastic line crosses up through the 20th percentile it is a positive signal, and when it crosses down through the 80th percentile it is a negative signal.
- MACD - Beggining of a mountain, time to buy. Beginning of a valley, time to sell.
- Buy or Sell when all three charts are agreed. When all three Tools are saying "buy", it is time to get in. When all three are saying "sell", it is time to get out.
 Read more about Technical Indicators in the Theory section.
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