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FT4Web by Investors FastTrack
|FastTrack has several timing indicators: Moving average, MACD, Stochastics, RSI, and
trend lines . The most powerful timing tools for low volatility issues are trend lines and
moving averages. MACD is useful with issues that make explosive moves. RSI and Stochastics
are the only way to time short term movements of volatile issues during trendless periods.
This section deals with the general descriptions of the indicators. Click here for examples of using timing strategies to make money.
Moving averages and trend lines measure price direction (trends). There are uptrends, downtrends, and trendless periods. These indicators work well when there are trends, either up or down, BUT CANNOT be used in trendless periods. Over the past 20 years, the market has spent about 25% of its time moving trendlessly, 25% in downtrends, and 50% in uptrends.
AccuTrack is a special form of trend-following indicator. It follows the relative trend of two different lines . . . but it is STILL a trend-following indicator that SHOULD NOT be used when both of the lines are trendless.
MACD and RSI are momentum indicators. The momentum indicators work when prices bounce like a ball. As the ball rises, it gradually slows until it reaches its peak, and then it accelerates as it falls. Momentum indicators look for that bouncing action. The switches occur when the ball becomes essentially motionless at tops and bottoms. The indicator moves above/below the center as the fund reaches tops and bottoms.
|MACD and RSI may be used during trendless periods. During long and strong
trends, both RSI and MACD can give much too early signals.
MACD measures price-direction momentum. RSI measures price-range momentum and is superior to MACD in trendless periods.
RSI is a price-momentum trading-range indicator. Stochastics is a price direction trading-range indicator. These indicators move to upper and lower extremes without particular regard for the current trend. They are best used to find trend entry and exit points when trend-following indicators are failing.
RSI and Stochastics may also be used to trade during trendless periods. These periods can produce impressive gains . . . but the trick is knowing when to start and stop playing the trading range.
Stochastics and MACD measure essentially the same thing. And would, generally, NOT be used to confirm each other.
While there is a place for timing, timing is a last resort. Find the best investments world-wide and own them. Hiding out in a money market fund is something that should be rare. There is almost always a bull market somewhere.