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One of the best ways to spot reversals is by spotting excessive fear.
To do so, we typically watch for agreement among Bollinger Bands (2,20), MACD, Relative Strength (RSI) and Williams’ %R in either overbought or oversold territory. However, we can also strengthen what those indicators say by adding in the Money Flow Index (MFI).
When it comes to trading, one of the best ways to tell what’s happening is by paying attention to the flow of money in and out of a stock.
Surely, none of us want to buy a stock if money is flowing out, right?
Any time you use technical analysis, confirmation is essential.
If you’re not willing to confirm, you’re doing yourself a great disservice. In fact, at no time will I ever just use Bollinger Bands (2,20), MACD, relative strength, or Williams’ R% alone.
Over the last 22 years, I’ve heard countless arguments for and against fundamental and technical analysis. While neither is perfect, they both have strengths we can capitalize on.
Candlestick patterns may have some odd names.
Abandoned baby bottom, three black crows, dark cloud cover, for example. But these are some of the most powerful tools you can add to your strategy, including these three.