a n d C h a n n e l s
EXHIBIT 3.6
Downtrend Line
Source: FX Solutions – FX AccuCharts
trendline supplies just the ceiling for a downtrend, the parallel downtrend channel provides the floor as well. Price action that truly fitscomfortably into the borders of a parallel trend channel upholds thehighest ideals of a true trend. This is because, for example, an uptrendthat fits well into a parallel uptrend channel will contain both higherlows and higher highs (see Exhibit 3.7). At the same time, a downtrend that fits well into a parallel downtrend channel will contain bothlower highs and lower lows (see Exhibit 3.8). This is in contrast to thesingle trendline, which requires price only to fulfill half of the ideal.One caveat regarding the parallel trend channel is that it oftenencourages traders to trade against the trend. In an uptrend channel,
69
c03.indd 69
1/13/09 9:59:07 AM
Te c h n i c a l A n a l y s i s
EXHIBIT 3.7
Parallel Uptrend Channel
Source: FX Solutions – FX AccuCharts
for example, with support on the bottom line and resistance on thetop, many traders are tempted not only to enter long on the bottom,but also to enter short on the top. A long entry on the bottom of anuptrend channel is a trade in the direction of the trend, while a shortentry at the top of that same uptrend channel is a countertrend trade.Though countertrend trading is by no means a taboo practice, and itcan often prove to be a profitable trading style for experienced traders, it is probably best for newer traders to stick to trading with thetrend. According to strict trendtraders, the top of an uptrend channel should be used exclusively for profit-taking on longs, rather thanentering short trades against the direction of the trend.
70
c03.indd 70
1/13/09 9:59:07 AM
H o w Tr e n d y — L i n e s a n d C h a n n e l s
EXHIBIT 3.8
Parallel Downtrend Channel
Source: FX Solutions – FX AccuCharts
Another word of caution regarding channels relates to breakouts.Many beginning traders will treat breakouts on both sides of a trendchannel as similar events. This could not be further from the truth.In a parallel uptrend channel, for example, a breakdown below theuptrend support line represents a potential change in trend that isgenerally considered a highly significant and potentially actionableevent. A breakout above the top line of the uptrend channel, on theother hand, is much less of an important or actionable event froma trading perspective. This type of breakout merely represents anacceleration of the trend, which frequently meets eventual failure as
71
c03.indd 71
1/13/09 9:59:08 AM
Te c h n i c a l A n a l y s i s
momentum becomes exhausted. All of the above also holds true, butin reverse, for the parallel downtrend channel.
T he Magic of Moving AveragesAs noted previously, the prevailing trend can be indicated by several different technical tools. Trendlines and channels are the mostprevalent, but they can be very subjective. Moving averages alsoshow trend direction well, and they are much less subjective becausethey are mathematically derived. Therefore, they do not require thetrader to use nearly as much human judgment in construction orinterpretation. By no means, however, does this make moving averages better than trendlines—they are just different.Moving averages dynamically calculate the average price of acurrency pair over a defined number of past periods. For example,on a daily chart (where each bar is worth one 24-hour period), a20-period simple moving average (SMA) adds the daily closeprices for the last 20 days and divides by 20. This calculation simply results in the average, or mean, price for the last 20 days. Butwhen this average is continuously calculated every single day (hencethe term “moving” in moving average), it results in a dynamic linethat follows price, and can effectively describe the trend. Exhibit 3.9shows a good example of a 20-period moving average expressing theoverall trend.One major weakness of moving averages that is often cited bytraders and analysts is the fact that they invariably lag, or follow, price.Moving averages, therefore, can never be predictive, as price alwaysarrives where it will arrive well before any moving average could.
72
c03.indd 72
1/13/09 9:59:08 AM
The Magic of Moving Averages
EXHIBIT 3.9
20-Period Moving Average
Source: FX Solutions – FX AccuCharts
Consequently, although moving averages can certainly do a goodjob of describing a current trend, they are extremely lacking whenit comes to signaling changes in trends. Many analysts and tradersthroughout the decades have attempted to address this shortcomingby creating new ways of calculating these important indicators.As a result, there are three primary types of moving averages thatare in the most common use today, which are all distinct from eachother by their mathematical constructs. The three types are as follows: the simple moving average (SMA), the weighted moving average (WMA), and the exponential moving average (EMA). Withoutdelving into the source of their mathematical distinctions, suffice it
73
c03.indd 73
1/13/09 9:59:08 AM
Te c h n i c a l A n a l y s i s
to say that SMAs assign equal weight to all of the data in the definedperiod, while WMAs and EMAs assign greater weight to the mostrecent price data in the defined period.WMAs and EMAs came about partly as an attempt to combatthe lagging nature of SMA signals. In practical use, however, thislagging effect has been mitigated only to a minor degree. Perhapsit is safe to say that moving averages will always lag price, and thereis not much that anyone can do about it.Lag notwithstanding, however, moving averages can certainly beuseful tools in helping to simplify price action for trading purposes.EXHIBIT 3.10
Crossovers of Price and One MovingAverage
Source: FX Solutions – FX AccuCharts
74
c03.indd 74
1/13/09 9:59:09 AM
The Magic of Moving Averages
This is accomplished primarily through the use of moving averagecrossovers. In the world of moving averages, a crossover can bedefined in a number of different ways.The most basic crossover, as shown in Exhibit 3.10, involves theintersection of price and a single moving average. If price crossesabove the moving average, it would represent a possible opportunityto buy the currency pair. If, on the other hand, price crosses belowthe moving average, it would signify a possible sell, or short.The second type of crossover, as shown in Exhibit 3.11, is probably the most commonly used moving average strategy. It involvesthe use of two moving averages of different periods, say 5 and 20,
EXHIBIT 3.11
Crossovers of Two Moving Averages
Source: FX Solutions – FX AccuCharts
75
c03.indd 75
1/13/09 9:59:10 AM
Te c h n i c a l A n a l y s i s
for example. If the shorter-period moving average crosses above thelonger one, it would be considered a signal to buy. Conversely, ifthe shorter moving average crosses below the longer one, it wouldbe considered a signal to sell.The third primary type of moving average crossover involves theuse of three moving averages. This method of using multiple confirming lines attempts to help combat the unprofitable whipsawaction that often results from nontrending, sideways markets. Systemsusing three different moving averages usually produce signals whenthe shortest period moving average crosses both longer moving averages, or when the shortest moving average crosses the middle oneand then the middle one subsequently crosses the longest.Most moving average trading systems are generally always in themarket. This means that after each trade is opened on a crossoverand then closed on an opposite crossover, another trade is immediately opened in the opposite direction to take the place of the previous trade. Therefore, there is always at least one trade open, whetherlong or short, depending on the prevailing crossover signal.As just mentioned, beginning traders should be forewarnedthat although crossover signals can often be exceptionally profitable, those traders that use them must be prepared for frequent lossesresulting from common whipsaw action. Whipsaws occur regardless of however many moving averages and confirmation crossovershappen to be utilized in a given trading system. The most commonwhipsaws occur when crossovers occur incessantly because of nontrending, sideways price action (as shown in Exhibit 3.12). This typeof price choppiness almost always results in multiple false crossoversignals with little to no follow-through, and consequently a string of
76
c03.indd 76
1/13/09 9:59:11 AM
The Magic of Moving Averages
EXHIBIT 3.12
Crossover Whipsaws
Source: FX Solutions – FX AccuCharts
many small losses. Like its close cousin, the lag, the whipsaw is simply an unavoidable fact of trading with moving averages.The idea behind moving average trading methods, therefore,centers on the goal of gaining large profits during trending periodswhen crossovers are few and far between—while at the same timewithstanding the inevitable small losses during sideways whipsawperiods when crossovers are abundant. The greatest challenge withthis type of trading lies in the ability of the trader to let the winningtrades run while immediately closing losing trades. Only in this waycan a trader using moving averages profit enough during trends tooffset the many losses incurred during horizontal price activity, and
77
c03.indd 77
1/13/09 9:59:11 AM
Te c h n i c a l A n a l y s i s
eventually come out ahead. This and other trend-trading strategieswill be discussed further in Chapter 5.
S eeing Patterns in the CandlesWhile moving averages and trendlines are meant to give an indication of trend direction for a long series of candles or bars, candlestick patterns reveal the battle between bulls and bears on only oneor a few candles. As mentioned earlier in this chapter, candlesticksand their patterns were introduced by Steve Nison, who broughtthis ancient charting method to America from its humble ricetrading roots in Japan.One of the primary differences between bars and candlestickslies in the imaginative interpretation of candle patterns, which arelabeled with equally imaginative names. Most candlestick patternsare considered either price reversal formations or patterns indicating indecision, while only a few are considered trend continuationformations.Before moving onto a presentation of the most common andimportant candlestick patterns developed in Japan, it should benoted that these patterns were never meant to comprise a completetrading system. Rather, most high-level practitioners of candlestickanalysis, including Nison himself, state emphatically that candle patterns are intended either to confirm or be confirmed by other technical studies. In other words, candle patterns should not be reliedupon exclusively to provide the full technical picture. That beingsaid, candle patterns can contribute a great deal of insight to anytechnician’s analytical process.
78
c03.indd 78
1/13/09 9:59:11 AM
Seeing Patterns in the Candles
Following are illustrations and explanations of some of the mostcommon candlestick patterns found in the foreign exchange markets. Several patterns, like the morning star and evening star, areomitted because of their relative lack of compatibility with currency charts. In this case, a morning/evening star depends on agap between candle opens/closes, which, in the 24-hour foreignexchange market, is relatively rare.Exhibit 3.13 illustrates the most common single-candle patternsused in forex trading.A doji forms when a currency pair’s open and close are eitherequal or close to equal. After the doji opens, price may go up and/ordown substantially, but should close at or near the open price. Thispattern represents indecision, or a tug-of-war, between the pair’s buyers and sellers. Only with additional technical confirmation could adoji be considered the beginnings of a price reversal.
EXHIBIT 3.13
Single-Candle PatternsHammerDoji
SpinningTop
HangingMan
InvertedHammer
ShootingStar
79
c03.indd 79
1/13/09 9:59:11 AM
Te c h n i c a l A n a l y s i s
Another sign of indecision similar to the doji is the spinning top.A spinning top has a very small real body with upper and lowershadows that are longer than the length of the real body.Hammers occur after downtrends, and signify a potential reversal.A hammer is top-heavy with the real body, and has a long lowershadow. The color of the real body is not important.A hanging man looks identical to a hammer, but occurs after anuptrend. Just like the hammer, a hanging man is top-heavy with thereal body, and has a long lower shadow. It also signifies a potentialreversal, and the color of the real body is unimportant.An inverted hammer is naturally the opposite of a hammer. Likethe hammer, the inverted hammer also occurs after downtrends, signifies a potential reversal, and has a body color that is not vital to theintegrity of the pattern. However, an inverted hammer looks like anupside-down hammer in that it is bottom-heavy with the real body,and has a long upper shadow.In a similar manner, a shooting star is the opposite of a hanging man. Like the hanging man, the shooting star also occurs afteruptrends, signifies a potential reversal, and has a body color that isnot vital to the integrity of the pattern. However, a shooting starlooks like an upside-down hanging man in that it is bottom-heavywith the real body, and has a long upper shadow.With the most common single-candle patterns in forex covered,Exhibit 3.14 illustrates the most common multiple-candle patternsused in forex trading.The bullish engulfing pattern is a bullish reversal pattern thatusually occurs after a downtrend. Unlike the single-candle patternsdescribed above, the bullish engulfing pattern is a two-candle pattern.
80
c03.indd 80
1/13/09 9:59:12 AM
Seeing Patterns in the Candles
EXHIBIT 3.14
Multiple-Candle PatternsBullish Engulfing
Bearish Engulfing
Harami
It consists of a small bearish body on the first candle, followed by alarge bullish body on the next candle that completely encompassesthe small body’s vertical range. This is considered a significant downtrend reversal pattern.Like the bullish engulfing pattern, the bearish engulfing patternis also a reversal pattern. However, a bearish engulfing pattern usually occurs after an uptrend. It consists of a small bullish body on thefirst candle, followed by a large bearish body on the next candle thatcompletely encompasses the small body’s vertical range. This is considered a significant uptrend reversal pattern.The opposite of an engulfing pattern is a harami, which consists of a large body followed by a smaller, encompassed body of theopposite color. Therefore, a harami can either be a large bullish candle followed by a small bearish candle, or a large bearish candle followed by a small bullish candle. Like engulfing patterns, haramis arealso considered reversal indicators.
81
c03.indd 81
1/13/09 9:59:12 AM
Te c h n i c a l A n a l y s i s
Of course, there are many other multiple-candle patterns. Butas mentioned previously, some depend upon gaps between candles,which are relatively rare in the 24-hour foreign exchange market.The basic candlestick patterns described in this chapter occur oftenon currency charts, and are therefore the best starting place forlearning and practicing candlestick analysis.
C urrency Char ts Take ShapeUnlike candlestick patterns, traditional Western chart patterns usuallytake the form of shapes that develop over a relatively long series ofbars or candles. Some of these shapes have been analyzed and tradedby technical analysts almost since the advent of financial charting.Commonly, when most people think of charts and technical analysis, they often think of perhaps the most popular pattern, headand-shoulders. Although the head-and-shoulders formation can bea solid, reliable pattern, there are a whole host of other potentiallyprofitable patterns that many traders use on an extensive basis.Chart patterns can be classified by their most common role,whether as a continuation pattern or a reversal pattern. Of course,a continuation pattern will not always act as a continuation pattern.It may sometimes act as a reversal pattern. The same is true for patterns that are commonly considered reversal patterns. But for thepurposes of classification, these patterns can be divided according totheir most common behavior.For the vast majority of chart patterns, the technical analyst ortrader looks either for breakouts to the upside or breakdowns to thedownside. Once these patterns are broken, it is usually considered
82
c03.indd 82
1/13/09 9:59:12 AM
C u r r e n c y C h a r t s Ta k e S h a p e
a trigger to trade in the direction of the break. Often, the break isfalse, and price will quickly return into the pattern from whence itbroke. But that is where proper risk management comes in. It is easyto know where to place a stop loss on a break of a pattern. Whereverthe break is deemed false or no longer valid (usually back on the sidebefore the break), is where the stop loss should be placed. This will beexplained further in the section of Chapter 6 on risk management.The basic structure of the most common chart patterns in foreign exchange trading will be described here. Further informationon trading chart patterns can be found in Chapter 5.To begin with, Exhibit 3.15 shows illustrations of the most common reversal patterns.Double tops and bottoms are both considered classic reversalformations. As its name implies, the double top occurs when pricehits the same or similar price high twice consecutively after a majoruptrend. The two peaks are separated by a trough. The signal to
EXHIBIT 3.15
Reversal Chart PatternsDoubleTop
TripleTop
Head-andShoulders Top
DoubleBottom
TripleBottom
Head-andShoulders Bottom
83
c03.indd 83
1/13/09 9:59:12 AM
Te c h n i c a l A n a l y s i s
sell short comes on a subsequent breakdown of the lowest pointin the trough (support). The double bottom occurs when pricehits the same or similar price low twice consecutively after a majordowntrend. The two troughs are separated by a peak. The signal tobuy comes on a subsequent breakout of the highest point in thepeak (resistance).Triple tops and bottoms are also considered classic reversal formations. The triple top occurs when price hits the same or similar price high three times consecutively after a major uptrend. Thepeaks are separated by troughs. The signal to sell short comes on asubsequent breakdown of the lowest trough (support). The triplebottom occurs when price hits the same or similar price low threetimes consecutively after a major downtrend. The troughs are separated by peaks. The signal to buy comes on a subsequent breakout ofthe highest peak (resistance).The well-known head-and-shoulders reversal pattern is similar to the triple top/bottom patterns. The primary difference lies inthe middle of the pattern. For example, in a head-and-shoulderstop, the middle peak (the head) is higher than the other two peaks(the shoulders). In an inverted head-and-shoulders bottom, on theother hand, the middle trough (the head) is lower than the othertwo troughs (the shoulders). The line connecting the troughs in ahead-and-shoulders top, or the peaks in a head-and-shoulders bottom, is called the neckline. Breaks of this neckline are consideredtrading signals.Following are some of the most common continuation patternsfound on currency charts. Exhibit 3.16 displays the ubiquitous flagand pennant patterns.
84
c03.indd 84
1/13/09 9:59:13 AM
C u r r e n c y C h a r t s Ta k e S h a p e
EXHIBIT 3.16
Flags and PennantsFlags
Pennants
A flag is usually a smaller, shorter-term continuation patternthat is characterized by a sharp move followed by a rectangle consolidation, and then by a continuation of the move prior to the flag.Trades are signaled at the breakout/breakdown of the flag rectangle.Flags are very common on foreign exchange charts.A pennant is very similar to a flag in that it is also generally asmaller, shorter-term continuation pattern. But after the initial sharpmove, the pennant forms a small triangle consolidation. This shouldthen be followed by a continuation of the move prior to the pennant.Trades are signaled at the breakout/breakdown of the pennant triangle. Like flags, pennants are also very common on currency charts.Also generally considered continuation patterns, the primary triangle variations are displayed in Exhibit 3.17.Triangles are larger price consolidation patterns that are characterized by progressively decreasing volatility as the pattern develops.
85
c03.indd 85
1/13/09 9:59:13 AM
Te c h n i c a l A n a l y s i s
EXHIBIT 3.17
Three Types of TrianglesSymmetricalTriangle
AscendingTriangle
DescendingTriangle
These common formations are most often considered continuation patterns. Symmetrical triangles are characterized by convergingsides, where neither of these sides is flat, or horizontal. Trades areinitiated at the triangle break.Ascending triangles are also common continuation patterns, butthey are most often considered bullish. As such, they usually formduring uptrends as bullish continuation formations. An ascending triangle is characterized by a rising bottom line with a horizontal topline. A breakout above the top resistance line in an ascending triangleis considered a potential signal to buy.Descending triangles are continuation patterns that are mostoften considered bearish. As such, they usually form during downtrends as bearish continuation formations. A descending triangle ischaracterized by a falling top line with a horizontal bottom line.A breakdown below the bottom support line in a descending triangle is considered a potential signal to sell short.
86
c03.indd 86
1/13/09 9:59:13 AM
C u r r e n c y C h a r t s Ta k e S h a p e
EXHIBIT 3.18
Wedges and RectanglesFalling Wedge
Rising Wedge
Rectangle
Somewhat like symmetrical triangles, wedges are characterizedby two converging lines, as shown in Exhibit 3.18. Unlike symmetrical triangles, however, the two sides of a wedge will both slopein the same direction. Therefore, a rising wedge will have two sidesthat both slope up, while a falling wedge will have two sides thatboth slope down. Falling wedges after uptrends are considered bullish continuation patterns, while rising wedges after downtrends areconsidered bearish continuation patterns. Trading signals are triggered on the breakout or breakdown of the wedge.Similar to a parallel trend channel, but flat, a rectangle is a horizontal trading range bounded by two horizontal lines, as shown inExhibit 3.18. Rectangles frequently serve as pauses in a trend, andtherefore are often considered continuation patterns. At least twotouches on both the top and bottom of a rectangle are necessary forthe formation. Trades are signaled on the breakout or breakdown of
87
c03.indd 87
1/13/09 9:59:14 AM
Te c h n i c a l A n a l y s i s
the rectangle. Incidentally, if a rectangle is of sufficient height it canalso be traded as a range, long at support and short at resistance.The chart patterns just described are certainly far from anexhaustive study of technical trading patterns. However, they represent the most important and most common patterns found on foreign exchange charts. Therefore, they comprise a solid introductionto the world of chart pattern analysis. More information on strategies involving these patterns will be discussed in Chapter 5.
I ndicators of ChangeNo discussion of technical analysis tools would be complete withoutmentioning some of the many mathematically derived indicators thatseem to have proliferated through the years. New indicators appearall the time, promising to be the next miracle add-on to our pricecharts. Up to now, though, there have been very few, if any, miracles.The main issue with many of these indicators is that, for themost part, they are lagging reflections of price. In other words, indicators are great at describing what price has done in the past, butsince they mostly just follow price action, many indicators are hardpressed to provide any reliable clue as to what might happen next.This was discussed earlier in this chapter in the section on movingaverages, which are also considered lagging indicators. For this reason, many indicators are relegated to serving as secondary confirmation tools. Of course, it is true that no technical tool could everreally tell the future. But many of the indicators that novice traders love to clutter up their charts with are not much more than arepackaged version of price itself.
88
c03.indd 88
1/13/09 9:59:14 AM
Indicators of Change
That being said, there are some very useful indicators availablethat can be extremely valuable in augmenting price action analysis.Some of these are described briefly below.Average True Range (ATR) is an exceptionally useful indicator that usually resides either vertically above or below the bar/candle price chart. ATR is an average measure of recent volatility.It is calculated as a moving average of a given past period of priceranges. When the ATR has a high reading, recent volatility has beenhigh. When a low reading is given, recent volatility has been low.ATR is used by technical currency traders to determine the recentlevel of trading activity and volatility for a given currency pair. ATRcan also be used for setting logical stop losses and price targets basedon volatility, among other uses.The Average Directional Index (ADX) also resides either vertically above or below the bar/candle price chart. ADX measuresthe strength of the current trend, not the direction of the trend.Strong trends, whether up or down, have high ADX readings, whilenontrending, ranging markets have low ADX readings. ADX is animportant indicator that can help a foreign exchange trader determine whether to use trend-trading techniques or range-tradingtechniques.Bollinger Bands are overlaid directly on the price bars/candles.They consist of a simple moving average (SMA) with two additionallines, one that is a certain number of standard deviations above theSMA and the other that is the same number of standard deviationsbelow the SMA. By default, Bollinger Bands are usually set at a20-period SMA with 2 standard deviations above and below themoving average. But these settings can be readily changed to suit
89
c03.indd 89
1/13/09 9:59:14 AM
Te c h n i c a l A n a l y s i s
EXHIBIT 3.19
Bollinger Bands
Source: FX Solutions – FX AccuCharts
the trading environment. The primary purpose of the BollingerBands indicator is to measure a currency pair’s volatility around themean. The Bands are often used to give indications of impendingvolatility increases (when the bands tighten). They can also be usedto provide indications of overbought or oversold market conditions.See Exhibit 3.19.The Parabolic Stop-And-Reverse (SAR) is an indicator thatexcels at providing a sensible trailing stop and reverse methodology.Trailing stops are useful elements of an overall stop loss strategy, andwill be discussed further in the section of Chapter 6 that covers riskmanagement. The Parabolic SAR dots follow price such that if a
90
c03.indd 90
1/13/09 9:59:14 AM
Indicators of Change
TIPS AND TECHNIQUES
The Bollinger SqueezeThere are almost as many different ways to interpret BollingerBands as there are traders using them to make trading decisions. But according to John Bollinger, CFA, CMT, famed originator of the Bands that bear his name, “The Squeeze” is perhapsthe most popular topic related to this powerful indicator. Bollingeris the founder and president of Bollinger Capital Managementand BollingerBands.com, and his work has long been renownedamong professional traders and investors alike.His book, Bollinger on Bollinger Bands, describes The Squeezein considerable detail. He writes, “Bollinger Bands are driven byvolatility, and The Squeeze is a pure reflection of that volatility.When volatility falls to historically low levels, The Squeeze is on.”He proceeds to write, “Time and again, we see The Squeezein action. A consolidation begins. The resulting trading range narrows dramatically. The Bollinger Bands begin to tighten aroundthe price structure. The stage is set.”The well-documented theory behind The Squeeze is thatperiods of high volatility generally follow periods of low volatility.When the Bollinger Bands narrow dramatically, volatility is drastically decreased. The subsequent expectation, then, is for priceto breakout violently in either direction. This can potentially be avery tradable event.But Bollinger goes on to caution, “Traders beware! There is atrick to The Squeeze, an odd turning of the wheel that you needto be aware of, the head fake. Often as the end of a Squeezenears, price will stage a short fake-out move, and then abruptlyturn and surge in the direction of the emerging trend.”If proper caution is exercised to control the risk inherent inthe common “fake-out” moves, The Squeeze can be an effectivetool in any forex trader’s repertoire.
91
c03.indd 91
1/13/09 9:59:15 AM
Te c h n i c a l A n a l y s i s
dot is below the price bar, the trade should be long with a dynamicstop loss at the dot. Conversely, if the dot is above the price bar,the trade should be short with a dynamic stop loss at the dot. Likemany other indicators, the Parabolic SAR can be prone to viciouswhipsaws where the trading signals result in a string of losses dueto a lack of trend. But the fact that this indicator stresses a logicaluse of the trailing stop-loss concept makes it a valuable tool for thetechnical trader.Besides the indicators described above, there is another special class of indicators, called oscillators, that fulfills an importantrole. Many of the oscillators, like Momentum and RSI, are verysimilar in formula and function. So they will not all be discussedhere. Instead, only the most important and unique oscillators thatare most applicable to foreign exchange trading will be covered.Oscillators excel at providing indications of overbought or oversoldstatus during ranging markets. When an oscillator reading is abovea certain overbought threshold during a trading range, it hints thatupward momentum may soon be exhausted, and that an impendingdownward turn may occur. Convers