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Playing the Trends


Technical analysis can be as simple or complex as a chartist wants it to be. Here are a few popular techniques

MOVING AVERAGE

Average price of a stock or index over a period, graphed as a curving line that smoothes out large price moves. A variation called the exponential moving average gives more weight to recent prices.

STOCHASTIC OSCILLATOR

A complex formula that tracks momentum. Measured on a 100-point scale, a number between 0 and 20 or 80 and 100 means the trend may be ending.

BOLLINGER BANDS

A 20-day moving average plotted alongside two additional lines that measure divergences from the average price. On their own, BBs indicate volatility and extreme levels of buying and selling.

MACD

The "moving average convergence/divergence" is calculated by subtracting the 26-day exponential moving average from the 13-day exponential moving average. It indicates both the trend and momentum.


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