What are the best technical indicators?

There are many different technical indicators out there that the experts on wall street as well as individual trader use. In my opinion, the best ones are Candlestick Charting, Stochastic and Macd (Moving Average Convergence-Divergence). A combination of these three technical indicators work the best for me in the past and I believe they will continue to work well for me.

Candlestick Patterns

There are a bunch of candlestick patterns that generate bullish signals. Here are a few of my favorite ones.

1. Bullish Engulfing Pattern

2. Piercing Pattern

3. Bullish Kicker Pattern

4. Bullish Harami Pattern

5. Above Stomach Pattern

6. Morning Star Pattern

Stochastic Pattern

Created by George C. Lane in the late 1950s, the Stochastic Oscillator is a momentum indicator that shows the strength of a trend for a certain period of time. Stochastic is a number between 0 and 100 where the reading below 20 is considered oversold and the reading above 80 is considered overbought. To create stochastic:

C_today = todays close.

L_n = the lowest price for the selected number of days.

H_n = the highest price for the selected number of days.Â

n = the number of days for Stochastic, selected by the user.Â

2. Calculate %D.

%D = (3-day sum of(C_today L_n )/(3-day sum of (H_n L_n ) * 100

There are two different stochastic fast and slow. Fast Stochastic consists of two lines %K and %D. However, fast stochastic is very sensitive to market turns and therefore many people prefer to use slow stochastic. To calculate slow stochastic, the %D of fast stochastic becomes the %K of slow stochastic and by repeating step 2 to obtain %D of Slow Stochastic.

Macd (Moving Average Convergence-Divergence)

Moving Average Convergence/Divergence or MACD is a technical analysis indicator created by Gerald Appel in the 1960s. MACD consists of three exponential moving averages. It gives a bullish signal when the two lines crossover. To create MACD:

1. Calculate a 12-day EMA of closing prices.

2. Calculate a 26-day EMA of closing prices.

3. Subtract the 26-day EMA from the 12-day EMA, and plot their difference as a solid line. This is the fast MACD line.

4. Calculate a 9-day EMA of the fast line, and plot the result as a dashed line. This is the slow Signal line.

- When the fast MACD line rises above the slow Signal line, it gives a bullish signal.

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