Technical indicators aren't magic, just support for trade entries and exits. This setup uses two core tools: EMA, a lagging trend indicator with common periods like 9, 21, 50, and 200, and VWAP, which averages price weighted by volume. Many traders watch VWAP, making it a self-fulfilling prophecy that matters in the market.
Chapters
I'm going to tell you a secret. Indicators don't work. Well, at least not how you expect them to. Most people think that indicators are the Holy Grail and you need to trade based on them. And that's where they're wrong. You see, indicators are supposed to strengthen or weaken our position on the stock. There is no magic indicator that will make you profitable. A good trader is one that uses indicators in order to support the evidence to take or exit a position. Now, after saying that, I actually like to keep my chart clean, and I only use the EMA and VWAP. Why, you ask? Well, these indicators mainly do two things. A, they help me identify the trend that is currently going on the stock, and B, they are commonly used by other traders, which means they hold weight, as other traders will look at them and base their decisions on them, which is basically a self-fulfilling prophecy. What is even a moving average? It's a technical indicator that determines the direction of a trend. It basically sums up the data of a stock over a specific period of time and divides it to an average. It's called moving average because it continually recalculates based on the latest price data. So basically it shows you the trend of the stock. It is important to note that this indicator is a lagging indicator. That basically means that because it's calculating on the past data, it is lagging and it will take time for it to show, which means that because they take past data in order to calculate, they are lagging in time and take time to update. The most commonly used moving averages are the 9, 21, 50, and 200. VWAP—Volume Weighted Average Price. The main difference between the VWAP and the moving averages is the VWAP takes into consideration the volume that occurred in a specific price. So basically, VWAP gives us a better understanding on the average price that people pay. It's one of the most common indicators used by traders and investors, and that's why I keep it on my chart. Now, there are a lot more indicators out there, but those are the ones that I use based on my preference. My recommendation to you is find the indicators that you like, but don't go overboard. Keep it as simple as you possibly can will benefit you the most, and I can promise you that.
