Top Technical Analysis Tools for Aussie Traders

Trading in the Australian Stock Market: Technical Analysis Tools can really make a difference to one’s decisions and overall performance. Of the lot, the top technical analysis tools that Aussie traders can benefit from are the following:

Charting Software

Charting platforms have a huge role in charting price movements and following through on patterns. The more advanced ones will be proprietary platforms developed either by TradingView or MetaTrader with support for the more advanced functionality offered by these charting libraries, indicators of various types, and high customization options. From there, clients can make sense of historical price data while applying different time frames to try to paint an accurate picture of market trends.

Moving Averages

Moving averages are terms used to describe technical indicators that smooth out price data over a given period of time. The two common types of moving averages are the Simple Moving Average and Exponential Moving Average. In trading, moving averages prove very useful in identifying trends and tendencies and potential reversal points, and crossovers often provide the signal for buying and selling.

Relative Strength Index (RSI)

The Relative Strength Index is actually a momentum oscillator, which calculates the speed and change of the movement of prices. It falls within a scale from 0 to 100 and is most often used to spot overbought or oversold situations in a given market. Where an RSI higher than 70 could mean that a stock has reached its overbought level, an RSI lower than 30 could mean that a stock has reached its oversold level.

Bollinger Bands

This is a volatility indicator, which is comprised of middle band (SMA) with two outer bands representing standard deviations. Bollinger Bands are important in identifying time periods when the volatility becomes very high/low and chances of the price reversing. At times, when the price moves toward the upper band, it indicates overbought conditions, and sometimes, when the price moves toward the lower band, it indicates oversold conditions.

MACD, or Moving Average Convergence Divergence:

The MACD is a trend-following indication, representing the relationship between two moving averages of the security price. It consists of the MACD line, signal line, and histogram. Traders apply the MACD in the identification of buy and sell signals based on crossovers and divergence from price action.

Fibonacci Retracement

Fibonacci retracement is a very widely used tool, where traders plot key levels of the Fibonacci sequence on a price chart to determine possible support and resistance levels that possibly point towards price reversal points: 23.6%, 38.2%, 50%, 61.8%, and 100%.

This highly popular technical indicator in itself or with others can be of great use during the day.

Volume Indicators

Volume indicators measure the volume of shares traded within a specified period, which indicates the strength of a price movement. High volume confirms a price trend. On the other hand, low volume might indicate weakness. Among the popular volume indicators, On-Balance Volume (OBV) and the VWAP are commonly used.

Stochastic Oscillator

The Stochastic Oscillator is a momentum indicator that measures the relationship of the closing price of a security relative to its price range over a given period. The oscillator establishes two lines, %K and %D, which traders are often using to detect overbought and oversold conditions. Any reading above 80 is termed overbought, while readings below 20 are termed over-sold.

Top Technical Analysis Tools for Aussie Traders