Oscillators(RSI,MACD,Slow stochastic),Bollinger bands,Support and Resistance levels,Candlestick Patters. Trendlines,Fibonacci retracements, Moving averages,Divergence of oscillators.
Range bound markets.
When the market is ranging there are only two possibilities if the price hits the boundary 1. Retrace OR 2. Break-through the boundary.The two possibilities make up the two major trading strategies in range bound market. 1) To trade inside the range. 2) To trade after the break-through.
Technical indicators in range bound markets.
The oscillators are the best indicators of overbought and oversold conditions.When the market is ranging traders can pay attention to the overbought/oversold levels of the oscillators or the cross overs of the MACD lines and stochastic lines.The signals from the oscillators are always a few candles behind the prices.
Traders should compare the current price with support and resitance levels and indicator signals so as to make a better trading decision.
In range bound markets bollinger bands help to tell the future direction of the price movement, particularly when the price breaks through the bands or rebounces away from the bands.If the bands are getting wider towards one direction(either up or down) in a range bound market, it means the price is moving more vigorously towards that direction and it is getting higher volatility.Price may eventually break-through that boundary.If the bands and central line is moving parallel and keep a constant width the price is more likely to retrace at the two bands.
Support and Resistance levels.
Resistance levels are formed by recent highs and support levels are formed by recent lows.The more times the price hits the recent highs/lows the stronger is the resistance/support levels.Traders can buy at support levels and sell at resistance levels and should always set tight stops just below the support level or above the resistance level to prevent any severe loss with subsequent break-throughs.
There are three indications from the candlestick patterns.Bearish,Bullish or Neutral.Traders should not place their trades solely based on candlestick patterns.A bearish pattern (like a bearish engulfing pattern) is only valid when it occurs near the resistance levels.If the price rises further after doji and breaks through a resistance level the doji is seen as a bullish signal.
Technical indicators in trending markets.
The trend lines indicates the direction of the trend and the support and resistance levels.Traders can buy at support level when the market is undergoing retracements or can sell when the price falls below support level.On the other side traders can sell at resistance levels, when the market rebounces or can buy when the price rises above the resistance level.
If the market is undergoing retracements fibonacci levels can estimate to which level the market is expected to resume its current trending direction.Traders can place orders near those fibonacci levels.
Moving averages can tell the direction of the current trend and they can also act as support and resistance levels.If the price falls below a moving average, support level or it breaks above a moving average, resistance level it is a signal of reversal.The longer the period of moving average, the more reliable is the signal.
Divergence of oscillators.
Although the overbought and oversold levels of oscillators, are of less use in trending markets, the divergence of indicators can indicate the future direction of the market.When the divergence occurs traders should pay attention to the trend lines, moving averages and fibonacci levels to see if the retracements have caused any break throughs and confirms any reversal signals.
To conclude traders shall not rely on only technical analysis tool to make trading decisions.They shall consider the overall situation on the market and take differences from different technical analysis tools they use, the more accurate are the decisions.In general three to four references from different technical analysis tool groups would be enough.