In this lesson, Irek takes you through the most important indicators that we will focus on throughout the Trading MasterClass program. Irek’s philosophy when it comes to trading indicators is ‘less is more’. But there are a few you’ll utilize on a daily basis. They are as follows:
50EMA, 20EMA —> The 20EMA and 50EMA are dynamic support and resistance levels (meaning they change with every new candlestick). Just like other S/R mentioned in Trading MasterClass, we will be using these EMAs for spotting trend reversals in the market, and for executing the strategies and management techniques. The 50EMA is the most important indicator of all.
MACD - This is the ‘moving average convergence and divergence’ indicator. When MACD is following the same pattern as price action (making lower lows for example), this is what we call convergence. But what we want to focus on with MACD is when we’re witnessing divergence. When divergence is present in the market, that means there is a potential trend reversal nearing (this is when the MACD indicator is no longer mimicking price action, and instead doing the opposite). MACD is typically the first sign of a trend reversal and is simply an extra confluence factor to add to your overall bias.
PIVOTS - Pivot points are utilized to plot support and resistance levels that are static (as opposed to dynamic). These levels are plotted by averaging out the daily high, low and close price together (based on the previous daily candlestick formation). This is not an indicator we’ll utilize often in Trading MasterClass- it will be your decision/preference as to whether you choose to utilize it or not.
RSI - This specific indicator tells us when price action is over-bought or over-sold. However, RSI will not be utilized in Trading MasterClass as it’s unnecessary information due to the nature of our strategies (which are based on reading and understanding price action, rather than relying on indicators). That being said, RSI is a common indicator utilized by many traders and funds worldwide, so it will be covered briefly in this lesson. But remember, in Trading MasterClass, we focus on simplicity and the philosophy of ‘less is more’.
VOLUME - This indicator tells us that there is a lot of action or volatility in the market. We will utilize this indicator on the 5-minute timeframe only, for timing our entries. When volume spikes this means people are buying or selling and we want to mainly trade around periods of high volume which, will allow for momentum. In this lesson, Irek explains when the high volume trading sessions take place for the foreign exchange market (London, NY and Asian Session). Regarding the equities market, generally, you’ll see volume spiking within the first hour or so after market open, and potentially again during the last hour for an end of day run.