Why Do Energy Traders Swear By Technical Trading Indicators?

Both traders and investors in the volatile energy markets such as natural gas, fuel oil, crude oil, and other refined products swear by technical trading indicators due to their ability to help them time trades. Even investors more focused on underlying fundamentals can benefit from learning how these trading indicators work, to help form a realistic opinion on new and existing trades.

Technical analysis is a broad study, but at its core, it reflects what markets know about themselves and what is being reflected in the price and on charts. With this information, technical trading indicators can identify patterns in this information and display it as color-coded signals on the charts that can be easily seen and understood. These signals alert the trader about a trend’s direction and strength of the trend. Technical trading indicators help make a prediction about the direction of future prices.

Trend Indicators Alert about Where Prices Are Headed

Trend indicators are highly useful to gauge the direction and strength of the trend. They use price averaging to establish a baseline; as price moves above the average it is considered as a bullish trend, and when prices fall below the average it signals a bearish trend. By studying the trend the traders are able to know when to enter and exit a trade.

Furthermore, an important feature of the Trend indicators is that they help identify trend reversals. In other words, they are used to identify when a trend has ended and a move on 0the opposite direction is taking place. Hence, they virtually help in finding the reversals in a commodity’s price direction.

Technical Indicators Give Clear Picture of the Market

Technical trading indicators make use of predefined mathematical formulas and give you a good view of everything that is happening in the market. Historical prices, the performance of the security, trend direction and strength, all that you want to know is right in front of your eyes. Therefore, these indicators are used often by traders and investors to time entries, place stops, and exit trades in a timely manner.

Technical Indicators Encourage Faster Decision Making

Traders that have become frequent users of technical indicators and charts are generally able to predict the upcoming trends in the market a lot faster than those who use these indicators less often. In this way, the trader who relies on technical indicators is able to arrive at decisions faster, and thus, can capitalize on the movements in the market and maximizes his or her profits.

Conclusion

If you want to get the best value from your investment you should start using technical indicators frequently. The more you use them the more benefits you’ll discover that technical trading indicators have to offer.

Cynthia A. Kase is a professional advisor on crude oil, natural gas forecast, energy market forecast and other related commodity trading.