MACD, stochastic are technical indicators amongst others.
Day and swing traders utilize them in the financial markets. However, only few
master those technical indicators. This article will help market participants to sharpen

their technical indicators.

Sharpening Technical Indicators Step One

The first step to sharpening technical indicators is to use them accordingly with the market patterns. 

1/ Rising Channel Market Pattern
2/ Declining Market Pattern
3/ Horizontal Market Pattern

Contrary to the market patterns, technical indicators belong to two main categories:

a/ trending technical indicators and
2/ balanced market technical indicators.

Indeed, trending technical indicators are adequate during trending phases (both the rising and
declining channels). Conversely, balanced market technical indicators are appropriate during the horizontal market pattern.

To quickly sharpen technical indicators, one ought to apply them accordingly by aligning them with the appropriate market pattern. For example MACD indicator, Moving averages and the True Strength Index are more effective during
the trending phase. On the other hand, the RSI, CCI and the stochastic indicators
are more suitable during the consolidation (balanced market).

Note that the only time, one will use a momentum technical oscillator during the trending phase is to time the entry in
the direction of the trend when the medium term trend is aligning with the long term trend.

Sharpening Technical Indicators Step Two

The next step to sharpen technical indicators
is to understand their ultimate purposes.
Indeed, each technical indicator has a unique purpose.
For example the purpose of the stochastic indicator is to
pinpoint divergence trading set-ups.
Therefore, it is more efficient to use the stochastic when one is screening for divergence trading set-ups stocks.

The RSI oscillator's first priority is to
compare the magnitude of recent gains to losses. Therefore, it is useful to pinpoint
stocks that are in the bullish zone and those that are in the bearish zones.
A stock screening conditions would be RSI crossing above or below the fifty level.

The purpose of the CCI indicator is to highlight the overbought and oversold
financial instruments relatively to a specific moving average. For example, if one is using the CCI indicator period twenty on the monthly chart, and the CCI is above plus hundred level, it signifies that the asset is overbought in comparison to moving average twenty. Contrary, the asset is oversold in comparison to the monthly chart moving average twenty when the CCI oscillator falls below the negative hundred.

Note that an asset can be oversold or overbought for a long time therefore, one should not sell as soon as one identifies an overbought asset and vice versa.

Similarly, MACD 's primary role is to pinpoint trending stocks by using moving averages convergence and divergence.
Indeed, the deviation of the moving twelve above the moving twenty six indicates the possibility of a bullish trend when one is using the standard MACD (12, 26, 9). Conversely, the MA 12 deviation below the moving average twenty six indicates a possible bearish trend. Note that when the moving average twelve deviates from the moving average twenty six, it is known as moving averages divergence. Moving averages divergence also indicates a strong momentum and volatility. On the other hand the moving averages convergence refers to a low volatility and balanced market.

Sharpening trading tools step three

The third step to mastering technical indicators such as the momentum oscillators is knowing how to trade oversold and overbought trading set-up.
A momentum indicator becomes overbought when the price reaches a resistance level. Now, an astute technical trader

will draw that resistance. Consequently, one will be ready to sell only and only if the price is suppressed below that level. However, if the price gains support above the resistance (breakout) one will look for an opportunity to buy though the oscillator is overbought.

Furthermore, a momentum oscillator is oversold when the price is at a support level. This time one must draw the support level, and be ready to buy only if the price exhibits a bullish trading signal above that support. Nevertheless, one will not hesitate to sell below that support level if the support turns into a resistance.

Warning

1/Overbought does not always equal to a sell signal and vice versa.
2/ One must implement a top-down trading method when one identifies those set-ups.

Sharpening Technical Indicators Step Four

The step four in sharpening trading tools is to know when and how to use a balanced market technical indicators in a trending market. To avoid common trading mistakes such as selling each time a momentum oscillator is overbought, and buying any time it is oversold, one can use a balanced market technical indicators to time their trades during a trending market.
For example a bullish trader will ignore all overbought trade set-ups during a trending phase, but will only focus on the oversold trade set-ups on the edge.

Obviously, one will prioritize the overbought trade set-ups in a bearish trending market and disregard the oversold trading signals.

Sharpening Trading Tools Step Five

It is about coming out the loop of resetting technical indicators after a losing trade. Surprisingly, most traders spent numerous hours changing their indicator settings. After a losing trade, beginners traders often change their technical indicators' settings. The belief is that the better the settings the better is the signal.
In most cases, those technical traders are wasting their time. Technical traders often exit that vicious circle as soon they discover that all technical indicators only give warnings. At the end of the day, the price action gives the direct (true) signals. Therefore, the price-action must always confirm technical indicators and their all warnings.

Conclusion

Surely, one will become a better technical trader as soon as one masters how to sharpen technical indicators.

It is a shame that most technical traders still used a vast array of powerful technical indicators without knowing

how to sharpen them. I believe that one should first learn how to sharpen a technical indicator before using it. 

Unfortunately, there are many technical traders out there who have skip that essential step. It is too late though. Today, one can start afresh, and begin to sharpen the most popular technical indicators like a professional. In fact, one should not blame the technical indicators, but oneself if one is still misusing them on a daily basis. Start sharpening your favourite technical indicators today.