The Chaikin Oscillator is a volume indicator that can help traders discern if price movements are verified by changes in trading volume. When there are discrepancies, it can mean that prices are exhibiting overbought or oversold conditions. Before the Chaikin Oscillator, On-Balance Volume was the most popular indicator for the job. On-Balance Volume (OBV) is a popular leading indicator introduced in the 1960s by Joe Granville. OBV is a line built using differences between daily trading volume – in Granville’s estimation, the major driver of market behavior – adding the difference on days that the market or stock moves up and subtracting the difference on days when the market or stock moves down. It looks for instances of rising volume that should correlate with price movement, but price movement has not occurred; additionally, OBV can be used to confirm lag. Continue reading...
Leading indicators are economic or price data which have some degree of correlation with a movement in the market or a stock price. Leading indicators tend to happen before the market or price movement occurs. Traders and economists use leading indicators frequently to prepare for what’s next; they are based on theory as well as empirical historical evidence but like all indicators, they do not have a 100% accuracy rate – past performance does not guarantee future results. Continue reading...
The Commodity Channel Index is an oscillator introduced in 1980 in Commodities magazine, but it can be used for indexes, ETFs, stocks, and so on. It basically displays the relative daily difference above or below a simple moving average. It can be used to identify overbought and oversold conditions and to confirm trends. The CCI averages out the prices of a commodity (or security) for a day, calling it the Typical Price, and compares it to the simple moving average for a time period (usually 20 days). Continue reading...
The Relative Strength Index (RSI) was developed by J. Welles Wilder Jr. to measure asset momentum using price changes and the speed of those changes. Like stochastics, the RSI is an oscillator that reads between 0 and 100; in this case, the RSI calculation determines the ratio of upward and downward movement using 14 periods of data, then smooths it out so only strong trends approach 0 or 100. Traders traditionally interpret RSI values of 70 or greater as an indicator of an overbought asset, while values 30 or below indicate an asset has been oversold; higher or lower values (like 80 and 20) can be used to minimize the number of bought or sold readings. Continue reading...
Technical Indicators are charting tools that appear as lines on charts, or as other kinds of graphical information, which serve as guidelines for buying and selling opportunities. They are based on mathematical formulas, and may be called oscillators, trading bands, and signal lines, among other things. Technical analysts use information about price, volume, standard deviation, and other metrics to construct systems for trading using mathematical formulas which can be translated into useful charting tools. The systems can bring discipline to a trader’s strategy by providing clearly defined circumstances in which a trader has reason to buy, sell, hold, and so on. Continue reading...
Investment analysis is the practice of evaluating assets or securities in terms of value, risk and return, as well as correlation with other assets. It is to determine their possible place within various strategies and portfolios. Some analysis will be done seeking the best option for specific asset classes, some analysis will focus on the best overall portfolio for a given situation. Analysis is done using quantitative metrics and indicators, some of which can be considered fundamental analysis tools and some of which are technical analysis tools. Continue reading...
Stock prices change based on the law of supply and demand. Ultimately, as with the price of any good or service, the outstanding supply and consumer demand will define its value in the marketplace. Indeed, the efficient market hypothesis states that the price of a LINK will already reflect all known information about it and what investors are willing to pay for it at the time, based on that information. Continue reading...
Market indicators are quantitative tools for the analysis of market information, which may hint or confirm that a trend or reversal is about to happen (leading indicator) or has begun (lagging indicator). Indicators are technical analysis algorithms which give investors signals that may be used as the guidelines for trading. Indicators might be called oscillators or have various other proper names, since some of them are quite well-known, but there are general conventions or instructions for how to use an indicator, how it can be tweaked to suit the scope of your analysis, and what is considered a trade signal. Continue reading...
The Absolute Breadth Index (ABI) is a market breadth indicator, calculated using the absolute value of the difference between the number of advancing stocks and declining stocks to indicate the size of market movement without considering price direction. Larger ABI numbers will indicate more volatility. When breadth is smaller, it means that the market isn’t experiencing significant movement, or movement in a definitive direction. When advances or declines pull away from the other, it indicates the presence of market-wide trends. Continue reading...
The Aroon Indicators are a pair of momentum indicators – the Aroon Up value and Aroon Down value – named after the Sanskrit word for the first light of day. Each indicator represents a standardized value for the strength of the upward or downward pressure on a stock, which analysts can compare to determine if there is a trend emerging. Aroon looks at the latency between highs for certain rolling time periods, with 25 days being the standard time frame. Continue reading...
Richard Arms invented the analysis tool that bears his name in 1967. The Arms Index, a technical analysis indicator, is also called the TRIN (short for “Trading Index”) because it seeks to indicate overbought or oversold conditions by serving as an index of trading activity relative to price. The Arms index is calculated using readily available data from major indexes such as the S&P 500 or NASDAQ. The ratio of the number of advancing stocks (stocks whose prices are increasing) to the number of declining stocks (stocks whose prices are decreasing) is computed to give us the A/D Ratio, a market breadth indicator that is one way of viewing the daily breadth of a security. The Advance/Decline Ratio uses the same numbers as the Advance/Decline Line but presents them as a ratio instead. The AD Ratio is sometimes more useful than an AD Line, including in instances where comparing AD for different indexes which have different metrics; the ratio is the standardization with which comparisons can be made. Continue reading...
The advance/decline divergence oscillator (also called the McClellan Oscillator after its creators) tracks the rate of change in the advance-decline line (net advances). The AD line is formed from the Net Advances/Declines calculated daily at market close; this represents the proportion of stocks which advanced (increased) in price that day versus those which declined – the size of the difference is called the daily breadth. The advance/decline divergence oscillator can be applied to any group of stocks or exchange. Continue reading...
The Detrended Price Oscillator (DPO) is a relatively uncomplicated tool of analysis that can be used to simplify a chart and identify conditions ripe for buying or selling. It turns the moving average line of a price chart into a flat horizontal axis, with prices plotted according to their distance from the moving average. Moving averages are important components of many technical indicators. A simple moving average determines the average of a range of closing prices for a security or index for a specific period of time. An exponential moving average is a moving average that gives more weight to the most recent data. Simple moving averages are not weighted for time the way that exponential moving averages are, which has the effect of snapping the chart to the most current information, while simple moving averages have lag. Continue reading...
In the dynamic world of financial markets, traders are constantly on the lookout for any tools or indicators that can provide them with an edge in predicting market moves. Two such indicators, bullish divergences and bearish reversal signals, play a significant role in technical analysis. In this article, we'll delve into the intricacies of these signals and explore their potential to forecast market trends. Continue reading...
Technical indicators include moving average lines, trading bands, oscillators, and formations (found here), often presented in combinations. Popular indicators carry proper names. There are thousands of technical indicators, but the most popular ones are the MACD, Bollinger Bands, Stochastic Oscillators, the Directional Movement Indicator and various patterns of price behavior, such as “Head and Shoulder” formations. Continue reading...
The Accumulation/Distribution Indicator (originally called the Cumulative Money Flow Line) tracks cash flow into or out of a security and correlates the cash flow changes to changes in the security price. By following the trading volume into or out of a security, it establishes the degree of correlation between this trading volume and the price of the security. Accumulation/distribution is designed to reveal divergences in price trends (specifically between stock price and trading volume). These divergences indicate the degree to which a security may be overbought or oversold at a given time. Continue reading...
Fourier Analysis is a mathematical method of identifying and describing harmonic patterns in complex oscillating environments, and is used in options pricing among other things. Fourier Analysis is used to compute the probability that results will be within a certain range. Fourier analysis also has many other applications in physics, engineering, and music, for instance, because it can create a system for identifying patterns and simplifying computations for complex systems which feature oscillations and waves which have frequencies. Continue reading...
Range-bound trading is a strategic approach employed by traders seeking to profit from securities trading within specific price channels. This method involves identifying crucial support and resistance levels and connecting them using horizontal trendlines. Traders capitalize on this strategy by buying securities at the lower support trendline and selling them at the upper resistance trendline, within the established channel. Continue reading...
Unlock the power of Diamond Top Formations in financial markets! 📈 Discover how this rare but potent pattern signals uptrend reversals. Learn to spot, analyze, and enhance its reliability with price oscillators. Sharpen your trading skills and stay ahead in the competitive world of finance! 💎 #TradingTips #TechnicalAnalysis #DiamondTopFormation Continue reading...
📈 Decoding Financial Channels: From product distribution to security trading, channels are key. Explore how they drive goods from producer to consumer, while traders predict stock behavior using price channels. Unlock market insights for smarter strategies. 🚀 #FinancialChannels101 Continue reading...