Technical Analysis / Share Charting introduction – a few thoughts…

Indicators

Technical Indicators are the other key tool in technical analysis. Technical indicators are graphical representations of various mathematical formulas based on the stock price and transaction volume. There are literally thousands of technical indicators available. More indicators are being developed as as new ideas are translated into formulas. Technical indicators’ main function is to tell when a stock is considered oversold or overbought, and when a stock is considered weak or strong relative to its past action. Beginner chartists are advised to start off with looking at some of the basic indicators, and understanding their concepts. It is important a chartist fully understands the view (of price or volume) the indicator is giving. As they get more experienced they can add more indicators to their tool-kit.

 

  • Moving Average — is a price average calculated over a specified period of time (look-back window). It’s often used to obtain a smoothed value of an price. Different types of moving averages include: simple, cumulative, weighted and Exponential moving averages.

  • Average True Range — averaged daily trading range, adjusted for price gaps

  • MACD (Moving Average Convergence Divergence) — is a computation of the difference between a fast and slow exponential moving average of closing price.

  • Stochastic — The Stochastic oscillators indicate overbought and oversold areas in the market, based upon momentum or price velocity. It is classified into stochastic fast and stochastic slow.

  • RSI (Relative Strength Index) — calculates a value based on the cumulative strength and weakness of closing price over a specified period of length. For the number of bars, RSI accumulates the points gained on bars with higher closes and the points lost on bars with lower closes and these two sums are indexed. It returns a value between zero and one hundred, regardless of the asset it is applied to.

  • Volume Average — a 50-bar average of the volume overlaid on the current volume. The number of bars are changed and used.

  • Volume Rate of Change — commonly used to determine the likelihood of a continuation of a current trend. It compares the most current bar’s volume to volume of a bar in the past (default is 14 bars ago).

  • Money Flow — it measures the momentum/ strength of money flowing into and out of a market by evaluating divergences between price and price activity incorporating volume into its calculation.

Posted in Uncategorized | Leave a comment