Accumulation/Distribution Line is a momentum indicator that associates changes in price and volume. The indicator is based on the premise that the more volume that accompanies a price move, the more significant the price move.

The Accumulative Swing Index is a cumulative total of the Swing Index created by J. Welles Wilder, Jr. Wilder designed the Swing Index to be a better representation of the true market trend. SI compares the relationships between current prices and the previous period`s prices. Buy when it crosses above the MA, sell when it goes below.

AROON is a technical indicator, developed by Tushar Chande in 1995, used for identifying trends in an underlying security and the likelihood that the trends will reverse. It is made up of two lines. One line is called Aroon up. which measures the strength of the uptrend, and the other line is called Aroon down. which measures the downtrend. The indicator reports the time it is taking for the price to reach, from a starting point, the highest and lowest points over a given time period, each reported as a percentage of total time. Both the Aroon up and the Aroon down fluctuate between zero and 100, with values close to 100 indicating a strong trend, and zero indicating a weak trend. The lower the Aroon up, the weaker the uptrend and the stronger the downtrend, and vice versa. The main assumption underlying this indicator is that a stock`s price will close at record highs in an uptrend, and record lows in a downtrend.

AROON Oscillator is calculated by subtracting the Aroon Down from the Aroon Up. The resultant number will oscillate between 100 and -100. The Aroon Oscillator will be high when the Aroon Up is high and the Aroon Down is low, indicating a strong upward trend. The Aroon Oscillator will be low when the Aroon Down is high and the Aroon Up is low, indicating a strong downward trend. When the Up and Down are approximately equal, the Aroon Oscillator will hover around zero, indicating a weak trend or consolidation. See the Aroon indicator for more information.

Average True Range. developed by J. Welles Wilder, the Average True Range (ATR) is an indicator that measures volatility. As with most of his indicators, Wilder designed ATR with commodities and daily prices in mind. Commodities are frequently more volatile than stocks. They were are often subject to gaps and limit moves, which occur when a commodity opens up or down its maximum allowed move for the session. A volatility formula based only on the high-low range would fail to capture volatility from gap or limit moves. Wilder created Average True Range to capture this missing volatility. It is important to remember that ATR does not provide an indication of price direction, just volatility. Wilder features ATR in his 1978 book, New Concepts in Technical Trading Systems. This book also includes the Parabolic SAR, RSI and the Directional Movement Concept (ADX). Despite being developed before the computer age, Wilder’s indicators have stood the test of time and remain extremely popular.

Bollinger Bands are similar to moving average envelopes. The difference between Bollinger Bands and envelopes is envelopes are plotted at a fixed percentage above and below a moving average, whereas Bollinger Bands are plotted at standard deviation levels above and below a moving average. Since standard deviation is a measure of volatility, the bands are self-adjusting: widening during volatile markets and contracting during calmer periods. Bollinger Bands were created by John Bollinger.

Bollinger Bands are usually displayed on top of security prices, but they can be displayed on an indicator. These comments refer to bands displayed on prices. As with moving average envelopes, the basic interpretation of Bollinger Bands is that prices tend to stay within the upper- and lower-band. The distinctive characteristic of Bollinger Bands is that the spacing between the bands varies based on the volatility of the prices. During periods of extreme price changes (i.e. high volatility), the bands widen to become more forgiving. During periods of stagnant pricing (i.e. low volatility), the bands narrow to contain prices.

Mr. Bollinger notes the following characteristics of Bollinger Bands.

1. Sharp price changes tend to occur after the bands tighten, as volatility lessens.
2. When prices move outside the bands, a continuation of the current trend is implied.
3. Bottoms and tops made outside the bands followed by bottoms and tops made inside the bands call for reversals in the trend.
4. A move that originates at one band tends to go all the way to the other band. This observation is useful when projecting price targets.

Candlestick Patterns includes a pattern recognition algorithm to select buy and sell points based on selected criteria. The selection is based on most prevalent buy and sell points and adjustments based on emotion to attempt to select optimum profit. Use in conjunction with a second indicator for confirmation.

Chaikin Money Flow compares the closing price to the daily high-low range to determine how much volume is flowing into, or out of, a security, and then compares this result to the total volume. It was developed by Marc Chaikin and is similiar to the Chaikin Oscillator. The CMF is based on the principle that rising prices should be accompanied by expanding volume, and vice versa. The formula emphasizes the fact that market strength is usually accompanied by prices closing in the upper half of their daily range with increasing volume.

Chaikin Oscillator: Inspired by the prior work of Joe Granville and Larry Williams, Marc Chaikin developed a new volume indicator, extending the work done by his predecessors. The Chaikin Oscillator is a moving average oscillator based on the Accumulation/Distribution indicator.

The most important signal generated by the Chaikin Oscillator occurs when prices reach a new high or new low for a swing, particularly at an overbought or oversold level, and the oscillator fails to exceed its previous extreme reading and then reverses direction.

1. Signals in the direction of the intermediate-term trend are more reliable than those against the trend.
2. A confirmed high or low does not imply any further price action in that direction. I view that as a non-event.

A second way to use the Chaikin Oscillator is to view a change of direction in the oscillator as a buy or sell signal, but only in the direction of the trend. For example, if we say that a stock that is above its 90-day moving average of price is in an uptrend, then an upturn of the oscillator while in negative territory would constitute a buy signal only if the stock were above its 90-day moving average—not below it.

A downturn of the oscillator while in positive territory (above zero) would be a sell signal if the stock were below its 90-day moving average of closing prices.

Correlation Coefficient ranges from 0 to 100 and measures the correlation between a linear regression line and an exponentional moving average. The linear regression reacts faster than an exponential moving average. When they are moving together, the stock is trending and the correlation coefficient is high. When the correlation coefficient is low the stock is making a change.

The Coppock Curve is a long-term price momentum indicator used primarily to recognize major bottoms in the stock market. It is calculated as a 10-month weighted moving average of the sum of the 14-month rate of change and the 11-month rate of change for the index. A buy signal is formed when there is an upturn in the curve after an extreme low in the curve. A sell signal is formed when there is a higher peak in stock prices but a lower peak in the Coppock curve. These are the basic signals, more signals and interpretations are seen at more advanced levels. Note: This variation uses daily data instead of monthly data. A buy signal is generated when the indicator is below zero and turns upwards from a trough. No sell signals are normally generated. Sell signals were added based on the opposite criteria of the buy signal.The indicator is trend-following, and based on averages, so by its nature it does not pick a market bottom, but rather shows when a rally has become established.

The Chaikin Volatility indicator compares the spread between a security`s high and low prices. It quantifies volatility as a widening of the range between the high and the low price. Buy when the CVI goes above zero and sell when it goes below.

Chande Momentum Oscillator is a technical momentum indicator invented by the technical analyst Tushar Chande. It is created by calculating the difference between the sum of all recent gains and the sum of all recent losses and then dividing the result by the sum of all price movement over the period. This oscillator is similar to other momentum indicators such as the Relative Strength Index and the Stochastic Oscillator because it is range bounded (+100 and -100). The security is deemed to be overbought when the momentum oscillator is above +50 and oversold when it is below -50. Many technical traders add a nine-period moving average to this oscillator to act as a signal line. Bullish signals are generated when the oscillator crosses above the signal, and bearish signals are generated when the oscillator crosses down through the signal.

Close To Open purchases the stock at the end of day closing price and sells at the opening price the next trading day. The only rule is that you buy at the end of a down day. This trading system takes advantage of the fact that the market futures is usually up more than down on average. The only downside is the number of trades and the associated trading cost.

Close To Open With Hold is similiar to the Close To Open indicator in that it purchases the stock at the end of the day closing price on down days. The difference is that the stock is held until the opening futures are down and sell the stock at market open. This system reduces the number of trades vs the Close To Open system and usually makes more profit.

Commodity Channel Index CCI, developed by Donaly Lambert measures the variation of a security`s price from its statistical mean. High values show the prices are unusually high compared to average prices, whereas low values indicate that prices are unusually low. Look for a divergence where the securitys price is making new highs and the CCI is not or the opposite. The CCI typically oscillates between +/- 100. Reading above 100 are considered overbought and below -100 are oversold. CCI is a versatile momentum oscillator that can be used to identify overbought/oversold levels or trend reversals. The indicator becomes overbought or oversold when it reaches a relative extreme. That extreme depends on the characteristics of the underlying security and the historical range for CCI. Volatile securities are likely to require greater extremes than docile securities. Trend changes can be identified when CCI crosses a specific threshold between zero and 100. Regardless of how CCI is used, chartists should use CCI in conjunction with other indicators or price analysis. Another momentum oscillator would be redundant, but On Balance Volume (OBV) or the Accumulation Distribution Line can add value to CCI signals.

Commodity Selection Index is a technical momentum indicator that attempts to identify which commodities are the most suitable for short-term trading. The larger the CSI value, the stronger is the trend and volatility characteristics associated with the asset. This indicator should only be used by traders who can handle large amounts of volatility as it indicates strong trending, but reversals are always possible.

Short-term traders know that the key to making money is movement, which is the reason that they mainly focus on the highly volatile assets. This index attempts to lessen the amount of risk taken, and make it easier to trade by incorporating trend characteristics. Some traders will only trade the commodity with the highest CSI value, while others will make transaction signals when they see a sharp increase in this value.

Comparative Relative Strength compares the strength of two securities. The default comparision is the New York Stock Exchange Composite Index. The strength comparision is plotted against an exponential moving average of the comparision to access trend changes in the indicator. Historically When the NASDAQ Composite leads the NYSE Composite, the market does well. This is probably due to the fact that the NASDAQ covers higher return and higher volatile securities, while the NYSE covers lower risk securites. When money is moved into the NASDAQ it is a BULLISH signal. When the money is moving into the NYSE it is a BEARISH signal.

Confidence Bands was created by Charlie Weeks. This technical stock indicator computes a linear regression of the security price based on the selected period. Confidence bands are thin calculated per the linear regression with a 99% confidence. The confidence bands are the projected band that the stock would be within with a 99% confidence. This indicator is similiar to standard error bands.

The Demand Index. developed by James Sibbet, combines price and volume in such a way that it is often a leading indicator of price change. Sibbet defined six rules for the Demand Index:

1. A divergence between the Demand Index and the price trend suggests an approaching weakness in price.
2. One more rally to new highs usually follows an extreme peak in the Demand Index (the Index is performing as a leading indicator).

3. Higher prices with a lower Demand Index peak usually coincides with an important top (the Index is performing as a coincidental indicator).
4. The Demand Index penetrates the level of zero indicating a change in trend (the Index is performing as a lagging indicator).
5. When the Demand Index stays near the level of zero for any period of time, a weak price movement that will not last long is indicated.
6. A large long-term divergence between prices and the Demand Index indicates a major top or bottom.

The Derivative Deviation by Charlie Weeks is a technical indicator that removes the noise by computing the derivative for each day and compares it against a standard deviation. Specific buy and sell rules based on derived criteria further improve the indicator.

The Derivative Oscillator by Charlie Weeks is a short term technical trading indicator that computes the first derivative(Delta) and second derivative(Gamma) of the stock. When the Delta and Gamma line cross a buy or sell signal is produced. This indicator usually gets you into and out of the market before anyone else and out when everyone else is just buying in.

The Derivative True Range by Charlie Weeks is a technical indicator similiar to the derivative deviation that removes the noise by computing the derivative for each day and compares it against an average true range. If the derivative goes above the computed average true range, a sell signal is given and if the derivative goes below the negative average true range a buy signal is given. Specific buy and sell rules based on derived criteria further improve the indicator.

The Directional Movement Index is a unique filtered momemtum indicator created by J. Welles Wilder, Jr. DMI is a rather complex trend following indicator. ADX is non-directional so it will quantify a trend`s strength regardless of whether it is up or down. ADX is usually plotted in a chart window along with two lines known as the DMI (Directional Movement Indicators). ADX is derived from the relationship of the DMI lines. Enter long when +DI has crosse above -DI and ADX is above 25.

Disparity Index is a technical indicator created by Dan Valcu, taken from `Technical Analysis of Stocks and Commodities`, Dec 2009 Issue. This indicator warns about peaks and troughs based on the premise that all deviation from a reference value will eventually return to that reference. The Disparity Index measures the deviation of the closing price from the exponential moving average. When the indicator rises above the resistance and turns down it is time to close a long position. When the indicator moves below the support and turns up, it is time to enter a long position. The support and resistance are based on one standard deviation above the 30-day moving average.

A Donchian channel is a market indicator developed by Richard Donchian; the channel is typically formed by taking the highest high and the lowest low the market in question has made in the previous n number days – when the price moves outside of the channel it is called a breakout. A common variation of the standard Donchian channel is a channel made from the highest close and lowest close in the previous n number of days with a breakout defined as a new higher or lower closing price.

The Dynamic Momentum Index (DMI) was developed by Tushar Chande and Stanley Kroll. The indicator is described in detail in their book The New Technical Trader. Chande`s DMI is very similar to Welles Wilder`s Relative Strength Index (RSI), however, there is one very important difference. Unlike the RSI which uses a fixed number of periods, the Dynamic Momentum Index uses a variable amount of periods as market volatility changes. The number of periods the DMI uses decreases as market volatility increases thereby allowing the indicator to be more responsive to price changes. The Dynamic Momentum Index can be interpreted in much the same way was as the more traditional RSI as an overbought and oversold indicator. Readings above 70 are considered to be overbought while readings under 30 are considered to be oversold.

The Ease of Movement indicator developed by Richard W. Arms, Jr. shows the relationship between volume and price change. As with Equivolume charting, this indicator shows how much volume is required to move prices.

High Ease of Movement values occur when prices are moving upward on light volume. Low Ease of Movement values occur when prices are moving downward on light volume. If prices are not moving, or if heavy volume is required to move prices, then the indicator will also be near zero. The Ease of Movement indicator produces a buy signal when it crosses above zero, indicating that prices are moving upward more easily; a sell signal is given when the indicator crosses below zero, indicating that prices are moving downward more easily.

Elder Ray Index is a technical indicator developed by Alexander Elder that measures the amount of buying and selling pressure in the market. This indicator consists of two separate indicators known as bull power and bear power. These figures allow a trader to determine the position of the price relative to a certain exponential moving average (EMA). Technical traders will use the values of the bull and bear power along with divergence to make transaction decisions. Long positions are taken when the bear power has a value below zero but is increasing and the bull power`s latest peak is higher than it was previously. A short position is taken when the bull-power value is positive but falling and the bear power`s recent low is lower than any other previous bottom. The slope of the EMA can also be used in both cases to help confirm the direction of the trend.

Envelopes are comprised of two moving averages. One moving average is shifted upward and the second moving average is shifted downward. Envelopes define the upper and lower boundaries of a security’s normal trading range. A sell signal is generated when the security reaches the upper band whereas a buy signal is generated at the lower band. The optimum percentage shift depends on the volatility of the security—the more volatile, the larger the percentage. The logic behind envelopes is that overzealous buyers and sellers push the price to the extremes (i.e. the upper and lower bands), at which point the prices often stabilize by moving to more realistic levels. This is similar to the interpretation of Bollinger Bands.

First Day Of The Month is a test of a statement made on a talk radio station I heard. It was stated that if you purchased the S&P 500 at the closing price on the last trading day of the month and sold it at the closing price on the first trading day of the next month, the returns would be better than if you held the stock all year and would involve less risk by only holding a stock 12 trading days of the year.

Fibonacci Fan Lines are displayed by drawing a trendline between two extreme points, for example, a trough and opposing peak. Then an invisible vertical line is drawn through the second extreme point. Three trendlines are then drawn from the first extreme point so they pass through the invisible vertical line at the Fibonacci levels of 38.2%, 50.0%, and 61.8%. (This technique is similar to Speed Resistance Lines.)

Fibonacci Retracements Fibonacci Retracements are displayed by first drawing a trendline between two extreme points, for example, a trough and opposing peak. A series of nine horizontal lines are drawn intersecting the trendline at the Fibonacci levels of 0.0%, 23.6%, 38.2%, 50%, 61.8%, 100%, 161.8%, 261.8%, and 423.6%. (Some of the lines will probably not be visable because they will be off the scale.) After a significant price move (either up or down), prices will often retrace a significant portion (if not all) of the original move. As prices retrace, support and resistance levels often occur at or near the Fibonacci Retracement levels.

Force Index is a technical indicator created by Alexander Elder. The Force Index is a price-and-volume oscillator that helps technical analysts determine if a stock`s trend is strengthening or weakening. Like all oscillators, the Force Index generates buy and sell signals when it crosses its center line. Trendlines can also be used to determine the direction and strength of the indicator’s current movement. When the Force Index is setting new highs, the stock`s current uptrend is likely to continue. When it is setting new low`s, the stock will probably keep sinking. If the Force Index is moving sideways, a trend change is likely.

Fractal Patterns looks for recurring patterns that can predict reversals among larger, more chaotic price movements. These basic fractals are composed of five or more bars. The rules for identifying fractals are as follows:

• A bearish turning point occurs when there is a pattern with the highest high in the middle and two lower highs on each side.
• A bullish turning point occurs when there is a pattern with the lowest low in the middle and two higher lows on each side.

The fractals shown in are two examples of perfect patterns. Note that many other less perfect patterns can occur, but the basic pattern should remain intact for the fractal to be valid.

The obvious drawback here is that fractals are lagging indicators — that is, a fractal can’t be drawn until we are two days into the reversal. While this may be true, most significant reversals last many more bars, so most of the trend should remain intact.

Applying Fractals to Trading

Like many trading indicators, fractals are best used in conjunction with other indicators or forms of analysis. Perhaps the most common confirmation indicator used with fractals is the Alligator indicator, a tool that is created by using moving averages that factor in the use of fractal geometry. The standard rule states that all buy rules are only valid if below the alligator’s teeth (the center average), and all sell rules are only valid if above the alligator’s teeth.

Gamma Oscillator is a technical indicator created by Charlie Weeks. The Gamma Oscillator calculates the volatility of the stock and the derivative of the volatility (Gamma). The two values are plotted and when Gamma goes below the volatility, the stock is a buy. When it goes above the stock is a sell.

Genetic Neural Algorithm is a technical indicator developed by Charlie Weeks. This indicator uses the new genetic and neural algorithms to analysis the stock data. First it uses 3600 possible genetic combinations to evolve trading rules. These are the upper and lower bands. Due to the selection of genetic combinations used in the analysis, the trading bands may not be symmetric. It then uses these trading rules in a neural backtesting algorithm to derive the optimum trading period using risk vs reward analysis. All of this data is then fed into the final analysis to compute the graph. Unlike other indicators that consistently use the same analysis over all the data no matter the range, this indicator re-analyzes the data and adjusts based on the selected range. To minimize curve fitting or overfitting to the existing data, walk forward out of sample testing is used.

Halloween Strategy is an investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market until October 31, in order to increase capital gains. The Halloween strategy is based on the premise that most capital gains are made between October 31 (Halloween) and May 1, and that the other six months of the year should be spent investing in other investment types or not at all.

Inertia is taken from the physics realm. It describes the phenomena of continuous motion of the body until an outside force acts upon it. The momentum of a stock that is based upon its volatility is measured by the Inertia here. Inertia is a smoothed RVI, as an outgrowth of Donald Dorsey`s Relative Volatility Index. It was the September 1995 issue of Technical Analysis of Stocks and Commodities where Dorsey introduced the idea of Inertia. The basic usage of the Inertia indicator is measuring a momentum of a currency trading price based on its volatility. Inertia is a smoothed RVI, as an outgrowth of Relative Volatility Index. A scale that Inertia is measured on is from 0 to 100. If the indicator is below 50 the Inertia is seen to be negative. Positive Inertia is supposed to have the indicator above 50. Positive inertia signs show a long-term upward trend whether long-term downtrends are indicated by negative Inertia.

The Intraday Momentum Index is a cross between between the Relative Strength Index and Candlestick Analysis. IMI values above 70 Indicate a potential overbought situation. Values under 30 indicate oversold. Look for divergences between the IMI and the price action. The IMI is useful in confirming Candlestick patterns. IMI values above 70 indicate a potential overbought situation with lower prices ahead. Values below indicate a potential oversold situation with higher prices ahead. As with all overbought/oversold indicators, you should first quantify the trendiness of the market before acting on the signals. Indicators such as Vertical Horizontal Filter, Directional Movement Indicator, and R-Squared can be used. The basic premise behind the IMI is that shifts in intraday moemntum precede shifts in interday momentum. Look for divergence between the indicator and the price action.

The Keltner Channel is a moving average band indicator whose upper and lower bands adapt to changes in volatility by using the average true range. The Keltner Channel is used to signal price breakouts, show trend, and give overbought and oversold readings.

Klinger Volume Oscillator is a technical indicator developed by Stephen Klinger that is used to determine long-term trends of money flow while remaining sensitive enough to short-term fluctuations to enable a trader to predict short-term reversals. This indicator compares the volume flowing in and out of a security to price movement, and it is then turned into an oscillator. A signal line (13-period moving average) is used to trigger transaction decisions. This technique is very similar to signals that are created with other indicators such as the MACD. The Klinger Oscillator also uses divergence to identify when price and volume are not confirming the direction of the move. It is considered to be a bullish sign when the value of the indicator is heading upward while the price of the security continues to fall. Traders will use other tools such as trendlines, moving averages and other indicators to confirm the reversal. The Klinger volume oscillator (KVO) by Stephen J. Klinger is based on cumulative volume, with volume added or subtracted according to the direction of typical price and weighted by a certain daily range calculation. A trend direction is determined from today and yesterday`s `typical prices` (which are (high+low+close)/3), trend = / 1 if TP[today] > TP[yesterday] -1 if TP[today] Back To Top

The Market Facilitation Index (MFI) created by Bill Williams, attempts to determine the efficiency of price movement by quantifying the price momement per unit volume. As a stand alone indicator the MFI has little value. However, by comparing the current proce bar`s MFI and volume with the previous bar`s MFI and volume, a tradeable system emerges.