Common Trading Indicators

Accumulation Swing Index

The Accumulation Swing Index (Wilder) is a cumulative total of the Swing Index.

Interpretation:
The Accumulation Swing Index may be analyzed using technical indicators, line studies, and chart patterns, as an alternative view of price action.

Parameters:
Limit Move Value

Aroon Index and Oscillator

The Aroon indicator is often used to determine whether a stock is trending or not and how stable the trend is.

Interpretation:
Trends are determined by extreme values (above 80) of both lines (Aroon up and Aroon down), whereas unstable prices are determined when both lines are low (less than 20).

Parameters:
Periods

Bollinger Bands

Bollinger Bands are similar in comparison to moving average envelopes. Bollinger Bands are calculated using standard deviations instead of shifting bands by a fixed percentage.

Interpretation:
Bollinger Bands (as with most bands) can be imposed over an actual price or another indicator.
When prices rise above the upper band or fall below the lower band, a change in direction may occur when the price penetrates the band after a small reversal from the opposite direction.

Parameters:
Source
Periods
Standard Deviations
Moving Average Type

Fractal Chaos Bands

The chaotic nature of stock market movements explains why it is sometimes difficult to distinguish hourly charts from monthly charts if the time scale is not given. The patterns are similar regardless of the time resolution. Like the chambers of the nautilus, each level is like the one before it, but the size is different. To determine what is happening in the current level of resolution, the fractal chaos band indicator can be used to examine these patterns.

Parameters:
Periods

Chaikin Money Flow

The Chaikin Money Flow oscillator is a momentum indicator that spots buying and selling by calculating price and volume together. This indicator is based upon Chaikin Accumulation/Distribution, which is in turn based upon the premise that if a stock closes above its midpoint [(high+low)/2] for the day then there was accumulation that day, and if it closes below its midpoint, then there was distribution that day.

Parameters:
Volume Source
Periods

Chaikin Volatility Oscillator

The Chaikin Volatility Oscillator is a moving average derivative of the Accumulation/Distribution index.

Interpretation:
The Chaikin Volatility Oscillator adjusts with respect to volatility, independent of long-term price action.

Parameters:
Periods
Rate of Change
Moving Average Type

Chande Momentum Oscillator (CMO)
The Chande Momentum Oscillator (Chande) is an advanced momentum oscillator derived from linear regression.

Interpretation:
Increasingly high values of CMO may indicate that prices are trending strongly upwards. Conversely, increasingly low values of CMO may indicate that prices are trending strongly downwards. CMO is related to MACD and Price Rate of Change (ROC).

Parameters:
Source (open, high, low, close or volume)
Periods

Commodity Channel Index
The CCI was developed by Donald Lambert. The purpose of this indicator is to identify cyclical turns in commodities.

Interpretation:
This indicator oscillates between an overbought and oversold condition and works best in a sideways market.

Parameters:
Periods

Comparative Relative Strength

The Comparative Relative Strength index divides one price field by another price field.

Interpretation:
The base security is outperforming the other security when the Comparative RSI is trending upwards.

Parameters:
Source 1 (open, high, low, close or volume)
Source 2 (open, high, low, close or volume)

Detrended Price Oscillator
The Detrended Price Oscillator is used when long-term trends or outliers must be removed from prices or index indicators.

Interpretation:
This indicator is often used to supplement a standard price chart. Other indicators can be plotted over the Detrended Price Oscillator.

Parameters:
Source (open, high, low, close or volume)
Periods
Moving Average Type

Directional Movement System
The Welles Wilder’s Directional Movement System contains five indicators; ADX, DI+, DI-, DX, and ADXR.

The ADX (Average Directional Movement Index) is an indicator of how much the market is trending, either up or down: the higher the ADX line, the more the market is trending and the more suitable it becomes for a trend-following system. This indicator consists of two lines: DI+ and DI-, the first one being a measure of uptrend and the second one a measure of downtrend.

Detailed information about this indicator and formulas can be found in Welles Wilder’s book, “New Concepts in Technical Trading Systems”.
The standard Directional Movement System draws a 14 period DI+ and a 14 period DI- in the same chart panel. ADX is also sometimes shown in the same chart panel.

Interpretation:
A buy signal is given when DI+ crosses over DI-; a sell signal is given when DI- crosses over DI+.

Parameters:
Periods

Ease of Movement

The Ease of Movement oscillator shows a unique relationship between price change and volume.

Interpretation:
The Ease of Movement oscillator rises when prices are trending upwards under low volume, and likewise, the Ease of Movement oscillator falls when prices are trending downwards under low volume.

Parameters:
Volume
Periods
Moving Average Type

Exponential Moving Average
An Exponential Moving Average is similar to a Simple Moving Average. An EMA is calculated by applying a small percentage of the current value to the previous value. An EMA applies more weight to recent values.

Interpretation:
A Moving Average is most often used to average values for a smoother representation of the underlying price or indicator.

Parameters:
Source (open, high, low, close or volume)
Periods

High Low Bands

High Low Bands consist of triangular moving averages calculated from the underling price, shifted up and down by a fixed percentage, and include a median value.

Interpretation:
When prices rise above the upper band or fall below the lower band, a change in direction may occur when the price penetrates the band after a small reversal from the opposite direction.

Parameters:
Periods

High Minus Low

Returns the high price minus the low price.

Linear Regression

Linear regression is a common statistical method used to forecast values using least squares fit.

Parameters:
Source (open, high, low, close or volume)
Periods

Moving Average Convergence / Divergence (MACD)

The MACD is a moving average oscillator that shows potential overbought/oversold phases of market fluctuation. The MACD is a calculation of two moving averages of the underlying price/indicator.

Interpretation:
Buy/Sell interpretations may be derived from crossovers (calculated from the Signal Periods parameter), overbought/oversold levels of the MACD and divergences between MACD and actual price.

Parameters:
Long Cycle
Short Cycle
Signal Periods

Mass Index

The Mass Index identifies price changes by indexing the narrowing and widening change between high and low prices.

Interpretation:
According to the inventor of the Mass Index, reversals may occur when a 25-period Mass Index rises above 27 or falls below 26.5.

Parameters:
Periods

Median Price

A Median Price is simply an average of one period’s high and low values.

Interpretation:
A Median Price is often used as an alternative way of viewing price action, and also as a component for calculating other indicators.

Momentum Oscillator

The momentum indicator calculates change of over a specified length of time as a ratio.

Interpretation:
Increasingly high values of the momentum oscillator may indicate that prices are trending strongly upwards. The momentum oscillator is closely related to MACD and Price Rate of Change (ROC).

Parameters:
Source (open, high, low, close or volume)
Periods

Money Flow Index

The Money Flow Index measures money flow of a security, using volume and price for calculations.

Interpretation:
Market bottoms below 20 and tops above 80. Divergence of price and Money Flow Index are also used.

Parameters:
Volume
Periods

Moving Average Envelope

Moving Average Envelopes consist of moving averages calculated from the underling price, shifted up and down by a fixed percentage.

Interpretation:
Moving Average Envelopes (or trading bands) can be imposed over an actual price or another indicator.
When prices rise above the upper band or fall below the lower band, a change in direction may occur when the price penetrates the band after a small reversal from the opposite direction.

Parameters:
Source (open, high, low, close or volume)
Periods
Moving Average Type
Shift: Shift is a double value specifying the percentage of shift for each moving average from the actual values.

Negative Volume Index

The Negative Volume Index shows focus on periods when volume decreases from the previous period.

Interpretation:
The interpretation of the Negative Volume Index is that well-informed investors are buying when the index falls and uninformed investors are buying when the index rises.

Parameters:
Source (open, high, low, close or volume)
Volume

On Balance Volume

The On Balance Volume indicator shows a relationship of price and volume as a momentum index.

Interpretation:
On Balance Volume index generally precedes actual price movements. The premise is that well-informed investors are buying when the index rises and uninformed investors are buying when the index falls.

Parameters:
Source (open, high, low, close or volume)
Volume

Parabolic SAR

The Parabolic SAR was developed by Welles Wilder. This indicator is always in the market (whenever a position is closed, an opposing position is taken). The Parabolic SAR indicator is most often used to set trailing price stops. A stop and reversal (SAR) occurs when the price penetrates a Parabolic SAR level.

Parameters:
Min AF (accumulation factor)
Max AF (accumulation factor)

Performance

The Performance indicator calculates price performance as a normalized value or percentage.

Interpretation:
A Performance indicator shows the price of a security as a normalized value. If the Performance indicator shows 50, then the price of the underlying security has increased 50% since the start of the Performance indicator calculations. Conversely, if the indictor shows –50, then the price of the underlying security has decreased 50% since the start of the Performance indicator calculations.

Parameter:
Source (open, high, low, close or volume)

Positive Volume Index

The Positive Volume Index shows focus on periods when volume increases from the previous period.

Interpretation:
The interpretation of the Positive Volume Index is that many investors are buying when the index rises, and selling when the index falls.

Parameters:
Source (open, high, low, close or volume)
Volume

Price Oscillator

The Price Oscillator shows a spread of two moving averages.

Interpretation:
The Price Oscillator is basically a moving average spread. Buying usually occurs when the oscillator rises, and conversely, selling usually occurs when the oscillator falls.

Parameters:
Source (open, high, low, close or volume)
Long Cycle
Short Cycle
Moving Average Type

Price Rate of Change

The Price ROC shows the difference between the current price and the price one or more periods in the past.

Interpretation:
A 12-day Price ROC is most often used as an overbought/oversold indicator.

Parameters:
Source (open, high, low, close or volume)
Periods

Price and Volume Trend

The Price and Volume Trend index is closely related to the On Balance Volume index.

Interpretation:
The Price and Volume Trend index generally precedes actual price movements. The premise is that well-informed investors are buying when the index rises and uninformed investors are buying when the index falls.

Parameters:
Source (open, high, low, close or volume)
Volume

Rainbow Oscillator

The rainbow oscillator is based upon multiple time frames of a moving average.

Interpretation:
When values stay above 80 or below 20, the trend may reverse suddenly.

Parameters:
Source (open, high, low, close or volume)
Levels
Moving Average Type

Relative Strength Index (RSI)

The RSI (Wilder) is a popular indicator that shows comparative price strength within a single security.

Interpretation:
9, 14 and 25 period RSI calculations are most popular. The most widely used method for interpreting the RSI is price/RSI divergence, support/resistance levels and RSI chart formations.

Parameters:
Source (open, high, low, close or volume)
Periods

Simple Moving Average

The Simple Moving Average is simply an average of values over a specified period of time.

Interpretation:
A Moving Average is most often used to average values for a smoother representation of the underlying price or indicator.

Parameters:
Source (open, high, low, close or volume)
Periods

Prime Numbers Bands

Similar to the Prime Numbers Oscillator, the prime numbers oscillator was developed by Modulus Financial Engineering, Inc. This indicator finds the nearest prime number for the high and low, and plots the two series as bands.

Interpretation:
This indicator can be used to spot market trading ranges.

Prime Numbers Oscillator

The prime numbers oscillator was developed by Modulus Financial Engineering, Inc. This indicator finds the nearest prime number from either the top or bottom of the series, and plots the difference between that prime number and the series itself.

Interpretation:
This indicator can be used to spot market turning points. When the oscillator remains at the same high point for two consecutive periods in the positive range, consider selling. Conversely, when the oscillator remains at a low point for two consecutive periods in the negative range, consider buying.

Parameters:
Source (open, high, low, close or volume)

Standard Deviations

Standard Deviation is a common statistical calculation that measures volatility. Other technical indicators are often calculated using standard deviations.

Interpretation:
Major highs and lows often accompany extreme volatility. High values of standard deviations indicate that the price or indicator is more volatile than usual.

Parameters:
Source (open, high, low, close or volume)
Periods
Standard Deviations
Moving Average Type

Stochastic Oscillator

The Stochastic Oscillator is a popular indicator that shows where a security’s price has closed in proportion to its closing price range over a specified period of time.

Interpretation:
The Stochastic Oscillator has two components: %K and %D. %K is most often displayed as a solid line and %D is often shown as a dotted line. The most widely used method for interpreting the Stochastic Oscillator is to buy when either component rises above 80 or sell when either component falls below 20. Another way to interpret the Stochastic Oscillator is to buy when %K rises above %D, and conversely, sell when %K falls below %D.

Parameters:
%K Periods
%K Slowing
%D Periods
Moving Average Type

The most commonly used arguments are 9 for %K periods, 3 for %K slowing periods and 3 for %D smoothing.

Fractal Chaos Oscillator

The chaotic nature of stock market movements explains why it is sometimes difficult to distinguish hourly charts from monthly charts if the time scale is not given. The patterns are similar regardless of the time resolution. Like the chambers of the nautilus, each level is like the one before it, but the size is different. To determine what is happening in the current level of resolution, the fractal chaos oscillator can be used to examine these patterns.

Parameters:
Periods

Swing Index

The Swing Index (Wilder) is a popular indicator that shows comparative price strength within a single security by comparing the current open, high, low and close prices with previous prices.

Interpretation:
The Swing Index is a component of the Accumulation Swing Index

Parameters:
Limit Move Value

Time Series Moving Average

A Time Series Moving Average is similar to a Simple Moving Average, except that values are derived from linear regression forecast values instead of raw values.

Interpretation:
A Moving Average is most often used to average values for a smoother representation of the underlying price or indicator.

Parameters:
Periods

Trade Volume Index

The Trade Volume index shows whether a security is being accumulated or distribute (similar to the Accumulation/Distribution index).

Interpretation:
When the indicator is rising, the security is said to be accumulating. Conversely, when the indicator is falling, the security is said to being distributing. Prices may reverse when the indicator converges with price.

Parameters:
Volume
Minimum Tick Value

Triangular Moving Average

The Triangular Moving Average is similar to a Simple Moving Average, except that more weight is given to the price in the middle of the moving average periods.

Interpretation:
A Moving Average is most often used to average values for a smoother representation of the underlying price or indicator.

Parameters:
Source (open, high, low, close or volume)
Periods

TRIX

TRIX is a momentum oscillator that shows the rate of change of an exponentially averaged closing price.

Interpretation:
The most common interpretation of the TRIX oscillator is to buy when the oscillator rises and sell when the oscillator falls. 3, 8 and 14 period moving averages are often used to smooth the TRIX oscillator.

Parameters:
Source (open, high, low, close or volume)
Periods

Stochastic Momentum Index

The Stochastic Momentum Index, developed by William Blau, first appeared in the January 1993 issue of Stocks & Commodities magazine. This indicator plots the closeness relative to the midpoint of the recent high/low range.

Interpretation:
The Stochastic Momentum Index has two components: %K and %D. %K is most often displayed as a solid line and %D is often shown as a dotted line. The most widely used method for interpreting the Stochastic Momentum Index is to buy when either component rises above 40 or sell when either component falls below 40. Another way to interpret the Stochastic Momentum Index is to buy when %K rises above %D, and conversely, sell when %K falls below %D.

Parameters:
%K Periods
%K Smoothing
%K Double Smoothing
%D Periods
Moving Average Type
%D Moving Average Type

The most commonly used arguments are 13 for %K periods, 25 for %K smoothing, 2 for %K double smoothing, and 9 for %D periods.

Average True Range

The Average True Range (Wilder) measures market volatility.

Interpretation:
High ATR values may signal market bottoms, and low ATR values may signal neutral markets.

Typical Price

A Typical Price is simply an average of one period’s high, low and close values.

Interpretation:
A Typical Price is often used as an alternative way of viewing price action, and also as a component for calculating other indicators.

Ultimate Oscillator

The Ultimate Oscillator compares prices with three oscillators, using three different periods for calculations.

Interpretation:
The most popular interpretation of the Ultimate Oscillator is price/indicator divergence.

Parameters:
Cycle 1
Cycle 2
Cycle 3

Variable Moving Average

A Variable Moving Average is an exponential moving average that adjusts to volatility.

Interpretation:
A Moving Average is most often used to average values for a smoother representation of the underlying price or indicator.

Parameters:
Source (open, high, low, close or volume)
Periods

Vertical Horizontal Filter

The Vertical Horizontal Filter (VHF) identifies whether a market is in a trending or choppy movement phase.

Interpretation:
The VHF indicator is most commonly used as an indicator of market volatility. It is also frequently used as a component for other technical indicators.

Parameters:
Source (open, high, low, close or volume)
Periods

VIDYA

VIDYA (Volatility Index Dynamic Average), developed by Chande, is a moving average derived from linear regression R2.

Interpretation:
A Moving Average is most often used to average values for a smoother representation of the underlying price or indicator. Because VIDYA is a derivative of linear regression, it quickly adapts to volatility.

Parameters:
Source (open, high, low, close or volume)
Periods
R2 Scale

R2Scale is a double value specifying the R-Squared scale to use in the linear regression calculations.
Chande recommends a value between 0.5 and 0.8 (default value is 0.65).

Volume Oscillator

The Volume Oscillator shows a spread of two different moving averages of volume over a specified period of time.

Interpretation:
The Volume Oscillator offers a clear view of whether or not volume is increasing or decreasing.

Parameters:
Volume
Short Term
Long Term
Points Or Percent (output scale type)

Volume Rate of Change (ROC)

The Volume Rate of Change indicator shows clearly whether or not volume is trending in one direction or another.

Interpretation:
Sharp Volume ROC increases may signal price breakouts.

Parameters:
Volume
Periods

Weighted Close

Weighted Close is an average of each day’s open, high, low, and close, where more weight is placed on the close.

Interpretation:
The Weighted Close indicator is a simple method that offers a simplistic view of market prices.

Weighted Moving Average

A Weighted Moving Average places more weight on recent values and less weight on older values.

Interpretation:
A Moving Average is most often used to average values for a smoother representation of the underlying price or indicator.

Parameters:
Source (open, high, low, close or volume)
Periods

Welles Wilder’s Smoothing

The Welles Wilder’s Smoothing indicator is similar to an exponential moving average. The indicator does not use the standard exponential moving average formula. Welles Wilder described 1/14 of today’s data + 13/14 of yesterday’s average as a 14-day exponential moving average.

Interpretation:
This indicator is used in the manner that any other moving average would be used.

Parameters:
Source (open, high, low, close or volume)
Periods

Williams’ Accumulation/Distribution

The Accumulation/Distribution indicator shows a relationship of price and volume.

Interpretation:
When the indicator is rising, the security is said to be accumulating. Conversely, when the indicator is falling, the security is said to being distributing. Prices may reverse when the indicator converges with price.

Williams’ %R

Williams’ %R measures overbought/oversold levels.

Interpretation:
The most widely used method for interpreting Williams’ %R is to buy when the indicator rises above 80 or sell when the indicator falls below 20.

Parameters:
Periods

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