|
The parameters for an indicator are specified at the time the indicator is
plotted. Different Indicators have different parameters. After plotting an
indicator, if u want to change the parameters, select the indicator, right click
and select the indicator properties option. This will bring up the property
dialog box. Change the parameters and click on either 'Apply' or 'Close' button.
Also You can select another indicator using Right click option 'add Indicator'.
Following indicators are available for chart analysis.
1. Accumulation/Distribution
There are no parameters for the Accumulation/Distribution indicator.
Overview
The Accumulation/Distribution 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.
Interpretation
The Accumulation/Distribution is really a variation of the more popularOn
Balance Volume. Both of these indicators attempt to confirm changes in prices by
comparing the volume associated with prices.
When the Accumulation/Distribution moves up, it shows that the security is
being accumulated, as most of the volume is associated with upward price
movement. When the indicator moves down, it shows that the security is being
distributed, as most of the volume is associated with downward price movement.
Divergences between the Accumulation/Distribution and the security's price
imply a change is imminent. When a divergence does occur, prices usually change
to confirm the Accumulation/Distribution. For example, if the indicator is
moving up and the security's price is going down, prices will probably reverse.
Calculation
A portion of each day's volume is added or subtracted from a cumulative
total. The nearer the closing price is to the high for the day, the more volume
added to the cumulative total. The nearer the closing price is to the low for
the day, the more volume subtracted from the cumulative total. If the close is
exactly between the high and low prices, nothing is added to the cumulative
total.
2. Average True Range
The parameters of a true range are as follows
Time Periods : Enter the number of time periods
to use when calculating the Average True Range. The term "time
periods" refers to days if the chart contains daily data, weeks for weekly
data, etc.
Style /Grid /Canvas: Choose color, style
and weight from the color/style tab
The Average True Range (ATR) is a measure of volatility.
Interpretation
Wilder has found that high ATR values often occur at market
bottoms following a "panic" sell-off. Low Average True Range values
are often found during extended sideways periods, such as those found at tops
and after consolidation periods.
The Average True Range can be interpreted using the same
techniques that are used with the other volatility indicators.
Calculation
The True Range indicator is the greatest of the following :
The distance from today's high to today's low.
The distance from yesterday's close to today's high
The distance from yesterday's close to today's low.
The Average True Range is a moving average (typically 14 days)
of the True Ranges.
3. Bollinger Bands
The parameters for the Bollinger Bands are shown below. These
parameters are specified at the time the indicator is plotted.
img border="0" src="Screenshots/Images/indicator-bollinger.jpg" width="522" height="318">
Time Periods. Enter the number of time periods
to use when calculating. The term "time periods" refers to days if the
chart contains daily data, weeks for weekly data, etc.
Deviations. Enter the number of standard
deviations by which to shift the upper and lower bands
Method. Choose the moving average calculation
method (i.e., simple, exponential).
Price Field. Choose the price field (i.e., open,
high, low, or close) to use when calculating Bollinger Bands.
Style / Grid / Canvas : Choose the color , style
and weight Bollinger Bands similar to moving average envelopes. The
difference between Bollinger Bands and envelopes is that 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.
Calculation
Bollinger Bands are displayed as three bands. The middle band is a normal
moving average. In the following formula, "n" is the number of time
periods in the moving average (e.g 20 days).
The upper band is the same as the middle band, but it is shifted up by the
number of standard deviations (e.g., two deviations.) The lower band is the
moving average shifted down by the same number of standard deviations
4. Commodity Channel Index (CCI)
The parameters for the CCI are shown below. These parameters are specified at
the time the indicator is plotted.
Time Periods. Enter the number of time periods to use when
calculating the Commodity Channel Index. The term "time periods"
refers to days if the chart contains daily data, weeks for weekly data, etc.
While the CCI was originally designed for commodities, the indicator also
works very well with stocks and mutual funds.
There are two basic methods of interpreting the CCI: looking for divergences
and as an overbought/oversold indicator.
A divergence occurs when the security's prices are making new highs while the
CCI is failing to surpass its previous highs. This classic divergence is usually
followed by a correction in the security's price.
The CCI typically oscillates between ±100. To use the CCI as an
overbought/oversold indicator, readings above +100 imply an overbought condition
(and a pending price correction) while readings below -100 imply an oversold
condition (and a pending rally).
Calculation
The following are basic steps involved in the calculation:
1. Add each period's high, low, and close and divide this sum by 3. This is
the typical price.
2. Calculate an n-period simple moving average of the typical prices computed
in Step 1.
3. For each of the prior n-periods, subtract today's Step 2 value from Step
1's value n days ago. For example, if you were calculating a 5-day CCI you
would perform five subtractions using today's Step 2 value.
4. Calculate an n-period simple moving average of the absolute values of each
of the results in Step 3.
5. Multiply the value in Step 4 by 0.015.
6. Subtract the value from Step 2 from the value in Step 1.
7. Divide the value in Step 6 by the value in Step 5.
5. Chaikin A/D Oscillator
There are no parameters for the Chaikin A/D Oscillator except for the
color/Style and Horizontal values.
The Chaikin Oscillator is a moving average oscillator based on the
Accumulation/Distribution indicator. The chaikin Oscillator, developed by Marc
Chaikin, is based on the difference between the 3-period and 10-period
exponential moving averages of the Accumulation/Distribution Line.
Calculation
A ten period exponential average of the difference between the high and the
low prices is first calculated. Then a ten period ROC is calculated of the
average values. This gives the chaikin's oscillator.
6. MACD
The parameters for the MACD are shown below.
Signal Time Periods. Enter the number of time periods to use when calculating
the MACD's signal line.
The basic MACD trading rule is to sell when the MACD falls below its 9-period
signal line. Similarly, a buy signal occurs when the MACD rises above its signal
line.
Interpretation
The MACD proves most effective in wide-swinging trading markets. There are
three popular ways to use the MACD: crossovers, overbought/oversold conditions,
and divergences.
Crossovers
The basic MACD trading rule is to sell when the MACD falls below its signal
line. Similarly, a buy signal occurs when the MACD rises above its signal line.
It is also popular to buy/sell when the MACD goes above/below zero.
Overbought/Oversold Conditions
The MACD is also useful as an overbought/oversold indicator. When the shorter
moving average pulls away dramatically from the longer moving average (i.e., the
MACD rises), it is likely that the security price is overextending and will soon
return to more realistic levels. MACD overbought and oversold conditions exist
vary from security to security.
Divergences
A indication that an end to the current trend may be near occurs when the
MACD diverges from the security. A bearish divergence occurs when the
MACD is making new lows while prices fail to reach new lows. A bullish
divergence occurs when the MACD is making new highs while prices fail to reach
new highs. Both of these divergences are most significant when they occur at
relatively overbought/oversold levels.
Calculation
The MACD is calculated by subtracting the value of a 26-day exponential
moving average from a 12-day exponential moving average. A 9-day dotted
exponential moving average of the MACD (the "signal" line) is then
plotted on top of the MACD
7. Moving Averages
The parameters for a moving average are shown below. These parameters are
specified at the time the moving average is plotted.
Time Periods. Enter the number of time periods to use when
calculating the moving average.
Price Field. Choose the price field (i.e., open, high, low,
close,
Style/Grid /Canvas : Choose color, style and weight from
the color/style tab
A Moving Average is an indicator that shows the average value of a security's
price over a period of time.
8. On Balance Volume
The parameters for the On Balance Volume are shown below.
Price Field. Choose the price field (i.e., open, high, low, or close) to use
when calculating the moving average.
Interpretation
On Balance Volume is a running total of volume. It shows if volume is flowing
into or out of a security. When the security closes higher than the previous
close, all of the day's volume is considered up-volume. When the security closes
lower than the previous close, all of the day's volume is considered
down-volume.
The basic assumption, regarding OBV analysis, is that OBV changes precede
price changes. The theory is that smart money can be seen flowing into the
security by a rising OBV. When the public then moves into the security, both the
security and the OBV will surge ahead.
If the security's price movement precedes OBV movement, a
"non-confirmation" has occurred. Non-confirma-tions can occur at bull
market tops (when the security rises without, or before, the OBV) or at bear
market bottoms (when the security falls without, or before, the OBV).
The OBV is in a rising trend when each new peak is higher than the previous
peak and each new trough is higher than the previous trough. Likewise, the OBV
is in a falling trend when each successive peak is lower than the previous peak
and each successive trough is lower than the previous trough. When the OBV is
moving sideways and is not making successive highs and lows, it is in a doubtful
trend
Once a trend is established, it remains in force until it is broken. There
are two ways in which the OBV trend can be broken. The first occurs when the
trend changes from a rising trend to a falling trend, or from a falling trend to
a rising trend.
The second way the OBV trend can be broken is if the trend changes to a
doubtful trend and remains doubtful for more than three days. Thus, if the
security changes from a rising trend to a doubtful trend and remains doubtful
for only two days before changing back to a rising trend, the OBV is considered
to have always been in a rising trend.
When the OBV changes to a rising or falling trend, a "breakout" has
occurred. Since OBV breakouts normally precede price breakouts, investors should
buy long on OBV upside breakouts. Likewise, investors should sell short when the
OBV makes a downside breakout. Positions should be held until the trend changes
(as explain-ed in the preceding paragraph).
This method of analyzing On Balance Volume is designed for trading short-term
cycles. According to Granville, investors must act quickly and decisively if
they wish to profit from short-term OBV analysis.
Calculation
On Balance Volume is calculated by adding the day's volume to a cumulative
total when the security's price closes up, and subtracting the day's volume when
the security's price closes down.
If today's close is greater than yesterday's close then:
OBV = Previous day's OBV + Current day's Volume
If today's close is less than yesterday's close then:
OBV = Previous day's OBV-Current day's Volume
If today's close is equal to yesterday's close then:
OBV = Previous day's OBV
9. Price Rate of Change (ROC)
The parameters for the Price Rate-Of-Change are shown below.
Time Periods. Enter the number of time periods to use when calculating Price
Rate-Of-Change.
Percent or Points. Choose the method to use when displaying the change in the
prices. Choose Percent to see the ratio (in percent) between the prices. Choose
Points to see the point difference
Overview
The Price Rate-of-Change ("ROC") indicator displays the difference
between the current price and the price x-time periods ago. The difference can
be displayed in either points or as a percentage. The Momentum indicator
displays the same information, but expresses it as a ratio.
Interpretation
It is a well recognized phenomenon that security prices surge ahead and
retract in a cyclical wave-like motion. This cyclical action is the result of
the changing expectations as bulls and bears struggle to control prices.
The ROC displays the wave-like motion in an oscillator format by measuring
the amount that prices have changed over a given time period. As prices
increase, the ROC rises; as prices fall, the ROC falls. The greater the change
in prices, the greater the change in the ROC.
The time period used to calculate the ROC may range from 1-day (which results
in a volatile chart showing the daily price change) to 200-days (or longer). The
most popular time periods are the 12- and 25-day ROC for short to
intermediate-term trading..
The 12-day ROC is an excellent short- to intermediate-term
overbought/oversold indicator. The higher the ROC, the more overbought the
security; the lower the ROC, the more likely a rally. However, as with all
overbought/over-sold indicators, it is prudent to wait for the market to begin
to correct (i.e., turn up or down) before placing your trade. A market that
appears overbought may remain overbought for some time. In fact, extremely
overbought/oversold readings usually imply a continuation of the current trend.
The 12-day ROC tends to be very cyclical, oscillating back and forth in a
fairly regular cycle. Often, price changes can be anticipated by studying the
previous cycles of the ROC and relating the previous cycles to the current
market.
Calculation
When the Rate-of-Change displays the price change in points, it subtracts the
price x-time periods ago from today's price:
ROC = Today' Close - Close x-periods ago
When the Rate-of-Change displays the price change as a percentage, it divides
the price change by price x-time period's ago:
ROC =( (Today's Close - Close x-periods ago)/ Today's' close x-periods
ago) *100
10 Relative Strength Index (RSI)
The parameters for the RSI are shown below.
Time Periods. Enter the number of time periods to use when calculating the
Relative Strength Index. The term "time periods" refers to days if the
chart contains daily data, weeks for weekly data, etc.
Price Field. Choose the price field (i.e., open, high, low, or close) to use
when calculating the Relative Strength Index.
Interpretation
When Wilder introduced the RSI, he recommended using a 14-day RSI. Since
then, the 9-day and 25-day RSIs have also gained popularity. Because you can
vary the number of time periods in the RSI calculation, I suggest that you
experiment to find the period that works best for you. (The fewer days used to
calculate the RSI, the more volatile the indicator.)
The RSI is a price-following oscillator that ranges between 0 and 100. A
popular method of analyzing the RSI is to look for a divergence in which
the security is making a new high, but the RSI is failing to surpass its
previous high. This divergence is an indication of an impending reversal. When
the RSI then turns down and falls below its most recent trough, it is said to
have completed a "failure swing." The failure swing is considered a
confirmation of the impending reversal.
In Mr. Wilder's book, he discusses five uses of the RSI in analyzing
commodity charts. These methods can be applied to other security types as well.
- Tops and Bottoms.
The RSI usually tops above 70 and bottoms below 30. It usually forms
these tops and bottoms before the underlying price chart.
- Chart Formations.
The RSI often forms chart patterns such as head and shoulders (page 215)
or triangles (page 216) that may or may not be visible on the price chart.
- Failure Swings
(also known as support or resistance penetrations or breakouts). This is
where the RSI surpasses a previous high (peak) or falls below a recent low
(trough).
- Support and Resistance.
The RSI shows, sometimes more clearly than price themselves, levels of
support and resistance.
- Divergences.
As discussed above, divergences occur when the price makes a new high (or
low) that is not confirmed by a new high (or low) in the RSI. Prices usually
correct and move in the direction of the RSI.
11. Stochastics Oscillator
The parameters for the Stochastic Oscillator are shown below. These
parameters are specified at the time the indicator is plotted. You can edit the
parameters of an existing plot by right-clicking on the indicator and choosing
Properties from the shortcut menu.
%K Time Periods. Enter the number of time periods used in the stochastic
calculation.
%D Time Periods. Enter the number of time periods used in the moving average
of %K. This is plotted as a dotted line (default) on top of %K.
%K Slowing. Enter the number of time periods used in the internal smoothing
of the %K value. A value of 1 is considered a fast stochastic; the default value
of 3 is considered a slow stochastic.
The Stochastic Oscillator compares where a security's price closed relative
to its price range over a given time period.
Interpretation
The Stochastic Oscillator is displayed as two lines. The main line is called
"%K." The second line, called "%D," is a moving average of
%K. The %K line is usually displayed as a solid line and the %D line is usually
displayed as a dotted line.
There are several ways to interpret a Stochastic Oscillator. Three popular
methods include:
- Buy when the Oscillator (either %K or %D) falls below a specific level
(e.g., 20) and then rises above that level. Sell when the Oscillator rises
above a specific level (e.g., 80) and then falls below that level.
- Buy when the %K line rises above the %D line and sell when the %K line
falls below the %D line.
- Look for divergences. For example, where prices are making a series
of new highs and the Stochastic Oscillator is failing to surpass its
previous highs.
Calculation
The Stochastic Oscillator has four variables:
- %K Periods.
This is the number of time periods used in the stochastic calculation.
- %K Slowing Periods.
This value controls the internal smoothing of %K. A value of 1 is
considered a fast stochastic; a value of 3 is considered a slow stochastic.
- %D Periods.
This is the number of time periods used when calculating a moving average
of %K. The moving average is called "%D" and is usually displayed
as a dotted line on top of %K.
The formula for %K is:
((Today's Close - Lowest Low in %K Periods)/(Highest high in %K periods -
Lowest Low in %K Period ))*100
For example, to calculate a 10-day %K, first find the security's highest-high
and lowest-low over the last 10 days. As an example, let's assume that during
the last 10 days the highest-high was 46 and the lowest-low was 38--a range of 8
points. If today's closing price was 41, %K would be calculated as:
37.5 = ((41-38)/(46-38))*100
The 37.5% in this example shows that today's close was at the level of 37.5%
relative to the security's trading range over the last 10 days. If today's close
was 42, the Stochastic Oscillator would be 50%. This would mean that that the
security closed today at 50%, or the mid-point, of its 10-day trading range.
The above example used a %K Slowing Period of 1-day (no slowing). If you use
a value greater than one, you average the highest-high and the lowest-low over
the number of %K Slowing Periods before performing the division.
A moving average of %K is then calculated using the number of time periods
specified in the %D Periods. This moving average is called %D.
The Stochastic Oscillator always ranges between 0% and 100%. A reading of 0%
shows that the security's close was the lowest price that the security has
traded during the preceding x-time periods. A reading of 100% shows that the
security's close was the highest price that the security has traded during the
preceding x-time periods.
12. Volume Rate of Change
The parameters for the Volume Rate-Of-Change are shown below.
Time Periods. Enter the number of time periods to use when calculating the
Volume Rate-Of-Change. The term "time periods" refers to days if the
chart contains daily data, weeks for weekly data, etc.
Percent or Points. Choose the method to use when displaying the change in the
volume. Choose Percent to see the ratio (in percent) between the volume figures.
Choose Points to see the point difference.
The Volume Rate-Of-Change (ROC) indicator is calculated by dividing the
volume change over the last x-periods by the volume x-periods ago. The result is
the percent by which the volume has changed over the last x-periods.
If volume is higher today than x-days ago, the ROC will be a positive number.
If volume is lower today then x-days ago, the R.O.C. will be negative.
Interpretation
Almost every significant chart formation (e.g., tops, bottoms, breakouts,
etc) is accompanied by a sharp increase in volume. The Volume ROC shows the
speed at which volume is changing.
Additional information on the interpretation of volume trends can be found in
the discussions on Volume and on the Volume Oscillator.
Calculation
The Volume Rate-Of-Change indicator is calculated by dividing the amount that
volume has changed over the last n-periods by the volume n-periods ago. The
result is the percentage that the volume has changed in the last n-periods.
If the volume is higher today than n-periods ago, the ROC will be a positive
number. If the volume is lower today than n-periods ago, the ROC will be a
negative number.
13. Williams %R
The parameters for the Williams %R are shown below.
Time Periods. Enter the number of time periods to use when
calculating the Volume Rate-Of-Change.
Style / Grid / Canvas: Choose the color, style and
weight
Williams' %R (pronounced "percent R") is a momentum indicator
that measures overbought/oversold levels.
| 
