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13 articles
Clear filtersMACD
MACD (moving average convergence divergence) plots the gap between a 12-period and a 26-period exponential moving average, with a signal line. It is unbounded, which makes it a trend indicator in an oscillator's clothes.
Bollinger Bands
Bollinger Bands are a moving average with bands set a number of standard deviations above and below it. The bands widen and narrow with volatility, which is the whole point of them.
ATR: Average True Range
ATR (Average True Range) measures how far a security typically moves in a period, gaps included. It has no direction, which is what makes it useful for sizing positions and placing stops.
The Stochastic Oscillator
Where the close sits inside the recent high-low range, expressed 0 to 100. It asks a different question from RSI and reaches extremes far more readily.
VWAP
VWAP (volume-weighted average price) is the average price every share traded at during a session, weighted by volume. It is an execution benchmark for institutions first and a chart reference second.
Fibonacci Retracements
Fibonacci retracements are levels drawn at set fractions of a prior move, such as 38.2, 50 and 61.8 percent. Their mathematical case is weak; their relevance comes from how many people draw them.
Pivot Points
Reference levels computed mechanically from the prior period's high, low and close. Their appeal is that they are fixed in advance and identical for everyone.
Relative Strength Against the Market
Relative strength is how a stock performs against a benchmark rather than in isolation. A stock down 3 percent on a day the index fell 6 has outperformed. It is a different measure from RSI.
Keltner and Donchian Channels
Two envelope constructions that answer different questions: one is built from average range, the other from the highest high and lowest low over a window.
Parabolic SAR
A trailing stop that accelerates. It is always in the market, always on one side, and it flips when price reaches it.
CCI and Williams %R
Two more oscillators. Both normalize price against a recent range, which is what almost every oscillator does, and the differences are in the arithmetic rather than in the information.
Money Flow Index
RSI with volume weighting. It is one of the few oscillators that introduces an input other than price, which is the whole of its claim.
Divergence, Across Indicators
Divergence is price making a new high or low while an indicator does not. It is the most cited observation in chart reading and one of the weakest, for a reason that follows from how indicators are built.