Technical Indicators
25 articles · 19 glossary terms
Moving averages, oscillators, volatility bands and volume measures — how each is calculated, what it actually claims, and where it fails.
Foundations
Start here if the subject is new.What Technical Analysis Is, and What It Is Not
Technical analysis studies price and trading volume to describe the balance of supply and demand. It describes conditions; it does not forecast outcomes.
Moving Averages: Simple and Exponential
The most used indicator there is. An average of recent closes, redrawn each bar, which converts a jagged series into a slope.
The Golden Cross and the Death Cross
Two named events describing the 50-day moving average crossing the 200-day. They are widely reported, heavily lagging, and describe a trend that has already turned.
RSI: The Relative Strength Index
A bounded oscillator comparing the size of recent gains to recent losses. It measures stretch, and the conventional thresholds are conventions rather than rules.
Volume and On-Balance Volume
Trading volume measures participation. It is the one input that is not a transformation of price, which is what makes it worth reading on its own.
Intermediate
Assumes the foundations above.MACD
Moving average convergence divergence plots the gap between two exponential averages. It is unbounded, which makes it a trend indicator wearing an oscillator's clothes.
Bollinger Bands
A moving average with bands set a number of standard deviations away. The bands widen and narrow with volatility, which is the whole point of them.
ATR: Average True Range
A plain measure of how far a security moves in a period, price gaps included. It has no direction, which is what makes it useful for sizing and for stop placement.
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
The volume-weighted average price is what the average share traded at over a session. It is an execution benchmark first and a chart reference second.
Fibonacci Retracements
Horizontal levels drawn at conventional fractions of a prior move. Their mathematical justification is weak and their practical 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
How a stock performs against a benchmark rather than in isolation. A stock down three percent on a day the index fell six has outperformed, and the chart alone does not show it.
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 normalise 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
Price makes a new extreme and an indicator does not. It is the most cited observation in chart reading and one of the weakest, for a reason that follows from the construction.
Advanced
Detail, edge cases and methodology.ADX and Trend Strength
ADX measures how strongly a market is trending without saying which way. Its real use is deciding which other indicators are appropriate right now.
Beta and Volatility
Two different measures of movement. Historical volatility says how much a security moves; beta says how much of that movement is shared with the market.
Ichimoku Kinko Hyo
Five lines intended to be read as one picture. Every component is a midpoint of a range or a shifted copy, which is what makes the whole thing derived from the same series.
Volume Profile
Volume plotted against price rather than against time. It answers where trading happened, which a conventional volume bar cannot.
Market Profile
A distribution of time spent at each price rather than volume. Built for a session, it describes where the market accepted a price and where it rejected one.
Elliott Wave, Assessed
A framework describing price as a nested sequence of five-wave and three-wave structures. Widely followed, and difficult to falsify in the form it is usually applied.
The Wyckoff Method, Assessed
A framework describing markets as cycles of accumulation and distribution driven by large operators. Its mechanism is plausible; its identification is retrospective.