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24-hour Volume
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# 24-hour Volume
#### Definition
Volume is the total amount of assets traded in a specific period of time. The 24-hour Volume indicator is used to measure the total volume of a symbol traded in the last 24 hours, expressed as in currency. It can be used to measure the market's interest in a particular symbol.
#### Calculation
To calculate the 24-hour volume, the indicator uses data from different timeframes; the timeframes chosen depend on the timeframe on the main chart:
Chart timeframe
Timeframe used for the calculation
less than 1D
1
1D - 1W
5
greater than 1W
60
The indicator calculates the sum of the volume for the last X bars of the lower timeframe, where X is the number of bars that opened in the last 24 hours. The indicator works with calendar hours regardless of the symbol session, so if there has been no past trades for 24 hours or more (e.g., on the first Monday bar on a symbol that is only traded on business days), 24-hour volume can be equal to the regular volume data.
The indicator always displays the 24-hour volume converted to the currency selected in the indicator's inputs. This means that, if the exchange presents its volume data in base currency (e.g., when for BTCUSD, the volume represents the number of BTC traded), the _24-hour Volume_ indicator converts the base volume into currency volume by multiplying the volume by the price on the chart. The 'Price Source' input can be used to select which specific chart value will be used for this conversion.
The volume can be additionally converted into a currency different from the one on the chart. This can be done by switching the 'Target Currency' input from Default to a different currency.
#### What to look for
The 24-hour volume is a metric used to track the total value of all cryptocurrency transactions within a 24-hour period. It can be used to measure the market's interest in a particular symbol and gauge its overall health. A high 24-hour volume means that there is high demand for the symbol and that it is healthy and viable. A low 24-hour volume may indicate that the symbol is not as popular as others.
#### Inputs
##### Price Source
Specifies the price source used to convert base volume into currency volume, if necessary.
##### Target Currency
Sets the currency that the 24-hour volume will be presented in. Available options: Default, USD, EUR, CAD, JPY, GBP, HKD, CNY, NZD, RUB.
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Accumulation Distribution (ADL)
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# Accumulation Distribution (ADL)
#### Definition
Accumulation Distribution Indicator or ADL (Accumulation Distribution Line) is a volume based indicator which was essentially designed to measure underlying supply and demand. It accomplishes this by trying to determine whether traders are actually accumulating (buying) or distributing (selling). This is accomplished by plotting a running total of each period’s Money Flow Volume. ADL can reveal divergences between volume flow and actual price to primarily either affirm a current trend or to anticipate a future reversal.
#### History
The Accumulation Distribution Line was created by famed stock analyst Marc Chaikin. The ADL has become closely related to two of Chaikin’s other famous indicators; the Chaikin Oscillator and the Chaikin Money Flow indicator.
#### Calculation
Accumulation/Distribution = ((Close – Low) – (High – Close)) / (High – Low) \* Period Volume
In order to fully understand how the indicator actually works, it is necessary to break this formula down into individual parts.
1. Find the Money Flow Multiplier.
((Close - Low) - (High - Close))/(High - Low) = Money Flow Multiplier
2. Once you have calculated the Money Flow Multiplier, you can calculate Money Flow Volume.
Money Flow Multiplier \* Period’s Volume = Money Flow Volume
3. As previously mentioned The ADL is a running total of each period’s Money Flow Volume. Therefore once you have the Current Money Flow Volume you can plot the ADL.
ADL = Previous ADL + Current Money Flow Volume
#### The basics
When breaking down the formula, what ultimately causes the ADL to rise or fall is the Money Flow Multiplier. The Money Flow Multiplier is determined by the relationship between a period’s closing price and the period’s high/low range. The Money Flow Multiplier is always within a range of 1 and -1. When a period closes in the upper half of the high/low range, the Money Flow Multiplier will rise closer to 1. On the other hand, when a period closes in the lower half of the high/low range, the Money Flow Multiplier will fall towards -1. The closer the multiplier is to 1, the higher the buying pressure. So when you combine a highly positive multiplier with strong volume the ADL will rise. When you combine a highly negative multiplier with strong volume, selling pressure will rise and the ADL will fall. Therefore ADL can be seen as a way of measuring the strength of buying and selling (accumulation and distribution) pressure. With this in mind, ADL becomes a valuable tool in both confirming trends as well as anticipating reversal.
#### What to look for
##### Trend Confirmation
This is actually the simplest benefit of using the ADL. During a strong uptrend or a strong downtrend, The ADL will actually move in the same direction as price confirming the current trend.
##### Divergence
Divergences play another huge role in analyzing the ADL. It is believed by many that volume precedes price so any instance in which volume and price are heading in opposite directions should surely be noted. ADL will help the trader identify these instances.
_Bullish ADL Divergence is when the ADL is trending upwards while price is trending down. ADL trending up shows an increase in buying pressure (Accumulation). Assuming volume does precede price, a reversal in price definitely seems possible._
_Bearish ADL Divergence is when the ADL is trending downwards while price is on the rise. In this instance, ADL is signaling an increase in selling pressure (Distribution), and price may soon take a downwards turn._
##### Unreliability
As with any indicator, it is important for whoever is employing the ADL to understand its shortfalls or weaknesses. ADL’s major shortfall is that the Money Flow Multiplier, which plays a major part in determining which direction the Accumulation/Distribution Line will move, does not take into account the change in price range between periods. This means that if there is any type of gap in price, it won’t be picked up by the ADL and therefore the line and price will become out of synch.
#### Summary
Overall, The Accumulation Distribution indicator is a fairly reliable indicator for calculating underlying factors on a security’s chart. This is not something that is easily done, so ADL can indeed be quite valuable. However, knowing the underlying buying and selling (accumulation and distribution) pressures is typically not enough on its own. That is why ADL is best used as a complementary indicator that is just one aspect of any trading program or strategy. Another reason why ADL should not necessarily be used as a stand-alone is the unreliability mentioned in the previous section. Sometimes ADL can become out of sync with price. It is typically best to have other tools in place in order to have a system of checks and balances.
##### Style
###### Accumulation/Distribution
Can toggle the visibility of the ADL as well as the visibility of a price line showing the actual current value of the ADL. Can also select the ADL's color, line thickness and visual type (Line is the default).
##### Properties
###### Last Value on Price Scale
Toggles the visibility of the Indicator Value on the vertical axis.
###### Arguments in Header
Toggles the visibility of the indicator's name and settings in the upper left hand corner of the chart.
###### Scaling
Scales the indicator to either the Right or to the Left.
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Advance/Decline Line
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# Advance/Decline Line
#### Definition
The advance decline line is known for its simplicity in showing how many stocks are advancing compared to how many stocks are declining on a daily basis. This indicator is used to study market breadth, in other words, how healthy the market is as a whole. If the advance decline line is sloping upward, it means more stocks are advancing than declining. If it is sloping downward, it means more stocks are declining than advancing.
#### History
One of the earliest applications of this breadth indicator occurred in the late 1930s as an element of research analysis of the New York Stock Exchange (NYSE). The advance decline line was used to develop a historical record of rises and falls, volumes, and gains as well as losses on the NYSE in the early 30s.
Although the theory for the advance decline line was developed in the 1930s, it was not made popular until the 1960s, where it was later used in the famous “Dow Theory Letters” written by Richard Russell.
#### How to calculate it yourself
1. Subtract the number of stocks which finished lower on the day from the number of stocks that finished higher on the day. This represents the net number of advances.
2. At the end of the next trading day, do the same thing as step 1. Except this time, if the total is positive, add it to the total from the previous day. If it is negative, subtract it from the total of the previous day.
3. Repeat both steps 1 and 2 daily.
#### Takeaways
The advance decline line is a breadth indicator that is used to show how many stocks are involved in a rising or falling market. It’s how you gauge the participation of the market to validate uptrends or downtrends.
The advance decline line is not perfectly correlated to the market and sometimes the two can diverge. If major indices rally and the advance decline line falls, this shows that fewer stocks are involved in the rally and could mean the index is nearing the end of its rally. When major indices are falling, a declining advance decline line will confirm its general downtrend. If, however, the major indices are declining, whereas the advance decline line is rising, then it means fewer stocks are declining in general overtime. This could mean that the index may be nearing the end of its decline.
#### What to look for
The advance decline line is used to confirm the strength of a current trend and the likelihood that the trend will reverse. This indicator shows what the direction of the market looks like depending on stock participation.
Bearish divergence: if indices are rising, but the advance decline line is sloping downwards, it’s a sign the markets may be about to reverse direction. If the advance decline line is sloping upward and the market is showing a downward trend, then the market is most likely healthy.
Bullish divergence: On the other hand, if indices are continuously moving lower and the advance decline line shows an upward trend, it may be an alert to show that sellers are losing their conviction. If the advance decline line and the markets both trend lower together, this shows a greater chance of a further decline in prices.
#### Summary
The advance decline line tracks market uptrends and downtrends and is a staple for confirming price trends in major indices or spotting divergences that may show a reversal. Use it to track market breadth, the number of stocks participating in the market, or warn you of coming reversals.
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Advance/Decline Ratio
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# Advance/Decline Ratio
#### Definition
The advance decline ratio shows the number of stocks that closed higher compared to the number of stocks that closed lower. This ratio is calculated using the prior day’s closing prices. The ratio is used to analyze market breadth and determine how strong the market is as a whole.
#### Calculations
The advance decline ratio is calculated by dividing the number of stocks that are advancing by the number of stocks that are declining.
#### Takeaways
When using the advance decline ratio, keep in mind that it rises when stocks are advancing faster than stocks that are declining, and the ratio falls when declining stocks are reported to have exceeded advances.
A historically low advance decline ratio potentially shows a market that is oversold, whereas a high advance decline ratio points towards a market that is potentially overbought. The advance decline ratio can be calculated for a variety of time periods, including one day, week, or month.
#### What to look for
1. There’s more than just one way to use the advance decline ratio. Let’s explore the options below.
2. Use the advance decline ratio to determine the market’s status and find out whether or not it is overbought or oversold.
3. Look at the overall trend of the ratio and use this information to help you determine whether or not the market is showing a bearish or bullish trend. A steadily increasing / decreasing ratio would signal the status of the trend.
#### Summary
To sum up, the advance decline ratio is a technical analysis indicator that helps traders determine overall trends, potential trends, and the possible reversal of trends that might impact the entire market. This tool can help identify the status of the market and whether or not it is bullish or bearish in nature.
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Advance/Decline Ratio (Bars)
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# Advance/Decline Ratio (Bars)
#### Definition
The bars-based advance/decline ratio indicator shows the number of bars that closed higher compared to the number of bars that closed lower for the current symbol and the specified length. The indicator calculates the number of green and red bars for the last several bars and divides the first number by the second. The ratio can be used to analyze the historical performance of the current symbol in the specified window: higher values mean the prices consistently traded up and vice versa.
#### Inputs
##### Length
The number of bars analyzed: e.g. if the window is 9, the indicator counts the number of green and red bars for the last 9 bars and divides one by another.
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Analyst price forecast
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# Analyst price forecast
The price forecast displayed on the chart of the [Forecast tab](https://www.tradingview.com/symbols/NASDAQ-AAPL/forecast/) of the symbol page reflects the dynamics of price changes over the past 2 years and the forecast of possible price behavior by the end of the next year. You can see three predicted price levels: minimum, maximum and average.
**Where does the forecast come from?**
FactSet provides analyst recommendations and their consensus score is a predictive measure of future price movement, giving insight into market expectations for each security.
For example, the screenshot shows 38 analysts' yearly consensus price prediction for NASDAQ:AAPL on November 28, 2022.
Forecast data is available for a number of symbols from the following exchanges: ADX, AMEX, ASX, ATHEX, BAHRAIN, BCBA, BCS, BER, BET, BIST, BME, BMFBOVESPA, BMV, BSE, BVB, BVC, BVL, BX, CSE, DFM, DUS, EGX, EURONEXT, FSE, FWB, GPW, HAM, HAN, HKEX, HNX, HOSE, IDX, JSE, KRX, LSE, LSIN, LUXSE, MIL, MUN, MYX, NAG, NASDAQ, NEO, NGM, NSE, NSENG, NYSE, NZX, OMXCOP, OMXHEX, OMXSTO, OMXTSE, OSL, OTC, PSE, QSE, SAPSE, SET, SGX, SIX, SSE, SWB, SZSE, TADAWUL, TASE, TPEX, TSE, TSX, TSXV, TWSE, UPCOM, XETR.
Remember that the forecast is not an investment recommendation or a guide to action. In investments and trading, you should not make any decisions without your own evaluation of the instrument.
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Arnaud Legoux Moving Average
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# Arnaud Legoux Moving Average
#### Definition
The Arnaud Legoux Moving Average (ALMA) is different from other moving averages because of its specific design to use Gaussian distribution that is shifted with a calculated offset in order for the average to be biased towards more recent days, instead of more evenly centered on the window. Built on the generalized Moving Average Framework, ALMA is able to use various indicators in conjunction with its own capabilities and run on multiple time frames, with the inclusion of custom bar types.
#### History
The Arnaud Legoux Moving Average (ALMA) indicator was developed by both Arnaud Legoux and Dimitrios Douzis-Loukas while trying to create a new and improved moving average that would showcase advanced smoothness and responsiveness in comparison to other moving averages at the time of its development. Legoux claimed the ALMA moving average was inspired significantly by the Gaussian Filter and often compares his developed moving average to the Hull Moving Average (HMA), which is said to be outperformed by the ALMA in effectiveness and smoothness.
#### Calculations
1. To calculate the Arnaud Legoux Moving Average (ALMA) you’ll first need to compute a weighted sum of the window's size using your input series and weights given by a Gaussian function with a peak value determined by the offset, and a width determined by sigma.
2. This weighted sum is then divided by the total sum of the weights.
#### Takeaways
The main goal of the Arnaud Legoux Moving Average (ALMA) is to generate the most reliable signals in comparison to other moving averages. To accomplish this, ALMA applies the average from left to right, then right to left, in turn, creating a combo line. The combo signal, as a result, adjusts accordingly by applying a Gaussian Offset that can adjust the combo line to the current price and a sigma.
#### What to look for
The Arnaud Legoux Moving Average has three elements to it:
Window: This element is the period. By default, the window is set to 9 periods, but it can be customized to fit any trading style.
Offset: This element is the Gaussian that is applied to the combo line and can be aligned to the current price. It’s default is set to 0.85, but by setting it to 1, you can make it align fully to the current price (similar to how an Exponential Moving Average (EMA) with a setting of 0 is like a Simple Moving Average (SMA)). 0.85 is what is recommended, however, you can customize it like with the window element.
Sigma: This element is a standard deviation that is applied to the combo line in order for it to appear more sharp. The default is set to 6 and it is not recommended to change the setting. The value of 6 is inspired by the [Six Sigma process](https://en.wikipedia.org/wiki/Six_Sigma).
#### Summary
To sum up, the Arnaud Legoux Moving Average is a moving average that is geared specifically for optimal smoothness and responsiveness. It was created to be set apart as a superior moving average at the time of its development and is often considered a prime average that is followed by many traders and investors for market screening. To follow this average without access to it in your screener, just adjust your preferred Exponential Moving Average (EMA) and/or Simple Moving Average (SMA) settings as described in the section above titled.
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Aroon
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# Aroon
#### Definition
The [Aroon Indicator](https://www.tradingview.com/scripts/aroon/) (often referred to as Aroon Up Down) is a range bound, technical indicator that is actually a set of two separate measurements designed to measure how many periods have passed since price has recorded an n-period high or low low with “n” being a number of periods set at the trader’s discretion. For example a 14 Day Aroon-Up will take the number of days since price last recorded a 14 day high and then calculate a number between 0 and 100. A 14 Day Aroon-Down will do the same thing except is will calculate a number based of the number of days since a 14 day low. This number is intended to quantify the strength of a trend (if there is one). The closer the number is to 100, the stronger the trend. Aroon is not only good at identifying trends, it is also a useful tool for identifying periods of consolidation.
#### History
The Aroon Indicator was developed in 1995 by technical analyst and author Tushar Chande. The fact that he named the indicator “Aroon” which is Sanskrit for “Dawn’s Early Light” demonstrates his belief in his indicator’s trend discovery capabilities.
#### Calculation
The Calculation relies on a user-defined period. For this example we will use a 14 Day Aroon.
Aroon-Up = ((14 - Days Since 14-day High)/14) x 100
Aroon-Down = ((14 - Days Since 14-day Low)/14) x 100
#### The basics
The Aroon Indicator is range bound, techncial indicator that produces numbers between 0 and 100. The technical analyst should focus on three areas on that scale.
1. Close to or at 100 indicates a stronger trend.
2. Close to or at 0 indicates a weaker trend.
3. The area right around 50 is middle ground and the trend could go either way.
When Aroon-Up is above 50 and close to 100 and Aroon-Down is below 50, this is a good indication of a strengthening uptrend. Likewise when Aroon-Down is above 50 and close to 100 and Aroon-Up is below 50, a strengthening downtrend may be at hand.
#### What to look for
##### Trend Spotting
Aroon's major function is to identify new trends as they happen. There are three steps to identifying when a new trend could be forming.
1. The Aroon-Up and the Aroon-Down cross each other.
2. The Aroon Lines will continue in opposite directions with one going above 50 towards 100 and the other staying below 50.
3. One of the Aroon Lines will then hit 100.
Based on those three steps, lets use a Bullish Trend as an example. In a Bullish Trend, The Aroon-Up and the Aroon-Down will cross. Then, the Aroon-Up will cross above 50 while the Aroon-Down crosses below 50. Finally the Aroon-Up will hit 100 signifying the emergence of a Bullish Trend.
##### Consolidation Periods
Another good function of the Aroon Indicator is its ability to identify periods of consolidation. This occurs when Both the Aroon-Up and the Aroon-Down have dropped below 50. This shows a period of sideways trading because neither the Bullish Trend nor Bearish Trend has any strength. This is especially true when both the Aroon-Up and the Aroon-Down are moving down in unison. When both drop in a parallel manner, a sideways trading range may be forming.
#### Summary
The Aroon Indicator (Aroon Up Down) is most definitely a very good indicator for identifying both trends as well as periods of consolidation. That being said, it is an indicator best used a complementary piece. Knowing the overall trend is an important part to any trading strategy. Using Aroon as a foundation and combining it with additional indicators which are used to generate signals is probably the most effective way to use Aroon.
#### Inputs
##### Length
The look back time period for the Aroon.
#### Style
##### Aroon Up
Can toggle the visibility of the Aroon Up as well as the visibility of a price line showing the actual current value of the Aroon Up. Can also select the Aroon Up's color, line thickness and visual type (Line is the default).
##### Aroon Down
Can toggle the visibility of the Aroon Down as well as the visibility of a price line showing the actual current value of the Aroon Down. Can also select the Aroon Down's color, line thickness and visual type (Line is the default).
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Auto Fib Extension
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# Auto Fib Extension
#### Definition
Auto Fib Extension is a tool that calculates target price levels following a retracement. Extension levels also indicate potential price reversal areas and show possible price levels after a retracement is completed. These levels are based on the key Fibonacci coefficients and the price movement of the symbol on the chart.
To use the new Auto Fib Extension indicator, use the _Indicators_ button on your chart and find the _Auto Fib Extension_ indicator in the _Built-ins_ tab.
The indicator is written in Pine Script and its source code is accessible. You can access it from the _Source code_ icon to the right of the indicator's name on the chart, or from the Pine Editor, by using the _Open_ button, then clicking on _New default built-in script…_ and _Auto Fib Extension_.
#### History
The concept of Fibonacci extensions is derived from the Fibonacci retracement method. It was developed to determine target price levels following a retracement. It is named after its use of the Fibonacci sequence and is based on the theory that markets often retrace an anticipated portion of a move before continuing in the initial direction.
#### Calculation
Fibonacci extensions don't have a specific formula. The extension levels are calculated based on the Fibonacci sequence, and the most common levels are 61.8%, 100%, 161.8%, 200%, and 261.8%. The Trend-Based Fib Extension drawing tool is based on three points set by the trader: the first two points define the trend line, the last one defines the retracement level. After setting the points, horizontal level lines are drawn and the levels identifying potential targets for further price movement are determined based on these lines.
With the new Auto Fib Extension indicator, you do not need to set points manually, as is required with the Trend-Based Fib Extension drawing tool. The algorithm will select the points and draw the levels automatically.
#### What to look for
Points 1 and 2 in this image show the direction of the trend line. Points 2 and 3 show the retracement level. Possible levels which the price may reach are shown by the indicator lines: the most commonly used take profit lines are 0.618, 1.0 and 1.618.
#### Inputs
##### Depth
The minimum number of bars that will be taken into account when calculating the indicator.
##### Extend Lines
Allows extending lines on the chart to the left or right.
##### Reverse
Allows you to reverse the order of the lines and the direction the indicator calculates.
##### Prices
Displays price values.
##### Levels
Displays level values.
##### Levels colors
The color of each level line.
##### Levels Format
The format used for displaying values. It can use either regular numerical values (the _Values_ option) or _Percent_ format.
#### Summary
To sum up, this has been a long awaited indicator that we are happy to add to our ever-growing list of technical analysis tools. Auto Fib Extension can be very useful in determining target levels after a retracement. Most technical indicators look backward by analyzing historical prices; Fibonacci extensions help identify possible price levels in the future.
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Auto Fib Retracement
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# Auto Fib Retracement
#### What is the Fibonacci Retracement indicator
Auto fib retracement was developed for technical analysis and is mainly used to better understand and define support and resistance levels in the market. It is named after its use of the Fibonacci sequence and is based on the theory that markets will retrace a specific portion of a move before continuing moving in the original direction.
Fibonacci retracements are a popular instrument used by technical analysts to determine support and resistance areas. In technical analysis, this tool is created by taking two extreme points (usually a peak and a trough) on the chart and dividing the vertical distance by the key Fibonacci ratios: 23.6%, 38.2%, 50%, 61.8%, and 100%.
Once these levels are defined, horizontal lines are drawn and used to determine possible support and resistance levels.
When using the Auto Fibonacci Retracement (Auto Fib) indicator, there is no need to explicitly set two points, as is done when using the Fib Retracement drawing tool. The indicator does everything for you.
To use this tool, open the "Indicators, metrics, and strategies" menu at the upper toolbar on your chart and find Auto Fib Retracement in the "Technicals" tab or simply start typing its name in the "Search" field.
You can also find it in Pine Editor via the new tab — Auto Fib Retracements.
#### Inputs
**Deviation:** A multiplier that affects how much the price should deviate from the previous pivot for the bar to become a new pivot
**Depth:** Affects the minimum number of bars that will be taken into account when building
**Extend lines:** Extends lines to the left or right on the chart
**Reverse:** Reverse the order of lines
**Prices:** Displays all prices
**Levels:** Displays all levels
**Levels format:** The format for displaying levels. It can incorporate values and percentages
#### Auto Fib Retracement in a nutshell
Many traders and investors value this tool and use Fibonacci ratios and retracements to place trades within long-term price trends. It can be even more beneficial when used with other tools and indicators, so go ahead and find the best configuration for your analysis.
Also read:
* [Indicators: simple steps to get started](https://www.tradingview.com/support/solutions/43000543626-tradingview-indicators-simple-steps-to-get-started/)
* [Paper Trading — main functionality](https://www.tradingview.com/support/solutions/43000516466-paper-trading-main-functionality/)
* [How to trade on TradingView](https://www.tradingview.com/support/solutions/43000756695-how-to-trade-on-tradingview/)
* [Drawing tools](https://www.tradingview.com/support/solutions/43000703396-drawing-tools-available-on-tradingview/)
* [Chart types](https://www.tradingview.com/support/solutions/43000703407-chart-types-available-on-tradingview/)
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Auto Pitchfork
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# Auto Pitchfork
#### Definition
Auto Pitchfork is a tool that aims to identify possible support and resistance levels and forecast the future price movement based on the previous trends. Auto pitchfork is an indicator that draws the Pitchfork drawing tool automatically based on past price movement.
The basic idea behind the use of a pitchfork is that it essentially creates a type of trend channel. A trend is considered active as long as price stays within the Pitchfork channel. Reversals occur when price breaks out of a Pitchfork channel. The pitchfork has a center median line (trend line) as well as two more sets of lines above and below that median line. The additional lines are set a specified number of standard deviations away from the median.
The indicator is written in Pine Script and its source code can be accessed, copied and modified. You can access it from the Source code icon to the right of the indicator's name on the chart, or from the Pine Editor, by using the Open button, then clicking on New default built-in script… and finding Auto Pitchfork in the menu there.
#### Inputs
#### Depth
The minimum number of bars that will be taken into account when calculating the indicator. Increasing this number will result in pitchforks that skip smaller price peaks and troughs in favor of bigger ones. For example, with Depth set to 10, each of the three points found by the indicator must be highest or lowest among the nearest 10 bars (five on the left and five on the right).
#### Type
There are four different types of Auto Pitchfork, based on four different Pitchfork drawings available on TradingView. Changing the option changes the calculation of the pitchfork’s slope, which allows the indicator to react to the price slopes it found differently.
The indicator is drawn using three points, and the slope is based on how these points are used to draw the median:
* Original. The median connects the first point found by the indicator with the middle of the line connecting points 2 and 3.
* Schiff. An additional point is calculated, based on the X coordinate of the point 1 and the Y coordinate of the middle between point 1 and point 2. The median connects that additional point to the middle of the line between points 2 and 3.
* Modified Schiff. The median connects the middle of the line between points 1 and 2 to the middle of the line between points 2 and 3.
* Inside. The median connects the middle of the line between points 1 and 2 to point 3.
#### Background Transparency
The transparency of the background between the Pitchfork lines, from 0 (fully visible) to 100 (fully transparent).
#### Extend Left
If selected, the pitchfork lines will extend both ways.
#### Level settings
Level settings allow you to tweak each level of the pitchfork separately. You can change the visibility (turn on/off), Fibonacci ratio used to calculate the line, color that the line and its background use, width of the line, and its type.
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Auto Trendlines
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# Auto Trendlines
The indicator analyzes the last 5000 bars and builds possible support and resistance lines. These lines are divided into small and large ones depending on which Zig Zag points they are built on:
1. Large. Consistently connects alternating high and low pivots with left/right length of 25/25. The price difference between low and high must exceed 5 \* ATR14, which is calculated in the first point.
2. Small. Consistently connects alternating high and low pivots with left/right length of 5/5. The price difference between low and high must exceed 2 \* ATR14, which is calculated in the first point.
A pivot point is a local extremum (minimum or maximum) to the left and right of which there are no price values that exceed this extremum. Thus, a point will be a 25/25 pivot high if there are no high values 25 bars to the left and 25 bars to the right of it that are higher than this value at this point.
In addition to pivot points on which Zig Zag is built, the indicator collects pivot points of other sizes to count touches and further filter of lines.
After calculating Zig Zags and collecting pivots of different sizes, the indicator builds all possible lines, which will be displayed on the chart after filtering. Each line has a non-displayed touch area on the chart - half of the average default ATR which is calculated at the points on which the line is drawn. The area is located between the line and the price chart and is used for fixing the touches that slightly missed the line, as well as for filtering the lines. Each line is conditionally divided into 2 parts:
1. Base part. The starting part of a line between the two initial points.
2. Extend part. The part of the line from the second point to the breakout point or the last available bar.
Each constructed line is checked for compliance with the following rules:
1. There must be a pivot on the base part of each line with the same actual size as the Zig Zag pivots and which may not be a Zig Zag point.
2. The base part must not have a line touching a pivot of the same actual size as the pivot at the second point of the line.
3. The base part of a small line must not lie in the touch area of a large line.
After filtering, the parameters of each remaining line are calculated and line intersections are processed. Lines are considered to intersect if the base part of one line enters the base part of another line by more than 30% of its length. If lines intersect, one line is selected, which will be displayed on the chart. The parameters by which the best line is selected are as follows:
1. Number of touches. A touch is a 3/3 pivot point that touches or crosses the line's Touch area. The line with more touches is considered to be the best.
2. The total length of the line, taking into account the extended part, the longer the better.
3. The actual size of the pivot at the second point of the line. Small lines are based on 5/5 pivots, but these points can also be larger pivots. The higher the actual size of the pivot at the second point of the line, the better this line is.
4. Slope angle. This is compared last. The greater the slope angle of the line, the better it is.
When all the lines to be displayed on the chart are defined, the indicator determines which of the lines should have extension and which should not. This is determined by the following rule: the extension should not exceed the length of the base part by more than 2 times. If the line complies with this rule, it continues infinitely to the right or to the breakout point, if not, the chart will show only the base part of the line.
A breakout is considered to be several consecutive bars with their closing price behind the line. The number of bars is regulated by the input. The default value is 3.
Inputs:
* Bars to Breakout. Number of bars needed to breakout the line. The default is 3.
* Line Size. Defines the size of Zig Zags on which to build lines. Possible values: Small, Large, Both.
* Show Pivots. Highlights the pivots on which the lines are drawn.
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Average Day Range (ADR)
|
# Average Day Range (ADR)
#### Definition
Average Day Range is an indicator that measures the volatility of an asset. It shows the average movement of the price between the high and the low over the last several days.
#### Calculations
To calculate the average value for a particular day, the indicator first calculates the average among the high values of the price for a given number of days, then the average among the low values for the same number of days. Then it finds the difference between these values.
#### Inputs
##### Length
The number of days for which the indicator will count the average value, 14 by default. It should be noted that setting it too low will take short-term noise into account, while a long period may take longer to react to new market movements.
#### Style
##### ADR
Toggles the visibility of the ADR line. You can also choose the color of the line, its thickness, and plot type (by default, Line is used).
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Average Directional Index (ADX)
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# Average Directional Index (ADX)
#### Definition
The Average Directional Index (ADX) is a specific indicator used by technical analysts and traders in order to determine the strength of a trend. The trend can be going either up or down, which is shown by two indicators which often accompany ADX, the Positive Directional Indicator, commonly known as +DI, and the Negative Directional Indicator, also known as -DI. It is for this reason that the average directional index is presented with three separate lines, symbolizing each indicator. Each line is used to help assess a trade and whether or not it should taken long or short, if at all. The ADX indicator on TradingView does not display the +DI and -DI lines by itself, but you can use the Directional Movement Index (DMI) indicator to see all three at the same time.
#### History
The Average Directional Index was initially designed by Welles Wilder for commodity daily charts, but was then modified so that it could be used in other markets and for various timeframes. These modifications allowed for ADX to become what it is today - an indicator to track the strength of market trends and analyzing said trends with the aid of additional, directional indicators.
#### Calculations
Due to the fact that the Average Directional Index includes multiple lines, the indicator requires a sequence of calculations, which are laid out below.
1. Start off by calculating the +DM, -DM, and True Range (TR) for each period you are analyzing. Note:
1. +DM = Current High - Previous High
2. \-DM = Previous Low - Current Low
2. You can use +DM when the Current High - Previous High > Previous Low - Current Low.
3. Use -DM when the Previous Low - Current Low > Current High - Previous High.
4. The TR is the greater of the Current High - Current Low, the Current High - Previous Close, or the Current Low - Previous Close.
5. Go ahead and smooth your period averages of +DM, -DM, and TR. Then, insert the -DM and +DM values to calculate the smoothed averages of those.
6. First xTR = Sum of first x TR readings (x = number of…)
7. Next xTR value = First xTR - (Prior xTR/14) + Current TR
8. Then divide the smoothed +DM value by the smoothed TR value to get your +DI value. Multiply this value by 100.
9. Divide the smoothed -DM value by the smoothed TR value to get your -DI value. Multiply this value by 100.
10. The formula for the Directional Movement Index (DX) is +DI minus -DI, then divided by the sum of +DI and -DI (all of these are absolute values). Multiply this value by 100.
11. In order to get the ADX, you’ll need to continue calculating the DX values for x periods. Smooth the results of the periods in order to get your ADX value.
12. First ADX = the sum of x periods of DX / x
13. Finally, ADX = ((Prior ADX \* 13) + Current DX) / x
#### Takeaways and what to look for
The Average Directional Index (ADX), as well as the Negative (-DI) / Positive (+DI) Directional Indicators, are momentum indicators and help investors determine the strength of a trend and trend direction..
The Average Directional Index projects market price and it is clearly seen when prices move up (when +DI is above -DI), and when the prices move down (when -DI is above +DI). When there are crosses between both +DI and -DI lines, it can signify potential trading signals, as a bearish or bullish market emerges.
A trend shows the most strength when the Average Directional Index is above 25 (potential signal to buy), and a trend is weak or the price is considered trendless if the ADX reaches below 20 - according to the concept creator, Wilder. Keep in mind, if ADX is below 20, it might not be the most ideal time to enter a trade.
If the market presents itself as not following a specific trend, this does not mean that the price isn’t moving, rather that it could be making a change or the direction is not currently present.
#### Limitations
Crossovers between indicator lines can occur quite often. In the case that this occurs too frequently, there will most likely be confusion among traders and the potential for money loss can be high. These moments in question are known as “false signals” and are most common when ADX is calculated below 25.
The Average Directional Index should be combined with other indicators that examine price and others that can help filter signals and control risk to get the most out of the tool. Like most indicators, it works best when paired with highly functioning data processors and other analytical tools.
#### Summary
To sum up, the Average Directional Index is a great tool for technical analysis and determining the strength of a trend, whether it be going up or down. Pair it with other indicators to analyze trends and find when it is a good time to place a trade, given market status.
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Average True Range (ATR)
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# Average True Range (ATR)
####
#### Definition
[The Average True Range (ATR)](https://www.tradingview.com/scripts/averagetruerange/) is a tool used in technical analysis to measure volatility. Unlike many of today's popular indicators, the ATR is not used to indicate the direction of price. Rather, it is a metric used solely to measure volatility, especially volatility caused by price gaps or limit moves.
#### History
J. Welles Wilder created the ATR and featured it in his book _New Concepts in Technical Trading Systems_. The book was published in 1978 and also featured several of his now classic indicators such as; The Relative Strength Index, Average Directional Index and the Parabolic SAR. Much like the indicators mentioned, the ATR is still widely used and has great importance in the world of technical analysis.
#### Calculation
To calculate the ATR, the True Range first needs to be discovered. True Range takes into account the most current period high/low range as well as the previous period close if necessary. There are three calculation which need to be completed and then compared against each other. The True Range is the largest of the following:
The Current Period High minus (-) Current Period Low
The Absolute Value (abs) of the Current Period High minus (-) The Previous Period Close
The Absolute Value (abs) of the Current Period Low minus (-) The Previous Period Close
true range = max\[(high - low), abs(high - previous close), abs (low - previous close)\]
\*Absolute Value is used because the ATR does not measure price direction, only volatility. Therefore there should be no negative numbers. \*Once you have the True Range, the Average True Range can be plotted. By default on TradingView the ATR is a Relative Moving Average (RMA) of the True Range, but the smoothing type can be changed to SMA, EMA or WMA in the settings.
#### The basics
Average True Range is a continuously plotted line usually kept below the main price chart window. The way to interpret the Average True Range is that the higher the ATR value, then the higher the level of volatility.
* The look back period to use for the ATR is at the trader's discretion however 14 days is the most common.
* ATR can be used with varying periods (daily, weekly, intraday etc.) however daily is typically the period used.
#### What to look for
##### Measuring the Strength of a Move
As previously stated Average True Range does not take into account price direction, therefore it is not used as an active indicator to predict future moves. Instead, it is most useful in measuring the strength of a move. For example, if a security's price makes a move or reversal, either Bullish or Bearish, there will usually be an increase in volatility. In that case, the ATR will be on the rise. This can be used as a way to gauge the underlying strength of the move. The more volatility in a large move, the more interest or pressure there is reinforcing that move.
On the other hand, during periods of sustained sideways movement, volatility is frequently low. This could assist in the discovery of trading ranges.
##### Using Absolute Value
The fact that ATR is calculated using absolute values of differences in price is something that should not be ignored. This is relevant because it means that securities with higher price values will inherently have higher ATR values. Likewise, securities with lower price values will have lower ATR values. The consequence is that a trader cannot compare the ATR Values of multiple securities. What is considered to be a high ATR Value or a high ATR Range for one security may not be the same for another security. A trader should study and research the relevance of ATR for each security independently when performing chart analysis.
##### Compare the charts below.
Apple (AAPL) has a price over $450 and an ATR over 12.
Ford (F) has a price over $17 and an ATR of less than 1.
#### Summary
ATR is a nice chart analysis tool for keeping an eye on volatility which is a variable that is always important in charting or investing. It is a good option when trying to gauge the overall strength of a move or for discovering a trading range. That being said, it is an indicator which is best used as a compliment to more price direction driven indicators. Once a move has begun, the ATR can add a level of confidence (or lack there of) in that move which can be rather beneficial.
#### Inputs
##### Length
The time period to be used in calculating the Average True Range. 14 days is the default.
#### Style
##### ATR
Can toggle the visibility of the ATR Line as well as the visibility of a price line showing the actual current value of the ATR Line. Can also select the ATR Line's color, line thickness and visual type (Line is the default).
##### Precision
Sets the number of decimal places to be left on the indicator's value before rounding up. The higher this number, the more decimal points will be on the indicator's value.
Also read:
* [How to trade on TradingView](https://www.tradingview.com/support/solutions/43000756695-how-to-trade-on-tradingview/)
* [Paper Trading — main functionality](https://www.tradingview.com/support/solutions/43000516466-paper-trading-main-functionality/)
* [The technical analysis essentials](https://www.tradingview.com/support/solutions/43000759577-the-technical-analysis-essentials-with-tradingview/)
* [Introduction to fundamental analysis](https://www.tradingview.com/support/solutions/43000759574-introduction-to-fundamental-analysis-on-tradingview/)
* [Portfolios: track your assets, know your trades](https://www.tradingview.com/support/solutions/43000760937-tradingview-portfolios-track-your-assets-know-your-trades/)
|
Balance of Power (BOP)
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# Balance of Power (BOP)
#### Definition
Balance of Power (BOP) is a price-based indicator used by technical analysts to evaluate the overall strength of buyers and sellers in the market. BOP oscillates around zero line, where positive values indicate Bull market dominance and negative values indicate Bear market dominance. On its own, BOP is not a particularly smooth indicator, and is therefore best paired with an indicator that can counter this by providing essential smoothness. By pairing the BOP with the Simple Moving Average (SMA), for example, the result is a smooth, proper analysis for viewing.
#### History
The Balance of Power (BOP) indicator was developed by Igor Livshin and was later introduced to the public in 2001 via Stocks and Commodities Magazine. BOP measures price trends by evaluating the strength of buyers and sellers within the market and determining in which price is pushed to extreme highs and lows.
#### Calculations
To calculate the Balance of Power, use the following formula:
Balance of Power = (Close price – Open price) / (High price – Low price)
#### Takeaways
Balance of Power (BOP) is known to oscillate around the zero center line, ranging from -1 to +1. A positive BOP indicates buyer market dominance, whereas negative BOP indicates seller market dominance. When BOP is equal to zero, it shows that buyers and sellers are equal in the current market.
#### What to look for
Keep in mind that BOP can be used to generate specific trading signals on the crossovers with its center line, suggesting the following:
1. Consider buying when the BOP becomes positive (crossing above the zero line) as it may imply that bulls are taking control.
2. Consider selling when BOP becomes negative (crosses below the zero line) as it may imply that bears are taking control.
#### Limitations
On its own, the Balance of Power indicator is quite choppy and is best paired with another indicator that can counter this with unparalleled smoothness. Oftentimes, this is paired well with the Simple Moving Average (SMA).
#### Summary
Balance of Power (BOP) is a price-based indicator used for technical analysis to determine the strength of buyers and sellers. On its own, BOP is not a particularly smooth indicator, and is therefore best paired with an indicator that can perform this, such as the Simple Moving Average (SMA).
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BBTrend
|
# BBTrend
BBTrend is an indicator developed by John Bollinger, the creator of Bollinger Bands. Designed to be used in conjunction with the regular Bollinger Bands, this indicator analyzes the strength and the direction of the trend based on two separate Bollinger Bands calculations, a long one and a short one.
The BBTrend indicator presents the resulting calculation as a histogram. When the BBTrend value is above zero, it indicates a bullish trend, whereas a reading below zero signifies a bearish trend. How far is the value removed from zero reflects the strength or momentum behind the trend.
#### Calculation
The BBTrend is calculated based on the bands of two different Bollinger Bands instances, a short one and a long one. The formula is:
```js
BBTrend = (math.abs(shortLower - longLower) - math.abs(shortUpper - longUpper)) / shortMiddle * 100
```
Where _shortLower_, _shortMiddle_, and _shortUpper_ are the components of the short Bollinger Bands, while _longLower_ and _longUpper_ are the bands from the long Bollinger Bands calculation. The length of both short and long Bollinger Bands can be changed in the indicator's Inputs.
The intensity of the color of each separate column in the histogram reflects the direction in which the BBTrend moves: a more intense green or red column indicates that the current value of BBTrend is moving away from 0, while a dimmer green or red shows that the BBTrend is trending towards 0, while still being above it (for green columns) or below it (for red ones).
#### Inputs
#### Short BB Length
The length of the short Bollinger Bands calculation used while calculating the BBTrend.
#### Long BB Length
The length of the long Bollinger Bands calculation used while calculating the BBTrend.
#### StdDev
The Standard Deviation of both Bollinger Bands calculations used while calculating the BBTrend.
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Awesome Oscillator (AO)
|
# Awesome Oscillator (AO)
####
#### Definition
The [Awesome Oscillator](https://www.tradingview.com/scripts/awesomeoscillator/) is an indicator used to measure market momentum. AO calculates the difference of a 34 Period and 5 Period Simple Moving Averages. The Simple Moving Averages that are used are not calculated using closing price but rather each bar's midpoints. AO is generally used to affirm trends or to anticipate possible reversals.
#### History
The Awesome Oscillator was created by Bill Williams.
#### Calculation
lengthAO1=input(5, minval=1) //5 periods
lengthAO2=input(34, minval=1) //34 periods
AO = sma((high+low)/2, lengthAO1) - sma((high+low)/2, lengthAO2)
#### The basics
Because of its nature as an oscillator, The Awesome Oscillator is designed to have values that fluctuate above and below a Zero Line. The generated values are plotted as a histogram of red and green bars. A bar is green when its value is higher than the previous bar. A red bar indicates that a bar is lower than the previous bar. When AO's values are above the Zero Line, this indicates that the short term period is trending higher than the long term period. When AO's values are below the Zero Line, the short term period is trending lower than the Longer term period. This information can be used for a variety of signals.
#### What to look for
##### Zero Line Cross
The most straightforward, basic signal generated by the Awesome Indicator is the Zero Line Cross. This is simply when the AO value crosses above or below the Zero Line. This indicates a change in momentum.
When AO crosses above the Zero Line, short term momentum is now rising faster than the long term momentum. This can present a bullish buying opportunity.
When AO crosses below the Zero Line, short term momentum is now falling faster then the long term momentum. This can present a bearish selling opportunity.
##### Twin Peaks
Twin Peaks is a method which considers the differences between two peaks on the same side of the Zero Line.
A Bullish Twin Peaks setup occurs when there are two peaks below the Zero Line. The second peak is higher than the first peak and followed by a green bar. Also very importantly, the trough between the two peaks, must remain below the Zero Line the entire time.
A Bearish Twin Peaks setup occurs when there are two beaks above the Zero Line. The second peak is lower than the first peak and followed by a red bar. The trough between both peaks, must remain above the Zero Line for the duration of the setup.
##### Saucer
A Saucer AO Setup looks for more rapid changes in momentum. The Saucer method looks for changes in three consecutive bars, all on the same side of the Zero Line.
A Bullish Saucer setup occurs when the AO is above the Zero Line. It entails two consecutive red bars (with the second bar being lower than the first bar) being followed by a green Bar.
A Bearish Saucer setup occurs when the AO is below the Zero Line. It entails two consecutive green bars (with the second bar being higher than the first bar) being followed by a red bar.
#### Summary
All in all, The Awesome Oscillator can be a fairly valuable tool. momentum is one of those aspects of the market that is crucial to understanding price movements, yet it is so hard to get a solid grip on. AO (momentum) can be used in some instances to generate quality signals but much like with any signal generating indicator, it should be used with caution. Truly understanding the setups and avoiding false signals is something that the best traders learn through experience over time. That being said, the Awesome Indicator produces quality information and may be a valuable technical analysis tool for many analysts or traders.
#### Style
##### Growing
Can change the Growing (Up) Bar's color and thickness as well as the indicator's visual type (Histogram is the default). Can also toggle the visibility of a price line showing the current value of the Awesome Oscillator.
##### Falling
Can change the Falling (Down) Bar's color and thickness.
##### Precision
Sets the number of decimal places to be left on the indicator's value before rounding up. The higher this number, the more decimal points will be on the indicator's value.
Also read:
* [How to trade on TradingView](https://www.tradingview.com/support/solutions/43000756695-how-to-trade-on-tradingview/)
* [Paper Trading — main functionality](https://www.tradingview.com/support/solutions/43000516466-paper-trading-main-functionality/)
* [The technical analysis essentials](https://www.tradingview.com/support/solutions/43000759577-the-technical-analysis-essentials-with-tradingview/)
* [Introduction to fundamental analysis](https://www.tradingview.com/support/solutions/43000759574-introduction-to-fundamental-analysis-on-tradingview/)
* [Portfolios: track your assets, know your trades](https://www.tradingview.com/support/solutions/43000760937-tradingview-portfolios-track-your-assets-know-your-trades/)
|
Bollinger Bands (BB)
|
# Bollinger Bands (BB)
#### Definition
[Bollinger Bands (BB)](https://www.tradingview.com/scripts/bollingerbands/) are a widely popular technical analysis instrument created by John Bollinger in the early 1980’s. Bollinger Bands consist of a band of three lines which are plotted in relation to security prices. The line in the middle is usually a Simple Moving Average (SMA) set to a period of 20 days (The type of trend line and period can be changed by the trader; however a 20 day moving average is by far the most popular). The SMA then serves as a base for the Upper and Lower Bands. The Upper and Lower Bands are used as a way to measure volatility by observing the relationship between the Bands and price. Typically the Upper and Lower Bands are set to two standard deviations away from the SMA (The Middle Line); however the number of standard deviations can also be adjusted by the trader.
#### History
Bollinger Bands (BB) were created in the early 1980’s by financial trader, analyst and teacher John Bollinger. The indicator filled a need to visualize changes in volatility which is of course dynamic, however at the time of the Bollinger Band’s creation, volatility was seen as static.
#### Calculation
There are three bands when using Bollinger Bands
Middle Band – 20 Day Simple Moving Average
Upper Band – 20 Day Simple Moving Average + (Standard Deviation x 2)
Lower Band – 20 Day Simple Moving Average - (Standard Deviation x 2)
#### The basics
The Bollinger Bands indicator is an oscillator meaning that it operates between or within a set range of numbers or parameters. As previously mentioned, the standard parameters for Bollinger Bands are a 20 day period with standard deviations 2 steps away from price above and below the SMA line. Essentially Bollinger Bands are a way to measure and visualize volatility. As volatility increases, the wider the bands become. Likewise, as volatility decreases, the gap between bands narrows. What is done with this information is up to the trader but there are a few different patterns that one should look for when using Bollinger Bands.
#### What to look for
##### High/Low Prices
One thing that must be understood about Bollinger Bands is that they provide a relative definition of high and low. Prices are almost always within the band. Therefore, when prices move up near the upper band or even break through the upper band, many traders would see that security as being overbought. This would preset a possible selling opportunity. Of course the opposite would also be true. When prices move down near the lower band or even break through the lower band, that security may be seen as oversold and a buying opportunity may be at hand.
##### Cycling Between Expansion and Contraction
Volatility can generally be seen as a cycle. Typically periods of time with low volatility and steady or sideways prices (known as contraction) are followed by period of expansion. Expansion is a period of time characterized by high volatility and moving prices. Periods of expansion are then generally followed by periods of contraction. It is a cycle in which traders can be better prepared to navigate by using Bollinger Bands because of the indicators ability to monitor ever changing volatility.
##### Price Action Confirmations
* Because of Bollinger Bands ability to display a critically important metric (changes in volatility), the indicator is often used in conjunction with other indicators in order to perform some advanced technical analysis. A good example of this is using Bollinger Bands (oscillating) with a Trend Line (not oscillating). As the example below shows, having the two different types of indicators in agreement can add a level of confidence that the price action is moving as expected.
* Another good example is using Bollinger Bands to confirm some classic chart patterns such as W-Bottoms. Bollinger often used Bollinger Bands to confirm the existence of W-Bottoms which are a classic chart pattern classified by Arthur Merrill.
In order for the Bollinger Bands to confirm the W-Bottom’s existence, the following four conditions must take place.
1. A reaction low forms which may (but not always) break through the Lower Band of the Bollinger Band but it will at least be near it.
2. Price move back around the SMA (The Middle Band).
3. A second drop in price creates a lower low than the initial reaction low in condition 1 however; the second, new low does not break through the Lower Band.
4. A strong move brings price back towards the Middle Band. A breakthrough of a resistance line created by the move in condition 2 may signify a potential breakout.
#### Walking the Bands
Of course, just like with any indicator, there are exceptions to every rule and plenty of examples where what is expected to happen, does not happen. Previously, it was mentioned that price breaking above the Upper Band or breaking below the Lower band could signify a selling or buying opportunity respectively. However this is not always the case. “Walking the Bands” can occur in either a strong uptrend or a strong downtrend.
During a strong uptrend, there may be repeated instances of price touching or breaking through the Upper Band. Each time that this occurs, it is not a sell signal, it is a result of the overall strength of the move.
Likewise during a strong downtrend there may be repeated instances of price touching or breaking through the Lower Band. Each time that this occurs, it is not a buy signal, it is a result of the overall strength of the move.
Keep in mind that instances of “Walking the Bands” will only occur in strong, defined uptrends or downtrends.
#### Summary
Bollinger Bands have now been around for three decades and are still one of the most popular technical analysis indicators on the market. That really says a lot about their usefulness and effectiveness. When used properly and in the proper perspective, Bollinger Bands can give a trader great insight into one of the greatest areas of importance which is shifts in volatility. Traders should of course be aware that Bollinger Bands are not unlike any other indicator in the sense that they are not perfect. A shift in volatility does not always mean the same thing. Knowledge of the causes of these things comes from experimentation and a great deal of experience. Bollinger Bands should be used in conjunction with additional indicators or methods in order to get a better understanding of the ever changing landscape of the market. Ultimately the more pieces of the puzzle that are put together, the more confidence should be instilled in the trader.
##### Inputs
###### Length
The time period to be used in calculating the SMA which creates the base for the Upper and Lower Bands. 20 days is the default.
Basis MA Type
Determines the type of Moving Average that is applied to the basis plot line.
###### Source
Determines what data from each bar will be used in calculations. Close is the default.
###### StdDev
The number of Standard Deviations away from the SMA that the Upper and Lower Bands should be. 2 is the default.
###### Offset
Changing this number will move the Bollinger Bands either Forwards or Backwards relative to the current market. 0 is the default.
TIMEFRAME
Specifies the timeframe that the indicator is calculated on. This option allows calculating BB based on a data from another timeframe, e.g. having BB calculated on 1H chart be displayed on a 5m chart.
Wait for timeframe closes
Specifies the behavior when the indicator's timeframe is higher than the chart's. When 'Wait for timeframe closes' is checked, higher timeframe values only come in and are interconnected on the chart when the higher timeframe completes.
#### Style
##### Basis
Can toggle the visibility of the Basis as well as the visibility of a price line showing the actual current price of the Basis. Can also select the Basis' color, line thickness and line style.
##### Upper
Can toggle the visibility of the Upper Band as well as the visibility of a price line showing the actual current price of the Upper Band. Can also select the Upper Band's color, line thickness and line style.
##### Lower
Can toggle the visibility of the Lower Band as well as the visibility of a price line showing the actual current price of the Lower Band. Can also select the Lower Band's color, line thickness and line style.
##### Background
Toggles the visibility of a Background color within the Bands. Can also change the Color itself as well as the opacity.
|
Bollinger BandWidth (BBW)
|
# Bollinger BandWidth (BBW)
#### Definition
[Bollinger BandWidth (BBW)](https://www.tradingview.com/scripts/bollingerbandswidth/) is a technical analysis indicator derived from the standard Bollinger Bands indicator. Bollinger Bands are a volatility indicator which creates a band of three lines which are plotted in relation to a security's price. The Middle Line is typically a 20 Day Simple Moving Average. The Upper and Lower Bands are typically 2 standard deviations above and below the SMA (Middle Line). Bollinger BandWidth serve as a way to quantitatively measure the width between the Upper and Lower Bands. BBW can be used to identify trading signals in some instances.
#### History
The creator of Bollinger Bands, John Bollinger, introduced Bollinger BandWidth in 2010 almost 3 decades after the introduction of his Bollinger Bands.
#### Calculation
Bollinger BandWidth = (Upper Band - Lower Band) / Middle Band \* 100
#### The basics
Bollinger BandWidth (BBW) uses the given calculation and outputs a Percentage Difference between the Upper Band and the Lower Band. This value is used to define the narrowness of the bands. What needs to be understood however is that a trader cannot simply look at the BBW value and determine if the Band is truly narrow or not. The significance of an instruments relative narrowness changes depending on the instrument or security in question. What is considered narrow for one security may not be for another. What is considered narrow for one security may even change within the scope of the same security depending on the timeframe. In order to accurately gauge the significance of a narrowing of the bands, a technical analyst will need to research past BBW fluctuations and price performance to increase trading accuracy.
#### What to look for
##### The Squeeze
One of the most well-known theories in regards to Bollinger Bands is that volatility typically fluctuates between periods of expansion (Bands Widening) and contraction (Bands Narrowing). With this in mind, the major trading signal generated by Bollinger BandWidth is known as _The Squeeze_.
The Squeeze setup is very straightforward and consists of two steps:
1. There is a period of low volatility. The means that the bands are narrow and price is moving relatively sideways.
2. The low volatility period is followed by a surge in volatility and price breaks through the Upper Band or falls through the Lower Band signifying a change in the sideways movement and the beginning of a new directional trend.
In a Bullish BBW Squeeze:
1. BBW drops.
2. Price breaks through the Upper Band which starts a new upward trend. Volatility also increases.
In a Bearish BBW Squeeze:
1. BBW drops. (In the example below, the threshold is 9% however this changes from security to security and timeframe to timeframe).
2. Price falls below the Lower Band which starts a new downward trend. Volatility also increases.
#### Summary
Bollinger BandWidth (BBW) be quite a useful technical analysis tool for identifying "The Squeeze" which can result in some nice buying or selling signals. Of course the trader should always use caution. Sometimes the breakout after a Squeeze setup has an immediate pullback and the rally never happens. It takes a trader's better judgment to really determine if the breakout is a strong, legitimate one. That being said, when a strong uptrend or downtrend after a Squeeze does occur it provides a great opportunity for the prepared analyst or trader.
#### Inputs
##### Length
The time period to be used in calculating the SMA which creates the base for the Upper and Lower Bands. 20 days is the default.
##### Source
Determines what data from each bar will be used in calculations. Close is the default.
##### StdDev
The number of Standard Deviations away from the SMA that the Upper and Lower Bands should be. 2 is the default.
##### Highest Expansion Length
The Highest Expansion plot displays the highest value that BBW had in the last N bars, where N is the length specified by this input.
##### Lowest Contraction Length
The Lowest Contraction plot displays the lowest value that BBW had in the last N bars, where N is the length specified by this input.
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Bollinger Bands %b (%b)
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# Bollinger Bands %b (%b)
#### Definition
[Bollinger Bands %b](https://www.tradingview.com/scripts/bollingerbandspercentbandwidth/) or Percent Bandwidth (%b) is an indicator derived from the standard Bollinger Bands (BB) indicator. Bollinger Bands are a volatility indicator which creates a band of three lines which are plotted in relation to a security's price. The Middle Line is typically a 20 Day Simple Moving Average. The Upper and Lower Bands are typically 2 standard deviations above and below the SMA (Middle Line). What the %b indicator does is quantify or display where price is in relation to the bands. %b can be useful in identifying trends and trading signals.
#### History
The creator of Bollinger Bands (BB), John Bollinger, introduced %b in 2010 almost 3 decades after the introduction of his Bollinger Bands.
#### Calculation
%b = (Current Price - Lower Band) / (Upper Band - Lower Band)
#### The basics
It is all about the relationship between price and the Upper and Lower Bands. There are six basic relationships that can be quantified.
In descending order from the Upper Band:
1. %b Above 1 = Price is Above the Upper Band
2. %b Equal to 1 = Price is at the Upper Band
3. %b Above .50 = Price is Above the Middle Line
4. %b Below .50 = Price is Below the Middle Line
5. %b Equal to 0 = Price is at the Lower Band
6. %b Below 0 = Price is Below the Lower Band
Generally speaking .80 and .20 are also relevant levels.
1. %b Above .80 = Price is Nearing the Upper Band
2. %b Below .20 = Price is Nearing the Lower Band
%b goes beyond just a visual inspection of price in relation to its location within Bollinger Bands (BB). It is a way of pinpointing its location and providing the technical analyst an exact value.
#### What to look for
##### Overbought/Oversold
It is typically best to look for trading signals generated by the %b during strong or clearly defined uptrends or downtrends. "Walking the Bands" is a situation when during a strong uptrend or downtrend, price frequently breaks through above the Upper Band (in an uptrend) or below the Lower Band (in a downtrend). When price is "Walking the Bands" these breakthroughs are not actual reversal signals. Price may indeed reverse somewhat but it often turns once again and resumes the overall trend.
Identifying when a Breakthrough signifies an actual trend reversal can be a difficult event pinpoint. This is mostly done through historical technical analysis and research. That being said, using %b to identify trading signals due to Overbought/Oversold conditions while staying within the overall trend is a little bit more straightforward.
Opportunities to trade with the trend can present themselves when Breakthroughs occur in the opposite direction of the underlying trend. For example, when the general trend is moving upwards and the regular BB indicator is "Walking the Bands" by constantly crossing the upper band into the Oversold territory, brief %b breakthroughs below 0 might indicate a good buying opportunity inside of that greater uptrend.
#### Summary
What makes Bollinger Bands %b useful, is that it takes a very popular, well-known indicator (Bollinger Bands (BB)) and narrows the focus. Instead of relying on the appearance of prices in relation to the Bands, technical analysts can use exact values to help make more informed decisions. %b is at its most valuable during a well-defined trend. During a well-defined trend, breaks above 1 and below 0 become much more significant. Therefore %b should be used in conjunction with additional indicators or technical analysis methods to help confirm over trend direction.
#### Inputs
##### Length
The time period to be used in calculating the SMA which creates the base for the Upper and Lower Bands. 20 days is the default.
##### Source
Determines what data from each bar will be used in calculations. Close is the default.
##### StdDev
The number of Standard Deviations away from the SMA that the Upper and Lower Bands should be. 2 is the default.
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Bollinger Bars
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# Bollinger Bars
The Bollinger Bars indicator is a tool developed by John Bollinger, the creator of [](https://www.tradingview.com/support/solutions/43000501840-bollinger-bands-bb/)[Bollinger Bands](https://www.tradingview.com/support/solutions/43000501840-bollinger-bands-bb/). This indicator provides an alternative visual for candlestick charts by maintaining a fixed width for a candle and using different colors to differentiate the candle's body and wicks. Traders may use this indicator to identify [](https://www.tradingview.com/support/solutions/43000584462-candlestick-patterns/)[candlestick chart patterns](https://www.tradingview.com/support/solutions/43000584462-candlestick-patterns/) and insights such as accumulation/distribution trends, periods of compression, and large range days.
Typically, candlestick charts draw a wide candle _body_ to highlight the range between a bar's open and close prices, using thinner tails (or _wicks_) to display the bar's remaining price action as it extends from its high to low prices. The color of the candle's body is green when the close price is above the open price, or red when the close price is below the open price.
The Bollinger Bars indicator sets the color of the candle's body similar to the traditional candlestick chart to display a green or red candle respectively. However, it uses the same width to draw all the candle components, therefore a candle's wicks appear as wide blue blocks above and below the candle's body. Presenting the bars this way can help visually emphasize the full price range traded within a given bar.
Traders may choose to pair this indicator with other Bollinger tools like the standard [Bollinger Bands](https://www.tradingview.com/support/solutions/43000501840-bollinger-bands-bb/) or [](https://www.tradingview.com/support/solutions/43000501971-bollinger-bands-b-b/)[Percent Bandwidth (%b)](https://www.tradingview.com/support/solutions/43000501971-bollinger-bands-b-b/).
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Chaikin Money Flow (CMF)
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# Chaikin Money Flow (CMF)
#### Definition
[Chaikin Money Flow (CMF)](https://www.tradingview.com/scripts/chaikinmoneyflow/) is a technical analysis indicator used to measure Money Flow Volume over a set period of time. Money Flow Volume (a concept also created by Marc Chaikin) is a metric used to measure the buying and selling pressure of a security for single period. CMF then sums Money Flow Volume over a user defined look-back period. Any look-back period can be used however the most popular settings would be 20 or 21 days. Chaikin Money Flow's Value fluctuates between 1 and -1. CMF can be used as a way to further quantify changes in buying and selling pressure and can help to anticipate future changes and therefore trading opportunities.
#### History
Chaikin Money Flow was created by famed stock analyst Marc Chaikin. The Chaikin Money Flow has become closely related to two of Chaikin’s other famous indicators; the Chaikin Oscillator and Accumulation/Distribution.
#### Calculation
The calculation for Chaikin Money Flow (CMF) has three distinct steps (for this example we will use a 21 Period CMF):
1\. Find the Money Flow Multiplier
\[(Close - Low) - (High - Close)\] /(High - Low) = Money Flow Multiplier
2\. Calculate Money Flow Volume
Money Flow Multiplier x Volume for the Period = Money Flow Volume
3\. Calculate The CMF
21 Period Sum of Money Flow Volume / 21 Period Sum of Volume = 21 Period CMF
#### The basics
Chaikin believed that buying and selling pressures could be determined by where a period closes in relation to its high/low range. If the period closes in the upper half of the range, then buying pressure is higher and if the period closes in the lower half of the range, then selling pressure is higher. This is what the Money Flow Multiplier determines (step 1 in the calculation above). The Money Flow Multiplier is what determines The Money Flow Volume and therefore, ultimately Chaikin Money Flow (CMF).
Chaikin's Money Flow's value fluctuates between 1 and -1. The basic interpretation is:
* When CMF is closer to 1, buying pressure is higher.
* When CMF is closer to -1, selling pressure is higher.
#### What to look for
##### Trend Confirmation
Buying and Selling Pressure can be a good way to confirm an ongoing trend. This can give the trader an added level of confidence that the current trend is likely to continue.
During a Bullish Trend, continuous Buying Pressure (Chaikin Money Flow values above 0) can indicate that prices will continue to rise.
During a Bearish Trend, continuous Selling Pressure (Chaikin Money Flow values below 0) can indicate that prices will continue to fall.
##### Crosses
When Chaikin Money Flow crosses the Zero Line, this can be an indication that there is an impending trend reversal.
Bullish Crosses occur when Chaikin Money Flow crosses from below the Zero Line to above the Zero Line. Price then rises.
Bearish Crosses occur when Chaikin Money Flow crosses from above the Zero Line to below the Zero Line. Price then falls.
It should be noted that brief crosses can occur resulting in false signals. The best way to avoid these false signals is by examining past performance for the particular security that is being analyzed and even adjusting the thresholds accordingly. For example, instead of a Zero Line Cross, a technical analyst may use two separate lines such as .05 and -.05.
##### Unreliability
Chaikin Money Flow does have a shortfall in its calculation. The shortfall is that the Money Flow Multiplier, which plays into determining Money Flow Volume and therefore Chaikin Money Flow values, does not take into account the change in trading range between periods. This means that if there is any type of gap in price, it won’t be picked up on and therefore Chaikin Money Flow and price will become out of sync.
#### Summary
Chaikin Money flow is a nice indictor that gives the technical analyst another view of Chaikin's theories about buying and selling pressure. It should not necessarily be used by itself as a stand-alone signal generating indicator. CMF works well when in conjunction with additional indicators, especially those indicators that were also generated by Chaikin; Accumulation/Distribution (ADL) and The Chaikin Oscillator.
#### Inputs
##### Length
The time period to be used in calculating Chaikin Money Flow.
#### Style
##### CMF
Can toggle the visibility of the Money Flow Line as well as the visibility of a price line showing the actual current value of Money Flow. Can also select the Money Flow Line's color, line thickness and visual type (Line is the default).
##### Zero
Can toggle the visibility of the Zero Line. Can also select the Zero Line's value, color, line thickness and visual type (Dashes are the default).
##### Precision
Sets the number of decimal places to be left on the indicator's value before rounding up. The higher this number, the more decimal points will be on the indicator's value.
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Bull Bear Power
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# Bull Bear Power
#### Definition
The Bull Bear Power (BBP) indicator, otherwise known as the Elder-Ray Index, estimates the relationship between the strength of bulls (buyers) and bears (sellers) on an instrument. When the indicator's value is nonzero, it supposedly suggests that either bulls or bears have more power in the market. The greater the distance is from zero, the greater the apparent dominance of bulls or bears. Positive values indicate higher bull power and negative values indicate higher bear power.
#### Calculations
The indicator's calculation consists of two separate components: "Bull Power" and "Bear Power". The "Bull Power" value is the difference between the current high price and the EMA of close prices, and the "Bear Power" value is the difference between the current low price and the same EMA. Taking the sum of the "Bull Power" and "Bear Power" gives us the Bull Bear Power value:
Bull Power = High - EMA
Bear Power = Low - EMA
Bull Bear Power = Bull Power + Bear Power
#### Inputs
Length
The length for the EMA's smoothing parameter calculation. Its default value is 13.
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Chaikin Oscillator
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# Chaikin Oscillator
#### Definition
The [Chaikin Oscillator](https://www.tradingview.com/scripts/chaikinoscillator/) is, at its core, an indicator of an indicator. The Chaikin Oscillator takes Accumulation/Distribution (ADL) and applies two Exponential Moving Averages of varying length to the line. The Chaikin Oscillator's value is then derived by subtracting the longer term EMA of the ADL from the shorter term EMA of the ADL. Ultimately this serves as a way to measure the momentum of the ADL by plotting a line which fluctuates between positive and negative values. Being aware of changes in momentum can help a trader or technical analyst to anticipate trend changes since changes in momentum often precede changes in trend.
#### History
The Chaikin Oscillator technical indicator was created by famed stock analyst Marc Chaikin. The Chaikin Oscillator has become closely related to two of Chaikin’s other famous indicators; Chaikin Money Flow and Accumulation/Distribution (ADL).
#### Calculation
There are four steps in calculating The Chaikin Oscillator (this example is for a (3,10) Period):
1\. Find the Money Flow Multiplier
\[(Close - Low) - (High - Close)\] /(High - Low) = Money Flow Multiplier
2\. Calculate Money Flow Volume
Money Flow Multiplier x Volume for the Period = Money Flow Volume
3\. Determine ADL
Previous ADL + Current Period Money Flow Volume = ADL
4\. Apply EMA (user defined periods) to the ADL to generate the Chaikin Oscillator
(3-day EMA of ADL) - (10-day EMA of ADL) = Chaikin Oscillator
#### The basics
Chaikin believed that buying and selling pressures could be determined by where a period closes in relation to its high/low range. If the period closes in the upper half of the range, then buying pressure is higher and if the period closes in the lower half of the range, then selling pressure is higher. This is what the Money Flow Multiplier determines (step 1 in the calculation above). The Money Flow Multiplier is the key to all of Chaikin's technical analysis tools. Money Flow Multiplier determines The Money Flow Volume, which in turn determines the direction of the ADL, which ultimately determines the direction and value of The Chaikin Oscillator.
As previously mentioned, The Chaikin Oscillator calculates a value that fluctuates between positive and negative values.
* When The Chaikin Oscillator's value is above 0, ADL's momentum and therefore buying pressure is higher.
* When The Chaikin Oscillator's value is below 0, ADL's momentum and therefore selling pressure is higher.
#### What to look for
##### Crosses
When The Chaikin Oscillator crosses the Zero Line, this can be an indication that there is an impending trend reversal.
Bullish Crosses occur when The Chaikin Oscillator crosses from Below the Zero Line to Above the Zero Line. Price then rises.
Bearish Crosses occur when The Chaikin Oscillator crosses from Above the Zero Line to Below the Zero Line. Price then falls.
##### Divergence
Chaikin Oscillator Divergence occurs when there is a difference between what price action is indicating and what The Chaikin Oscillator is indicating. These differences can be interpreted as an impending reversal.
Bullish Chaikin Oscillator Divergence is when price makes a new low but the Chaikin Oscillator makes a higher low.
Bearish Chaikin Oscillator Divergence is when price makes a new high but the Chaikin Oscillator makes a lower high.
#### Summary
Chaikin Oscillator is an indicator of an indicator. It uses Accumulation/Distribution (ADL) and takes it a step further. The ADL measure buying/selling pressure and the Chaikin Oscillator adds in the element of momentum. Because momentum often precedes changes in price or trend, it should always be taken into consideration by technical analysts when possible. However, like with most indicators, The Chaikin Oscillator is at its best when it is not used as a stand-alone technical indicator but in conjunction with additional indicators and chart analysis.
#### Inputs
##### Fast Length
The time period to be used in calculating the shorter term EMA.
##### Slow Length
The time period to be used in calculating the longer term EMA.
#### Style
##### Chaikin Oscillator
Can toggle the visibility of the Chaikin Oscillator Line as well as the visibility of a price line showing the actual current value of The Chaikin Oscillator. Can also select The Chaikin Oscillator Line's color, line thickness and visual type (Line is the default).
##### Zero
Can toggle the visibility of the Zero Line. Can also select the Zero Line's value, color, line thickness and visual type (Dashes are the default).
##### Precision
Sets the number of decimal places to be left on the indicator's value before rounding up. The higher this number, the more decimal points will be on the indicator's value.
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Chande Kroll Stop
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# Chande Kroll Stop
#### Definition
The Chande Kroll Stop indicator is a stop for either a short or long position. It presents itself as a red and green (sometimes blue) line that is overlaid on the price chart. The red line represents the stop level for a short position, whereas the green line represents the stop level for a long position. The Chande Kroll Stop is calculated on the true range and therefore is labeled as independent from the volatility of the instruments involved.
#### History
The Chande Kroll Stop indicator was first discussed and later implemented in “The New Technical Trader,” written by Tushar Chande and Stanely Kroll. Established as a trend-following indicator, the Chande Kroll Stop identifies a trader’s stop by calculating the average true range of the market trend, cataloguing any market volatility in the process.
#### Calculations
The stop indicator is calculated on the average true range of an instrument’s volatility in connection with market trends. Stops are placed under / on the high and low of the last “n” bars on the chart. The difference is proportional to the average true range on “n” bars and the resulting values are used accordingly.
#### Takeaways
Keep in mind that the true range is the highest in absolute value for the three values shown below:
1. Current bar high — current bar low;
2. Current bar high — previous bar close;
3. Current bar low — previous bar close.
#### What to look for
The Chande Kroll Stop can be used in a variety of ways. It is common to sell when the price crosses below both lines, whereas it is common to buy when the price crosses above both lines. Moreover, it is recommended to trade when the two lines cross each other in some way.
The lines of the Chande Kroll Stop begin to flatten out as the price moves sideways and this, in turn, allows for price to trade more broadly between both lines. Being aware of the line position is key to placing a successful trade, and traders should make sure to trade in the direction of the market trend.
The Chande Kroll Stop can also be used to stop trend changes. When the green/blue line crosses above the red line, a new uptrend is highlighted. When the red line crosses below the green/blue line, a new downtrend is highlighted.
#### Summary
The Chande Kroll Stop indicator is a stop that consists of two lines that overlay on the price chart. It is created by taking the true averages over a specific period of time in order to stop trade losses to a point where they would be volatile to the market and where the market trend would be most likely to switch in direction.
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Chande Momentum Oscillator (CMO)
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# Chande Momentum Oscillator (CMO)
#### Definition
The Chande Momentum Oscillator is a technical momentum indicator and was designed specifically to track the movement and momentum of a security. The oscillator calculates the difference between the sum of both recent gains and recent losses, then dividing the result by the sum of all price movement over the same period (usually defined as 20 periods).
#### History
The Chande Momentum Oscillator was invented by Tushar Chande and first introduced in 1994 in his book, “The New Technical Trader” written with the help of his colleague, Stanley Kroll. Chande and Kroll also worked together in developing the Chande Kroll Stop.
#### Calculations
1. Start by calculating the sum of the higher closes over “n” periods.
2. Then, calculate the sum of the lower closes over “n” periods.
3. Next, go ahead and subtract the sum of the lower closes over “n” periods from the sum of the higher closes over “n” periods.
4. Continue by adding the sum of the lower closes over “n” periods to the sum of the higher closes over “n” periods.
5. Divide 4 from 3 and then multiply by 100.
6. Plot the result on your chart and proceed with trading.
#### Takeaways
From the start, traders should be aware of the time frame they choose when using the Chande Momentum Oscillator. Signals are greatly affected by this decision.
When focusing on your chart settings and applying indicators and strategies to begin your trading, keep in mind that pattern recognition often generates more reliable signals when compared with absolute oscillator levels.
In strong trending markets, it’s possible for overbought and oversold indicators to be considered less effective. When assessing your indicators, make sure to be aware of this point and proceed with your picks accordingly.
#### What to look for
The Chande Momentum Oscillator measures momentum on up and down days and doesn’t have the ability to smooth results, therefore triggering more frequent overbuys and oversells. This indicator oscillates between +100 and -100, but a security is not considered to be overbought until the oscillator is above +50. If the indicator oscillates below -50, then it is considered oversold.
It’s common to initiate a moving average (i.e. 10-period) to this oscillator to act as a signal line - if the oscillator crosses above the moving average, it generates a bullish signal. Similarly, if the oscillator moves below the moving average, it generates a bearish signal.
The Chande Momentum Oscillator can also be used to determine trend strength by analyzing the strength or weakness of the present market trend.
#### Summary
The Chande Momentum Oscillator is a technical momentum indicator and tracks the momentum of a security while also being able to determine market trend strength or weakness. It is a strong indicator to use to measure general gains and losses in the current market and has signals that are sensitive to pattern recognitions.
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Chop Zone
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# Chop Zone
#### Definition
The Chop Zone is a visual indicator that was designed to analyze trends and identify their choppiness. Chop Zone is plotted within levels -100/+100 and signals to the differences between close price and its Exponential Moving Average (EMA) by converting the values calculated into colors.
#### History
The Chop Zone inherited its name from the Choppiness Index, which was created by E.W. Dreiss, an Australian commodity trader.
#### Takeaways
The Chop Zone indicator allows traders and analysts to determine whether or not a market is choppy, showcasing a sideways trend, or not choppy, showcasing a directional trend.
The Choppiness Index is a range-bound oscillator and therefore, has values that fall within a certain range. As mentioned above, that range falls between -100/+100.
#### What to look for
The Chop Zone works in a way that the closer the calculated value is to 100, the higher the level of registered choppiness. In this case, choppiness refers to the sideways movement of a trend. In the other direction, the closer the calculated value is to -100, the stronger the market trend - directional movement of the trend. Little residual choppiness is registered in this case.
More often than not, traders and technical analysts use a threshold of sorts to indicate market trends that are becoming more and more choppy. These are often in the higher zones of market trend data. In turn, there is a threshold in the lower zone that indicates towards directional trends - not choppy.
#### Summary
The Chop Zone analyzes trends and indicates whether or not a trend is choppy or not. This indicator allows its users to determine the overall direction of a trend and is often associated with the Choppiness Index, a range-bound oscillator using values from -100/+100, used to analyze the range of a choppy trend.
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Choppiness Index (CHOP)
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# Choppiness Index (CHOP)
####
#### Definition
The [Choppiness Index (CHOP)](https://www.tradingview.com/scripts/choppinessindex/) is an indicator designed to determine if the market is choppy (trading sideways) or not choppy (trading within a trend in either direction). The Choppiness Index is an example of an indicator that is not directional at all. CHOP is not meant to predict future market direction, it is a metric to be used to for defining the market's trendiness only. A basic understanding of the indicator would be; higher values equal more choppiness, while lower values indicate directional trending.
#### History
The Choppiness Index was created by Australian commodity trader E.W. Dreiss.
#### Calculation
100 \* LOG10( SUM(ATR(1), n) / ( MaxHi(n) - MinLo(n) ) ) / LOG10(n)
n = User defined period length.
LOG10(n) = base-10 LOG of n
ATR(1) = Average True Range (Period of 1)
SUM(ATR(1), n) = Sum of the Average True Range over past n bars MaxHi(n) = The highest high over past n bars
#### The basics
* As a range-bound oscillator, The Choppiness Index has values that always fall within a certain range. CHOP produces values that operate between 0 and 100.
* The closer the value is to 100, the higher the choppiness (sideways movement) levels.
* The closer the value is to 0, the stronger the market is trending (directional movement)
* Often times, technical analysts will use a threshold on the higher end to indicate the market moving into choppiness territory. Likewise there will be a threshold in the lower zone to indicate trending territory. Common threshold values are popular Fibonacci Retracements. 61.8 for the high threshold and 38.2 for the lower threshold.
#### What to look for
##### Market Condition Confirmation
* The first way that technical analysts can use CHOP is to confirm current market conditions. With readings above the upper threshold, continued sideways movement maybe expected.
* Readings below the lower threshold may indicate a continuing trend.
##### Upcoming Trendiness Change
* The second practical use for CHOP is anticipating changes in the market's trendiness. It is generally believed that extended periods of consolidation (sideways trading) are followed by an extended period of trending (strong, directional movement) and vice versa.
#### Summary
The Choppiness Index is an interesting metric which can be useful in identifying ranges or trends. What analysts need to be wary of, is identifying when a range or trend is likely to continue and when it is likely to reverse. The best way to accomplish this would be by combining CHOP with additional charting tools and analysis. For example, using CHOP in conjunction with trend lines and traditional pattern recognition.
##### Inputs
##### Length
The time period to be used in calculating CHOP (14 is the Default).
##### Offset
Changing this number will move the CHOP either Forwards or Backwards relative to the current market. 0 is the default.
#### Style
##### CHOP
Can toggle the visibility of the CHOP as well as the visibility of a price line showing the actual current price of the CHOP. Can also select the CHOP Line's color, line thickness and visual style (Line is the Default).
##### Upper Band
Can toggle the visibility of the Upper Band as well as select its value, color, line thickness and line style.
##### Lower Band
Can toggle the visibility of the Lower Band as well as select its value, color, line thickness and line style.
##### Background
Toggles the visibility of a Background color within the Bands. Can also change the Color itself as well as the opacity.
##### Precision
Sets the number of decimal places to be left on the indicator's value before rounding up. The higher this number, the more decimal points will be on the indicator's value.
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Commodity Channel Index (CCI)
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# Commodity Channel Index (CCI)
#### Definition
The [Commodity Channel Index (CCI)](https://www.tradingview.com/scripts/commoditychannelindex/) is a momentum oscillator used in technical analysis primarily to identify overbought and oversold levels by measuring an instrument's variations away from its statistical mean. CCI is a very well-known and widely-used indicator that has gained level of popularity in no small part of its versatility. Besides overbought/oversold levels, CCI is often used to find reversals as well as divergences. Originally, the indicator was designed to be used for identifying trends in commodities, however it is now used in a wide range of financial instruments.
#### History
The Commodity Channel Index (CCI) was created by Donald Lambert and introduced in 1980. It first appeared in what was then known as _Commodities_ Magazine.
#### Calculation
There are several steps involved in calculating the Commodity Channel Index. The following example is for a typical 20 Period CCI:
CCI = (Typical Price - 20 Period SMA of TP) / (.015 x Mean Deviation)
Typical Price (TP) = (High + Low + Close)/3
Constant = .015
The Constant is set at .015 for scaling purposes. By including the constant, the majority of CCI values will fall within the 100 to -100 range. There are three steps to calculating the Mean Deviation.
1. Subtract the most recent 20 Period Simple Moving from each typical price (TP) for the Period.
2. Sum these numbers strictly using absolute values.
3. Divide the value generated in step 3 by the total number of Periods (20 in this case).
#### The basics
The Commodity Channel Index indicator takes a security's change in price and compares that to its average change in price. CCI's calculation produces positive and negative values that oscillate above and below a Zero Line. Typically a value of 100 is identified as overbought and a reading of -100 is identified as being oversold. However, it is important to note a couple of things.
1. Actual overbought and oversold thresholds can vary depending on the financial instrument being traded. For example, a more volatile instrument may have thresholds at 200 and -200.
2. Frequently, overbought/oversold conditions are seen as a precursor to a price reversal. However, when using CCI, overbought and oversold conditions can often be a sign of strength, meaning the current trend may be strengthening and continuing.
#### What to look for
##### Overbought/Oversold
Because The Commodity Channel Index's primary function is to identify when a security is either overbought or oversold, it makes sense that anticipating future movements of price when these levels are crossed, is crucial to getting the most out of the CCI.
* Overbought and Oversold conditions can be used in their more traditional sense to identify future reversals. Remember true overbought/oversold thresholds values can and often do vary between instruments.
When price crosses above the overbought threshold, a fall in price may occur soon afterwards.
Price crossing below oversold conditions may signify a reversal to a rise in price.
* Overbought and Oversold conditions can also be seen as a sign of strength when using the CCI. The current trend may be strengthening.
During a Bullish Trend, price crossing above the overbought threshold may indicate strong confidence in the move and price will continue to rise.
During a Bearish Trend, price crossing below the oversold threshold may indicate strong confidence in the move and price will continue to fall.
##### Divergence
Momentum often does precede changes in price. Therefore, as with most momentum based oscillators, divergence between price and the indicator's reading should not be ignored. The Commodity Channel Index is no different. Divergences between CCI and price action can be a signal that changes in trend may be forthcoming.
Bullish CCI Divergence occurs when price makes a lower low while CCI makes a higher low.
Bearish CCI Divergence occurs when price makes a higher high while CCI makes a lower high.
#### Summary
The fact that The Commodity Channel Index indicator has been in use now for over 30 years is a testament to the value placed on it within the technical analysis community. Time and time again it is demonstrated how important momentum is when analyzing the market and attempting to determine future moves. Whether you are using CCI to confirm trends or to look for reversals, its momentum quantifying prowess should not go unnoticed. Like most indicators, CCI is best used not as a stand-alone indicator but in conjunction with others.
#### Inputs
##### Length
The time period to be used in calculating the SMA portion of the CCI (20 is the default).
##### Source
Determines what data from each bar will be used in calculations. Close is the default.
##### Smoothing section
You can learn more about the inputs in the "Smoothing" section in [this Help Center article](https://www.tradingview.com/support/solutions/43000742042/).
##### Calculation section
You can learn more about the inputs in the "Calculation" section in [this Help Center article](https://www.tradingview.com/support/solutions/43000591555/).
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Connors RSI (CRSI)
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# Connors RSI (CRSI)
####
#### Definition
[Connors RSI (CRSI)](https://www.tradingview.com/scripts/connorsrsi/) is a technical analysis indicator created by Larry Connors that is actually a composite of three separate components. The Relative Strength Index (RSI), developed by J. Welles Wilder, plays an integral role in Connors RSI. In fact, Wilder's RSI is used in two of the indicator's three components. The three components; The RSI, UpDown Length, and Rate-of-Change, combine to form a momentum oscillator. Connors RSI outputs a value between 0 and 100, which is then used to identify short-term overbought and oversold conditions.
#### History
Connors RSI was developed by Connors Research.
#### Calculation
There are three major components to Connors RSI
* RSI = Standard RSI developed by Wilder. This is typically a short-term RSI. In this example it is a 3 Period RSI.
* UpDown Length = The number of consecutive days that a security price has either closed up (higher than previous day) or closed down (lower than previous days). Closing up values represented in positive numbers and closing down is represented with negative numbers. If a security closes at the same price on back to back days, the UpDown Length is 0. Connors RSI then applies a short-term RSI to the UpDown Streak Value. In this example it is a 2 period RSI.
* ROC = The Rate-of-Change. The ROC takes a user-defined look-back period and calculates a percentage of the number of values within that look back period that are below the current day price change percentage.
The final CRSI calculation then simply finding the average value of the three components.
CRSI(3,2,100) = \[ RSI(3) + RSI(UpDown Length,2) + ROC(100) \] / 3
#### The basics
Connors RSI (CRSI) uses the above formula to generate a value between 0 and 100. This is primarily used to identify overbought and oversold levels. Connor's original definition of these levels is that a value over 90 should be considered overbought and a value under 10 should be considered oversold. On occasion, signals occur during slight corrections during a trend. For example, when the market is in an uptrend, Connors RSI might generate short term sell signals. When the market is in a downtrend, Connors RSI might generate short term buy signals.
A technical analyst should also be aware of the value of adapting or tweaking the Connor RSI. One of the issues with Connor RSI is that signals oftentimes occur early. For example, in an uptrend, a sell signal may present itself. However, the market continues to rise, thus a false signal. One potential safeguard against potential false signals would be combining the Connors RSI with additional technical analysis tools such as basic chart pattern analysis or additional indicators used to measure trend strength.
Another issue worth noting regarding the Connor RSI, is the placement of the overbought and oversold thresholds levels. For some trading instruments, the thresholds for overbought may need to be raised even higher and for oversold even lower. For example 95 and 5 respectively. These levels should generally be set after research and historical analysis. Making sure thresholds are in the proper place, should also help to cut down on false signals.
#### What to look for
Connors RSI is designed to define overbought and oversold levels and therefore trade signals based on those levels.
A bullish signal occurs when Connors RSI enters oversold territory.
A bearish signal occurs when Connors RSI enters overbought territory.
\*As previously mentioned, signals occasionally occur in the opposite direction of an overall trend.
#### Summary
Connors RSI indicator is a tool that takes a well established indicator, The Relative Strength Index (RSI) and applies it to its own theories. It can be a good way to define overbought and oversold levels and identify possible trading opportunities. That being said, Connors RSI does have a tendency to produce false signals. Therefore an astute technical analyst should experiment with what parameters work best for the security being traded. Also, combining Connors RSI with additional indicators will potentially increase its efficiency.
#### Inputs
##### RSI Length
The time period to be used in calculating the RSI. 3 is the default.
##### UpDown Length
Determines the time period of the UpDown RSI calculation, 2 is the default length.
##### ROC Length
The lookback for the ROC calculation. 100 is the default.
#### Style
##### CRSI
Can toggle the visibility of the CRSI Line as well as the visibility of a price line showing the actual current value of the CRSI. Can also select the CRSI Line's color, line thickness and visual style (Line is the Default).
##### Upper Band
Can toggle the visibility of the Upper Band Line. Can also select the Upper Band Line's value, color, line thickness and line style.
##### Lower Band
Can toggle the visibility of the Lower Band Line. Can also select the Lower Band Line's value, color, line thickness and line style.
##### Background
Can toggle the visibility of the Background. Can also select the Background's color and opacity.
##### Precision
Sets the number of decimal places to be left on the indicator's value before rounding up. The higher this number, the more decimal points will be on the indicator's value.
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Coppock Curve
|
# Coppock Curve
#### Definition
The Coppock Curve is a price momentum indicator to determine major lows in the stock market and is calculated as a moving average. The Coppock Curve is said to have been developed for long-term strategies involving indexes, ETFs, and other liquid instruments rather than intraday trading. The indicator can be used to identify major market trends, determine trend direction, and guide long-term investing or trading strategies.
#### History
The formula used for the Coppock Curve was developed in 1962 by Edwin S. Coppock in that year’s edition of Barron’s. The indicator was originally introduced as a long-term buy or sell indicator for major indices. It was first implemented this way to allow for indices to identify and target large trends.
#### Takeaways
The Coppock Curve is an oscillating trendline that ranges both higher and lower than zero, incorporating two rates of change in its calculations:
1. 11-period change;
2. 14-period change.
The curve reviews the rate of change for these periods and then derives a signal line indicator that is extrapolated from this data, by using a 10-month weighted moving average. When using the curve, traders, investors, and technical analysts can look to the signal line indicator to help analyze and come to their own investment conclusions based on their findings for medium/long-term trades.
#### What to look for
Just apply the Coppock Curve to a chart and then use trend analysis to analyze the bigger picture looking for where the Coppock Curve is above or below the zero line.
#### Summary
The Coppock Curve was created by an economist for medium to long-term trend analysis in indexes, ETFs, and other liquid instruments. It measures the rate of change and looks to present a clear trend for the medium and long-term.
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Correlation Coefficient (CC)
|
# Correlation Coefficient (CC)
#### Definition
[Correlation Coefficient (CC)](https://www.tradingview.com/scripts/correlationcoefficient/) is used in statistics to measure the correlation between two sets of data. In the trading world, the data sets would be stocks, etf's or any other financial instrument. The correlation between two financial instruments, simply put, is the degree in which they are related. Correlation is based on a scale of 1 to -1. The closer the Correlation Coefficient is to 1, the higher their positive correlation. The instruments will move up and down together. The higher the Correlation efficient is to -1, the more they move in opposite directions. A value at 0 indicates that there is no correlation.
##### High Positive Correlation
#### History
Correlation Coefficient is used not only in finance, but in statistical analysis spanning many different topics. It has been in use for hundreds of years.
#### Calculation
The Correlation Coefficient calculation uses Closing Prices. The below example will be made using the Closing Prices over 12 periods for the SPY and JPM:
_numbers may vary slightly due to rounding_
PERIOD
DATE
SECURITY 1
SECURITY 2
Date
SPY
JPM
1
8/1/2013
170.66
56.54
2
8/2/2013
170.95
56.40
3
8/5/2013
170.70
56.10
4
8/6/2013
169.73
55.49
5
8/7/2013
169.18
55.30
6
8/8/2013
169.80
54.83
7
8/9/2013
169.31
54.52
8
8/12/2013
169.11
54.09
9
8/13/2013
169.61
54.29
10
8/14/2013
168.74
54.15
11
8/15/2013
166.38
53.29
12
8/16/2013
165.83
51.83
All of the necessary data will need to be set up (preferably in a table) which can be done in three steps.
1\. First, every period needs to be squared for both securities.
PERIOD
DATE
SECURITY 1
SECURITY 2
Date
SPY
JPM
SPY Squared
JPM Squared
1
8/1/2013
170.66
56.54
29124.84
3196.77
2
8/2/2013
170.95
56.40
29223.90
3180.96
3
8/5/2013
170.70
56.10
29138.49
3147.21
4
8/6/2013
169.73
55.49
28808.27
3079.14
5
8/7/2013
169.18
55.30
28621.87
3058.09
6
8/8/2013
169.80
54.83
28832.04
3006.33
7
8/9/2013
169.31
54.52
28665.88
2972.43
8
8/12/2013
169.11
54.09
28598.19
2925.73
9
8/13/2013
169.61
54.29
28767.55
2947.40
10
8/14/2013
168.74
54.15
28473.19
2932.22
11
8/15/2013
166.38
53.29
27682.30
2839.82
12
8/16/2013
165.83
51.83
27499.59
2686.35
2\. Multiply the each period value of SPY by each period of JPM. Notice the last column.
PERIOD
DATE
SECURITY 1
SECURITY 2
Date
SPY
JPM
SPY Squared
JPM Squared
SPY x JPM
1
8/1/2013
170.66
56.54
29124.84
3196.77
9649.12
2
8/2/2013
170.95
56.40
29223.90
3180.96
9641.58
3
8/5/2013
170.70
56.10
29138.49
3147.21
9576.27
4
8/6/2013
169.73
55.49
28808.27
3079.14
9418.32
5
8/7/2013
169.18
55.30
28621.87
3058.09
9355.65
6
8/8/2013
169.80
54.83
28832.04
3006.33
9310.13
7
8/9/2013
169.31
54.52
28665.88
2972.43
9230.78
8
8/12/2013
169.11
54.09
28598.19
2925.73
9147.16
9
8/13/2013
169.61
54.29
28767.55
2947.40
9208.13
10
8/14/2013
168.74
54.15
28473.19
2932.22
9137.27
11
8/15/2013
166.38
53.29
27682.30
2839.82
8866.39
12
8/16/2013
165.83
51.83
27499.59
2686.35
8594.97
3\. Find the Average Value for each column.
PERIOD
DATE
SECURITY 1
SECURITY 2
Date
SPY
JPM
SPY Squared
JPM Squared
SPY x JPM
1
8/1/2013
170.66
56.54
29124.84
3196.77
9649.12
2
8/2/2013
170.95
56.40
29223.90
3180.96
9641.58
3
8/5/2013
170.70
56.10
29138.49
3147.21
9576.27
4
8/6/2013
169.73
55.49
28808.27
3079.14
9418.32
5
8/7/2013
169.18
55.30
28621.87
3058.09
9355.65
6
8/8/2013
169.80
54.83
28832.04
3006.33
9310.13
7
8/9/2013
169.31
54.52
28665.88
2972.43
9230.78
8
8/12/2013
169.11
54.09
28598.19
2925.73
9147.16
9
8/13/2013
169.61
54.29
28767.55
2947.40
9208.13
10
8/14/2013
168.74
54.15
28473.19
2932.22
9137.27
11
8/15/2013
166.38
53.29
27682.30
2839.82
8866.39
12
8/16/2013
165.83
51.83
27499.59
2686.35
8594.97
Average
169.1667
54.7358
28619.6762
2997.7049
9261.3142
Now that all of the data has been properly arranged in a table, the rest of the formula can be completed. This portion can be done in three steps as well.
1. Calculate the Variance for both securities. Variance = Squared Average - (Average Value \* Average Value)
SPY Variance: _2.3151_
JPM Variance: _1.697_
2. Calculate the Covariance of the securities. Covariance = (Average Value of Security1 x Security2) - (Security1 Average Value x Security2 Average Value)
SPY & JPM Covariance = _1.8395_
3. Calculate the Correlation Coefficient.Correlation Coefficient = Covariance / SQRT(Security1 Variance x Security2 Variance)
SPY & JPM Correlation Coefficient = 0.9432
#### The basics
Even though The Correlation Coefficient (CC) moves within a band of 1 to -1, it is not considered an oscillator. Values fluctuate between positive and negative correlation, indicating how closely their prices move together. A Correlation Coefficient of +1 is perfect positive correlation and they move in perfect synch. A Correlation Coefficient of -1 is perfect negative correlation and they move in exact opposite directions. Both of these extremes are rare and the Correlation Coefficient will often fluctuate somewhere between the two. Correlation Coefficient of 0 is the middle point indicating that there is currently no correlation between the two instruments.
##### High Negative Correlation
#### What to look for
As opposed to a lot of technical analysis indicators, The Correlation Coefficient is ideal for longer-term investing. If in an investor is going for a truly diversified portfolio, then the Correlation Coefficient can come in quite useful. It can help you determine for diverse the assets in your portfolio are from one another. In other words, by having instruments with low correlation, unnecessary, duplicated risk can be avoided.
#### Summary
As previously mentioned, The Correlation Coefficient can be a useful tool in assembling a diverse portfolio. One thing to always keep in mind however, is the correlation between two instruments can and does change from time to time. This indicator will help the trader to be aware of such changes and alter their investments accordingly.
#### Inputs
##### Symbol
The second instrument which will then be compared to the original instrument on the chart.
##### Length
The time period to be used in calculating the correlation. 20 days is the default.
##### Source
Determines what data from each bar will be used in calculations. Close is the default.
#### Style
##### Correlation
Can toggle the visibility of the Correlation Coefficient as well as the visibility of a price line showing the actual current value of the Correlation Coefficient. Can also select the Correlation Coefficient's color, line thickness and visual style (Area is the Default).
##### Level
Toggles the visibility and sets price level of three additional horizontal lines. By default, the lines display the maximum and minimum possible values of the correlation coefficient calculation (1 and -1, respectively), as well as the level of zero correlation. It is also possible to set the color, line thickness and select the visual style of each line (the default is Dashed line).
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Crypto Open Interest
|
# Crypto Open Interest
Open Interest is the total number of outstanding derivative contracts that have not been settled.
It is important to understand that since this is the number of open positions, the value can both increase and decrease during the day.
On the chart, open interest data for crypto derivatives is available as the "Crypto Open Interest" indicator in the "Financials" tab:
Values may be presented in base currency, quote currency, or contracts, depending on the exchange and crypto derivative.
List of exchanges where open interest is available for crypto derivatives: BINANCE, BITGET, BITMEX, BYBIT, COINBASE, DERIBIT, KRAKEN, HTX, OKX
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Cumulative Volume Delta
|
# Cumulative Volume Delta
The Cumulative Volume Delta indicator uses intrabar volume and price fluctuations to estimate the difference (delta) between buying and selling pressure within each chart bar, and it accumulates each bar's results over a specified period to provide a broader perspective on the relationship between volume and price activity.
The indicator analyzes each chart bar from an intrabar timeframe (i.e., a timeframe lower than the chart's), categorizing each intrabar's volume as positive or negative. It gradually accumulates the polarized volume values throughout a chart bar to calculate the volume delta, and it keeps track of the highest and lowest volume delta values achieved over the bar's duration.
Unlike the Volume Delta indicator, which only estimates the volume delta for individual chart bars, the Cumulative Volume Delta indicator accumulates volume delta across a period to provide a broader perspective. Each new bar's volume delta adds to the cumulative value calculated on the previous bar. The only exception is when a new period starts, which resets the cumulative calculation.
After calculating the period's cumulative values on a bar, the indicator plots a candle to represent the results:
* The candle's open value is the starting point of the bar's calculation. When the bar is the first in a period, the candle always opens at 0. Otherwise, the open equals the closing value from the previous CVD candle.
* The candle's close value represents the sum of the bar's final volume delta value and the total volume delta accumulated from previous bars within the period.
* The high reflects the highest cumulative volume delta calculated throughout the bar's duration.
* The low reflects the lowest cumulative volume delta calculated throughout the bar's duration.
#### Calculation
The Cumulative Volume Delta indicator scans volume and price action across lower-timeframe bars within each chart bar to calculate and accumulate volume delta values. To do this, it must first determine the intrabar timeframe to analyze.
Users can decide the lower timeframe manually or let the indicator determine the timeframe. By default, it selects the timeframe automatically based on the chart's timeframe using the following rules:
Chart timeframe
Timeframe used for the calculation
Seconds
1S
Minutes or Hours
1
Daily
5
Others
60
When selecting an intrabar timeframe manually, it's important to note that lower timeframes provide higher precision at the cost of less chart bar coverage. Higher timeframes provide more historical data, but the volume delta values will be less precise.
After timeframe selection, the indicator analyzes the direction of the available intrabars to categorize their volume and calculate the delta on each bar.
If the intrabar's opening price is not equal to the closing price:
* It considers the intrabar's volume positive and adds the value to the chart bar's total if the closing price exceeds the opening price.
* It considers the intrabar's volume negative and subtracts it from the chart bar's total if the closing price is below the opening price.
If the intrabar's opening and closing prices are equal:
* It considers the intrabar's volume positive and adds the value to the chart bar's total if the closing price exceeds the close of the previous intrabar.
* It considers the intrabar's volume negative and subtracts it from the chart bar's total if the closing price is below the previous intrabar's close.
* If the closing price equals that of the previous intrabar, the indicator assigns the previous intrabar's positive/negative status to the current intrabar.
Lastly, after computing a bar's volume delta values, the indicator adds those values to the current period's running total to calculate the opening, high, low, and closing cumulative volume delta on that bar. The running total resets to 0 each time a new period starts.
#### Inputs
#### Anchor period
Specifies the size of the calculation period. At the start of each new period, the indicator resets its volume delta accumulation, and the current bar's CVD candle starts at 0. On other bars, the indicator adds each bar's volume delta to the period's running total, and the current CVD candle's opening value aligns with the previous candle's closing value.
#### Use custom timeframe
Determines whether the user manually chooses the lower timeframe. If unchecked (default), the indicator selects the timeframe automatically. Otherwise, it uses the value specified in the "Timeframe" input below.
#### Timeframe
Specifies the intrabar timeframe used for volume delta calculation when "Use custom timeframe" is enabled. Higher timeframes provide more historical data at the cost of reduced precision. Lower timeframes cover fewer chart bars but offer higher precision.
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Cumulative Volume Index (CVI)
|
# Cumulative Volume Index (CVI)
#### Definition
The Cumulative Volume Index (CVI) is a running total of the difference between the number of stocks advancing and number of stocks declining. Think of it like a running scoreboard, tracking the entire market and its outperformance or underperformance, on a cumulative basis.
#### Calculations
The Cumulative Volume Index is calculated as follows:
CVI = Previous Period CVI + (Advancing stocks - Declining stocks)
#### Definitions:
Advancing stocks - The number of advancing stocks in the current period
Declining stocks - The number of declining stocks in the current period
#### Takeaways
It’s good to use the Cumulative Volume Index with other indicators and technical analysis tools, rather than on its own. The CVI is not comprehensive enough to paint a clear trading or investing signal. Instead it is a broad market tool to measure breadth.
The CVI helps to confirm whether or not market capital is moving in or out of an index. If the CVI trends lower, it is often assumed that a trend has lost some of its momentum and a possible reversal can be seen in the future. If the CVI is trending higher, however, this could signal the opposite - that a trend is gaining momentum. This could be a signal for traders to start making trades in congruence with the trend.
#### What to look for
The CVI can be used to follow the broad markets and its overall strength throughout a period of time. While the CVI is helpful for gauging market breadth, it can also be used to examine the underlying trend to determine if more stocks are advancing than declining over time.
#### Summary
The Cumulative Volume Index is an indicator best known for tracking price trends in and outside of the stock market. With the addition of other indicators, the analyzed pattern can help determine when a trend is weakening or generally trending lower, as well as when it is strengthening or generally moving higher. It’s important to remember that the number isn’t as important here, rather the pattern and general trend analyzed by the CVI.
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Detrended Price Oscillator (DPO)
|
# Detrended Price Oscillator (DPO)
#### Definition
The [Detrended Price Oscillator indicator (DPO)](https://www.tradingview.com/scripts/detrendedpriceoscillator/) is used to remove trend from price. This is done in order to identify and isolate short-term cycles. DPO is not typically aligned with the most current prices. It is offset to the left (the past) which helps to remove current trend. Because it is offset to the past, the DPO is not considered a momentum oscillator. It only measures past prices against a Simple Moving Average as a way to gauge a cycle's high/low range as well as typical duration.
#### Calculation
(Price of (N/2 + 1) periods ago) - (N Period SMA) = DPO
N = The user defined look-back period
#### The basics
The Detrended Price Oscillator indicator (DPO) compares past prices to a displaced (shifted to the past) Simple Moving Average. The SMA is displayed a Zero Line, with DPO fluctuating between positive (above the line) and negative (below the line) values. Simply put, a positive values means that price was above the SMA and a negative value means price was below the SMA.
#### What to look for
The main purpose of the DPO is to analyze historical data in order to observe cycle's in a market's movement. DPO can give the technical analyst a better sense of a cycle's typical high/low range as well as its duration.
##### Cycle High/Low Range
##### Cycle Duration
#### Summary
The Detrended Price Oscillator (DPO)is not necessarily intended to be a signal-generating indicator. Instead it is best served as a way for a technical analyst to build confidence when identifying the characteristics of a trading instrument's typical cycle. Because of this, it would be prudent to use the DPO alongside additional indicators which are designed to gauge trend or momentum.
#### Inputs
##### Period
The time period to be used in calculating the DPO.
##### Centered
When the DPO is centered, the DPO line stays offset towards the left. When it is not centered, it shifts back to the right to match current price.
#### Style
##### Detrended Price Oscillator
Can toggle the visibility of the DPO as well as the visibility of a price line showing the actual current value of the DPO. Can also select the DPO Line's color, line thickness and visual style (Line is the Default).
##### Zero Line
Can toggle the visibility of the Zero Line. Can also select the line’s value, line thickness, value and visual type (dashes is the default).
##### Precision
Sets the number of decimal places to be left on the indicator's value before rounding up. The higher this number, the more decimal points will be on the indicator's value.
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Divergence
|
# Divergence
#### Definition
A divergence occurs when an asset’s price is moving opposite to a specific technical indicator or is moving in a different direction from other relevant data. The divergence indicator warns traders and technical analysts of changes in a price trend, oftentimes that it is weakening or changing direction.
Divergence can be either positive, signifying the possibility of a move that is higher in the asset’s price, or it can be negative, signifying the possibility of a move that is lower in the asset’s price.
#### Takeaways
Divergence often works with other indicators and data. It is usually used by technical analysts and traders when the asset’s price is moving counter to the direction of another indicator.
As mentioned above, positive divergence indicates that the price could start rising and usually occurs when the price is moving lower, but while another indicator counters this direction by moving higher. In other words, showing bullish signals.
Negative divergence indicates that the price could start declining and usually occurs when the price is moving higher, while another indicator moves lower as well. In other words, showing bearish signals.
#### What to look for
Divergence is most often used to track and analyze the momentum in an asset’s price and the odds of a price reversal within the current trend. While using divergence, traders and analysts can decide on whether or not they would like to exit the position or set a stop loss in the case the divergence is negative and prices begin to fall.
#### Limitations
It is best to use divergence with the aid of other indicators and analysis tools in order to help identify and confirm trend reversals and major market patterns. Divergence should not be relied on by itself to tell you the pertinent information you need to know as an investor. Risk control is key in your analysis and the fact that divergence is not always present in price reversals should definitely be what pushes you to combine it with other tools and indicators.
Additionally, divergence can reflect long-term or short-term changes. When making snap decisions, acting on divergence alone could prove detrimental to your trading. Make sure you have other risk factors applied to your charting and general market analysis.
#### Summary
The divergence indicator helps traders assess changes in the price trend and indicates when price will move with or against the direction of another indicator. It can be either positive or negative, but it is important to note its limitations and that it should be used with other indicators that can also monitor price trends.
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Directional Movement (DMI)
|
# Directional Movement (DMI)
#### Definition
[Directional Movement (DMI)](https://www.tradingview.com/scripts/directionalmovement/) is actually a collection of three separate indicators combined into one. Directional Movement consists of the Average Directional Index (ADX), Plus Directional Indicator (+DI) and Minus Directional Indicator (-DI). ADX's purposes is to define whether or not there is a trend present. It does not take direction into account at all. The other two indicators (+DI and -DI) are used to compliment the ADX. They serve the purpose of determining trend direction. By combining all three, a technical analyst has a way of determining and measuring a trend's strength as well as its direction.
#### History
J. Welles Wilder created the DMI and featured it in his book _New Concepts in Technical Trading Systems_. The book was published in 1978 and also featured several of his now classic indicators such as; The Relative Strength Index, Average True Range (ATR) and the Parabolic SAR. Much like the indicators mentioned, the DMI is still widely used and has great importance in the world of technical analysis.
#### Calculation
Calculating the DMI can actually be broken down into two parts. First, calculating the +DI and -DI, and second, calculating the ADX. To calculate the +DI and -DI you need to find the +DM and -DM (Directional Movement). +DM and -DM are calculated using the High, Low and Close for each period. You can then calculate the following:
Current High - Previous High = UpMove
Previous Low - Current Low = DownMove
If UpMove > DownMove and UpMove > 0, then +DM = UpMove, else +DM = 0
If DownMove > Upmove and Downmove > 0, then -DM = DownMove, else -DM = 0
Once you have the current +DM and -DM calculated, the +DM and -DM lines can be calculated and plotted based on the number of user defined periods.
+DI = 100 times Exponential Moving Average of (+DM / Average True Range)
-DI = 100 times Exponential Moving Average of (-DM / Average True Range)
Now that -+DX and -DX have been calculated, the last step is calculating the ADX.
ADX = 100 times the Exponential Moving Average of the Absolute Value of (+DI - -DI) / (+DI + -DI)
#### The basics
DMI has a value between 0 and 100 and is used to measure the strength of the current trend. +DI and -DI are then used to measure direction. When combined, the indicator can provide some valuable insight. A general interpretation would be that during a strong trend (ADX above 25 but dependent on the analyst's interpretation), when the +DI is above the -DI, then a Bullish Market is defined. When -DI is above +DI, then a Bearish Market is at hand.
One thing to be considered is that what DMI values determine, strength or a potential signal, is up to the trader's interpretation. Acceptable values may change depending on the financial instrument being examined, therefore some historical analysis of the instrument in question would be prudent. A technical analyst can make better decisions based on what has occurred in historical examples.
#### What to look for
##### Trend Strength
Analyzing trend strength is the most basic use for the DMI. To analyze trend strength, the focus should be on the ADX line and not the +DI or -DI lines. Wilder believed that a DMI reading above 25 indicated a strong trend, while a reading below 20 indicated a weak or non-existent trend. A reading between those two values, would be considered indeterminable. However, as previously mentioned, an experienced trader would not take the 25 and 20 values and apply them in every situation. What is truly a strong trend or a weak trend depends on the financial instrument being examined. Historical analysis can assist in determining appropriate values.
Also, keep in mind that Wilder developed the dmi for use with currencies and commodities which are typically more volatile than stocks and have stronger trends. This will factor into determining which values are appropriate not just for analyzing the strength of a trend, but also for any signals generated.
##### Crosses
DI Crossovers are the significant trading signal generated by the DMI. There is a particular set of conditions for each cross.
##### Bullish DI Cross
1. ADX must be over 25 (strong trend. The value is determined by trader)
2. The +DI crosses above the -DI.
3. Stop Loss should be set at the current day's low. The signal should not be abandoned, if the low is not breached, even if the -DI crosses above the +DI
4. The signal strengthens if ADX rises.
5. If ADX strengthens, trader's should employ a trailing stop.
##### Bearish DI Cross
1. ADX must be over 25 (strong trend. The value is determined by trader)
2. The -DI crosses above the +DI.
3. Stop Loss should be set at the current day's high. The signal should not be abandoned, if the high is not breached, even if the +DI crosses above the -DI
4. The signal strengthens if ADX rises.
5. If ADX strengthens, trader's should employ a trailing stop.
#### Summary
Directional Movement (DMI) is another quite valuable technical analysis indicator provided by Wilder. It takes the very complex subject of trend strength and direction and calculates it down into a very simple and straightforward visual. The key takeaway of using the DMI is that even though it can provide quality information and even trading signals, it is not an easy indicator to master. To truly get the most out of DMI, a technical analyst will have to continually study and tweak their use of the indicator. Combining the knowledge of how DMI works and its capabilities, along with a decent amount of historical analysis and experience, will help the trader to make the DMI a good, possible addition to their overall trading strategy.
#### Inputs
##### ADX
The time period to be used in calculating the ADX which has a smoothing component (14 is the Default).
##### DI Length
The time period to be used in calculating the DI (14 is Default).
#### Style
##### ADX
Can toggle the visibility of the ADX Line as well as the visibility of a price line showing the actual current value of the ADX. Can also select the ADX Line's color, line thickness and visual style (Line is the Default).
##### +DI
Can toggle the visibility of the +DI Line as well as the visibility of a price line showing the actual current value of the +DI. Can also select the +DI Line's color, line thickness and visual style (Line is the Default).
##### \-DI
Can toggle the visibility of the -DI Line as well as the visibility of a price line showing the actual current value of the -DI. Can also select the -DI Line's color, line thickness and visual style (Line is the Default).
##### Precision
Sets the number of decimal places to be left on the indicator's value before rounding up. The higher this number, the more decimal points will be on the indicator's value.
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Double Exponential Moving Average (EMA)
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# Double Exponential Moving Average (EMA)
#### Definition
The Double Exponential Moving Average (EMA) is a technical indicator that uses two moving averages to help confirm uptrends when price moves above average, and confirm downtrends when the price moves below average. A trend change might be occurring when the price moves in a direction away from the average. In addition, moving averages can be used to signify support and/or resistance territories.
#### History
The Double EMA was first introduced by Patrick Mulloy in his article from 1994 titled, “Smoothing Data with Faster Moving Averages.” His article was published in Technical Analysis of Stocks & Commodities magazine.
#### Calculations
The formula for Double EMA is as follows:
DEMA = 2 × EMAN − EMA of EMAN
#### Definition:
N= Look-back period
1. To calculate Double EMA, first choose the look-back period you would like to examine (i.e. five, 15, 100 periods).
2. Once you have selected your period, go ahead and calculate the EMA for that period (EMAN).
3. Then apply a different EMA with the same lookback period to EMAN
4. To finish, multiply the EMANby two and subtract the smoothed EMA amount. Now you’re all set.
#### Takeaways
The Double EMA has a quicker response when compared with traditional EMAs and can be used in the same ways. Remember that if you are using Double EMAs that it reacts quicker and therefore you should be planning your strategies around this information - alterations may be in order.
If working with a longer timeframe (e.g. 100 periods), keep in mind that the Double EMA will react slower than if you were using a shorter timeframe (e.g. 10 periods).
#### What to look for
The formula listed above does not rely on using the double exponential smoothing factor, rather it doubles the EMA and consequently cancels out the lag by subtracting smoothed EMA. The calculations, as you might have been able to tell, are a little complicated and therefore need more conclusive data instead of pure EMA calculations alone. Today, it is easier to calculate Double EMAs because of modern technology and charting.
Double EMAs are more advanced than traditional moving averages and react quicker, making them more sought after by day and swing traders. Investors also use Double EMAs, but usually stick to traditional moving averages since long-term investors tend to be less active in their assets.
#### Limitations
Traditional moving averages are good to use to identify trends in markets, but they don’t give much data when prices are choppy or not smooth. When price crosses the moving average or Double EMA, it is difficult to determine results and decide on when a trade will be profitable.
For this reason, it is great to pair the Double EMA with other technical indicators, or other price and/or fundamental analysis tools. By pairing the Double EMA, investors and traders can better determine market trends while looking at the big picture, and not getting hung up on the limitations or focusing on one sole indicator.
To conclude our limitations section, one thing to note would be the significance of reducing lag. Reducing lag can be beneficial in some instances, such as if there is a reversal in actual price. It can help get a trader out quickly and before any major losses occur. However, reduced lag may also result in something called overtrading; when an indicator provides a trader with too many signals at once. An indicator that has less lag is also more susceptible to reacting to small shifts in price that would normally not have a large effect. So remember that lag can be good at times, but at others it can really get in the way. It is up to the trader to decide whether or not lag is something they want or need from their indicator.
#### Summary
The Double EMA is an indicator that identifies uptrends and downtrends in the current market. It responds quicker than traditional moving averages and can be used with other indicators to help traders analyze overall market trends. Make sure to look into lag if you will be utilizing Double EMAs so that you can determine if reducing lag will be what is best for you and your trade.
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Envelope (ENV)
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# Envelope (ENV)
#### Definition
[Moving Average Envelopes (ENV)](https://www.tradingview.com/scripts/envelope/) are a banded indicator. ENV displays an upper envelope above a basis line and a lower envelope below the basis line. The basis line is a moving average, either a simple moving average or an exponential moving average. The envelopes are set a (user defined) percentage away from the basis line. Envelopes are a good indicator for trend identification as well as identifying overbought and oversold conditions.
#### Calculation
A Moving Average Envelope (ENV) is actually fairly simple to calculate. For this example we will use a 20 Period SMA with 10% Envelopes:
Basis = 20 Period SMA
Upper Envelope = 20 Period SMA + (20 Period SMA x 0.1)
Lower Envelope = 20 Period SMA - (20 Period SMA x 0.1)
#### The basics
Moving Average Envelopes (ENV) are a trend following indicator. Because moving averages lag behind price, the envelopes will as well. That being said, any price movements that break through either of the envelopes should not go unnoticed. ENV is designed to have the majority of price action occur within the envelopes. Therefore, when price breaks through, this is a sign of strength and can indicate a significant price move. For example, in an strong trend (in either direction) a breakthrough above the upper envelope may indicate that the uptrend is strengthening and will continue. Another example is that during a sideways trend, a breakthrough above the upper envelope may signal an overbought condition leading to price falling back within the envelopes.
As with many indicators, the trick to using ENV efficiently and effectively is using the correct parameters. This is the difficult part. This mostly comes by experimentation and experience. Historical analysis can also help the technical analyst to discover historical levels for a particular security. Another technique is overlaying several Moving Average Envelopes onto each other and setting the envelopes varying percentages away. This can give the technical analyst additional breakthrough points to consider.
#### What to look for
##### Trend Confirmation
Frequently, during a strong, clearly defined trend, a breakthrough into overbought or oversold territory is a sign of strength. This can be used to confirmed the likelihood of a continuing trend.
During a Bullish Trend, a breakthrough above the upper envelope can be seen as a sign of strength and the uptrend is likely to continue.
During a Bearish Trend, a breakthrough below the lower envelope can be seen as a sign of strength and the downtrend is likely to continue.
##### Overbought and Oversold
When a market is choppy or trading sideways, Moving Average Envelopes can be useful for identifying overbought and oversold conditions. These conditions can typically lead to price corrections where price moves back towards the moving average.
#### Summary
Despite having a very simple premise, Moving Average Envelopes (ENV) can actually be quite effective. Being able to help identify trends as well as overbought and oversold conditions is a valuable trait in an indicator and one that can greatly help technical analysts. When combined with additional technical analysis tools such as pattern analysis or momentum indicators, ENV can become an integral part of a sound trading strategy.
#### Inputs
##### Length
The time period to be used in calculating the MA which creates the base for the Upper and Lower Envelopes (20 is the default).
##### Percent
The percentage to be applied to the bands.
##### Source
Determines what data from each bar will be used in calculations. Close is the default.
##### Exponential
Determines if a simple or exponential moving average will be used for the basis.
##### STYLE
##### Basis
Can toggle the visibility of the Basis as well as the visibility of a price line showing the actual current value of the Basis. Can also select the Basis' color, line thickness and line style.
##### Upper
Can toggle the visibility of the Upper Band as well as the visibility of a price line showing the actual current value of the Upper Band. Can also select the Upper Band's color, line thickness and line style.
##### Lower
Can toggle the visibility of the Lower Band as well as the visibility of a price line showing the actual current value of the Lower Band. Can also select the Lower Band's color, line thickness and line style.
##### Background
Toggles the visibility of a Background color within the Bands. Can also change the Color itself as well as the opacity.
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Fisher Transform
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# Fisher Transform
#### Definition
The Fisher Transform is a technical indicator that converts price to Gaussian normal distribution and signals when prices move significantly by referencing recent price data. Information provided by the Fisher Transform can help identify reversals or big changes in asset pricing. Ultimately, this indicator can be used to determine trends and underscore key price moves within said trends.
#### History
The Fisher Transform was developed and first introduced by J.F. Ehlers to act as a technical analysis indicator that spots major price reversals.
#### Calculations
The formula for Fisher Transform is as follows:
Fisher Transform = ½ \* ln(1 + X / 1 - X)
#### Definition:
ln= natural logarithm
X= the transformation of price from -1 to 1
1. To calculate Fisher Transform, first choose the look-back period you would like to examine (e.g. nine periods). This will be how many periods the indicator will be applied to.
2. Once you have selected your period, go ahead and convert the prices of the periods to values between -1 and +1. Don’t forget to input for Xand complete all calculations within the brackets of the formula.
3. Then multiply your results by the natural log.
4. With this new result, multiply by 0.5.
5. Repeat the calculation process as each period concludes and convert the most recent price to a value between -1 and +1 (based on the most recent periods). Now you’re all set.
6. To finish, add/subtract the calculated values from your previous calculated value. Now you’re all set.
#### Takeaways
Turning points become a lot clearer with the use of Fisher Transform and its ability to track asset prices. In addition, while some traders choose to look for more dramatic readings that signal to price reversals, others may find it more beneficial to track Fisher Transform directional changes. Although the Fisher Transform is usually applied to asset prices, it can be applied to other indicators as well.
#### What to look for
As mentioned in the Definition section, the Fisher Transform is a technical indicator that converts price to Gaussian normal distribution, often including data that is not usually normal distributed (i.e. market prices).This causes data to present itself as more uniform, with less extreme changes in order to determine true price reversals in the market.
This technical indicator is what some would call “unbounded,” and therefore it is possible for extremes to occur long-term. The basis of what constitutes an extreme is determined by the historical readings of the asset you are working with. Reading values differ depending on the asset you’re analyzing. Asset readings are important because they have the potential of signalling a reversal, which can be confirmed or denied by Fisher Transform directional changes.
The Fisher Transform will often have a signal line attached. It is essentially the Fisher Transform’s value moving average and moves slower than the traditional indicator’s line. It is often used when the Fisher Transform moves across the trigger line.
Many traders opt to use the Fisher Transform with other indicators that specifically map out trend analysis. This is because the Fisher Transform sends out many different trade signals, some of which are not profitable in the slightest. By pairing it up with other indicators, traders get a more complete picture on when to acknowledge and act on buy and sell signals.
Keep in mind that the Fisher Transform indicator should not be confused for Bollinger Bands. They may look different on a chart, but both are rooted in distribution of asset prices and can often be confused. One way to easily tell them apart is to remember that the Fisher Transform appears on a price chart as a separate indicator, whereas Bollinger Bands are distinctively overlaid over the price.
#### Limitations
As mentioned in the What to look for section, the Fisher Transform can often send out many trade signals, causing a bit of congestion when all it is trying to do is make reversals and extreme change in price easier for traders to identify. This can become quite an issue, which is why pairing it with another indicator is highly suggested.
#### Summary
The Fisher Transform is an indicator that converts price to Gaussian normal distribution and alerts traders of price movement and changes in trend by referencing recent price data. The information that is provided by the indicator can help traders determine when is right to buy and sell, based on reversals or big changes in asset pricing. The Fisher Transform is best paired with other trend analysis indicators to help identify price trends and highlight key price moves of an asset within the market.
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Exponential Moving Average
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# Exponential Moving Average
####
#### Definition
The Exponential Moving Average (EMA) is a specific type of moving average that points towards the importance of the most recent data and information from the market. The Exponential Moving Average is just like it’s name says - it’s exponential, weighting the most recent prices more than the less recent prices. The EMA can be compared and contrasted with the simple moving average.
#### Calculations
The formula for calculating the Exponential Moving Average (EMA) is shown below.
#### Definitions:
EMA = Exponential Moving Average
Although there are many options to choose from when considering the smoothing factor, most opt for a value of 2. This value gives more credibility to the most recent data points available. The more a trader increases the smoothing factor value, the more influence the most recent data will have on the moving average.
To calculate the EMA, follow this simple formula.
The Exponential Moving Average is equal to the closing price multiplied by the multiplier, plus the EMA of the previous day and then multiplied by 1 minus the multiplier.
EMA = Closing price x multiplier + EMA (previous day) x (1-multiplier)
#### Takeaways
Similar to other moving averages, the EMA is a technical indicator that produces buy and sell signals based on data that shows evidence of divergence and crossovers from general and historical averages. Additionally, the EMA tries to amplify the importance that the most recent data points play in a calculation.
It is common to use more than one EMA length at once, to provide more in-depth and focused data. For example, by choosing 10-day and 200-day moving averages, a trader is able to determine more from the results in a long-term trade, than a trader who is only analyzing one EMA length.
It’s best to use the EMA when for trending markets, as it shows uptrends and downtrends when a market is strong and weak, respectively. An experienced trader will know to look both at the line the EMA projects, as well as the rate of change that comes from each bar as it moves to the next data point. Analyzing these points and data streams correctly will help the trader determine when they should buy, sell, or switch investments from bearish to bullish or vice versa.
#### What to look for
Short-term averages, on the other hand, is a different story when analyzing Exponential Moving Average data. It is most common for traders to quote and utilize 12- and 26-day EMAs in the short-term. This is because they are used to create specific indicators. Look into Moving Average Convergence Divergence (MACD) for more information. Similarly, the 50- and 200-day moving averages are most common for analyzing long-term trends.
Moving averages can be very useful for traders using technical analysis for profit. It is important to identify and realize, however, their shortcomings, as all moving averages tend to suffer from recurring lag. It is difficult to modify the moving average to work in your favor at times, often having the preferred time to enter or exit the market pass before the moving average even shows changes in the trend or price movement for that matter.
All of this is true, however, the EMA strives to make this easier for traders. The EMA is unique because it places more emphasis on the most recent data. Therefore, price movement and trend reversals or changes are closely monitored, allowing for the EMA to react quicker than other moving averages.
#### Limitations
Although using the Exponential Moving Average has a lot of advantages when analyzing market trends, it is also uncertain whether or not the use of most recent data points truly affects technical and market analysis. In addition, the EMA relies on historical data as its basis for operating and because news, events, and other information can change rapidly the indicator can misinterpret this information by weighting the current prices higher than when the event actually occurred.
#### Summary
The Exponential Moving Average (EMA) is a moving average and technical indicator that reflects and projects the most recent data and information from the market to a trader and relies on a base of historical data. It is one of many different types of moving averages and has an easily calculable formula.
#### Inputs
##### Length
The time period to be used in calculating the Exponential Moving Average. 9 days is the default.
##### Source
Determines what data from each bar will be used in calculations. Close is the default.
##### Offset
Changing this number will move the Exponential Moving Average either Forwards or Backwards relative to the current market. 0 is the default.
##### Smoothing section
You can learn more about the inputs in the "Smoothing" section in [this Help Center article](https://www.tradingview.com/support/solutions/43000742042/).
##### Calculation section
You can learn more about the inputs in the "Calculation" section in [this Help Center article](https://www.tradingview.com/support/solutions/43000591555/).
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Dividend Yield
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# Dividend Yield
#### Definition
The dividend yield shows how much a company pays in dividends per year relative to the price of the underlying asset that pays out the dividend. It’s listed as a percentage and is presented as a financial ratio. The word “yield” is often used in fixed income investing to convey how much an asset is paying out just to hold it outright.
#### Calculations
The dividend yield formula is as follows:
Dividend yield = annual dividends per share : price per share
We usually calculate the dividend yield from the financial report of the full last year. Keep in mind that the longer it’s been since the company’s annual report, the less relevant the data is going to be for investors.
To decide how to go about calculating the dividend yield, investors should consider and analyze the history of company dividend payments in order to help them choose which method of calculation will be most effective for them and provide the most accuracy.
#### Takeaways
The dividend yield is the amount of money that a company pays its shareholders in return for them owning a share of the company’s stock, then divided by the company’s current stock price. Some companies will pay higher dividends than others, and can even have their dividends taxed at a higher rate.
The analysis of dividend yields is used often when investors are searching for companies to invest in. Dividend yield is often desired by fixed income investors. Companies such as Real estate investments trusts, business development companies, and master limited partnerships are all likely to pay higher dividends on average because the U.S. Treasury requires that companies such as these pay the majority of their income to their shareholders. Instances such as these are called the “pass-through” process and allow the company to forgo income taxes on profits that it then pays to shareholders as dividends. Shareholders, however, do have to pay taxes on their income profit.
Keep in mind that higher dividend yields don’t always point towards good investment opportunities. There are cases where companies have high dividend yields due to a decline in stock price, and not because they are highly profitable.
#### What to look for
If the dividend yield remains where it is and does not rise or decline in percentage, then it is safe to assume that the yield will rise when the stock price falls. On the other hand, if the stock price rises, the dividend yield will fall. The dividend yield changes relative to the stock price, and therefore it may present itself as uncharacteristically high when stocks are quickly falling in value.
The dividend yield is shown as a percentage rather than a dollar amount to make it simpler to see the amount of return the shareholder of a company can expect to make relative to what they have invested. The yield, in general, shows how much a company pays out in dividends each year.
#### Limitations
Dividends may come at the expense of necessary or potential growth of a company, as each dollar a company pays through dividends is a dollar that the company cannot therefore reinvest within. As explained above, it is not in an investor’s best interest to analyze a stock solely based on the dividend yield. In addition, investors should be wary of a company that looks as though it is declining, all the while with a high dividend yield. The stock price is the denominator of the formula and used to calculate the dividend yield.
#### Summary
The dividend yield is a percentage that shows the amount in which a company pays in dividends per year, relative to the company’s stock price. The yield can be used with other indicators to aid analysis and should not be an investor’s sole focus due to instances that showcase insufficient or irrelevant data to a company’s stock price.
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Historical Volatility
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# Historical Volatility
####
#### Definition
Historical volatility is a statistical measure used to analyze the general dispersion of security or market index returns for a specified period of time. It is commonly calculated by identifying the average deviation from a financial instrument’s average price within the set time period. Options traders use historical volatility to calculate the probabilities of their trades.
Volatility is often called the fear gauge, but that is not the case at all and a misrepresentation as it primarily conveys sudden change in price or the rapid changes occurring. More often than not, historical volatility is calculated by using standard deviation, but there are many other ways of calculating the measure. Note that the higher the historical volatility value, the higher the security risk. Understanding that risks can be both bearish and bullish, the results are not necessarily something to be overly wary of.
#### Takeaways
Historical volatility is mainly used to measure the distance a security’s price moves in relation to it’s mean value. However, it can be used to measure other specifics as well, including loss probability.
Historical volatility can be used to measure how far index prices move away from the moving average for trending markets, which is how a strong trend can show a low volatility value while prices change drastically. The value doesn’t fluctuate on a daily basis, rather steadily changes over time with the market trend.
Although used to measure price movements, historical volatility also helps analyze all different types of risk valuation and tolerance. High historical volatility may require higher risk tolerance than its lower value counterparts. This inherently calls for alterations to the measure, whether that be stop-loss level changes or margin requirement adjustments.
#### What to look for
Although volatility doesn’t sound all too great, many traders and investors make decent profits with high volatility. With low volatility also comes the low potential of making capital gains, which occurs when a stock or security isn’t mobile. With high volatility, there comes the constant gamble of high risk, high reward. Losses, however, can be crippling, which means trades must be calculated down to the millisecond and timing has to be perfect.
For smooth sailing, it is best if volatility levels are calculated in the middle ground - not too high, not too low. It’s difficult to say where that middle ground is, as it varies depending on the specific market and, even more particularly, on the specific stock. By comparing the volatility with other securities and by using a combination of technical analysis indicators, a middle ground for volatility levels shouldn’t be too hard to find.
#### Summary
Historical volatility measures the changes of security prices in a market over a specified period of time. It can be used to measure risk and traders often use it to analyze and determine the status of market trends. High volatility is often associated with negative connotations, but this is not always the case, as we’ve learned above. If you’re not ready to gamble, finding a neutral ground when it comes to historical volatility is a good place to start with your trading.
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Funding Rate
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# Funding Rate
The periodic cash flow that equilibrates perpetual futures (unlike traditional futures) with the underlying spot index. The funding rate can be positive or negative, depending on market conditions. A positive rate – perpetual trading at a premium (contango) – requires longs to pay shorts; a negative rate – perpetual at a discount (backwardation) – requires shorts to pay longs.
The funding rate is typically calculated as Funding Rate = Interest Rate + Premium Index, where:
* Interest Rate is a fixed component reflecting the cost of capital, usually set by the exchange
* Premium Index represents the difference between the perpetual contract price and the spot price.
Some exchanges may apply proprietary adjustments to this formula.
On the chart, funding rate data is available as the "Funding Rate" indicator in the "Financials" tab.
Values are presented in percentages.
"Funding Rate" is available for crypto derivatives of the following exchanges: BINANCE, BITGET, BITMEX, BYBIT, COINBASE, DERIBIT, HTX, KRAKEN, OKX.
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Donchian Channels (DC)
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# Donchian Channels (DC)
#### Definition
[Donchian Channels (DC)](https://www.tradingview.com/scripts/donchianchannels/) are used in technical analysis to measure a market's volatility. It is a banded indicator, similar to Bollinger Bands %B (%B). Besides measuring a market's volatility, Donchian Channels are primarily used to identify potential breakouts or overbought/oversold conditions when price reaches either the Upper or Lower Band. These instances would indicate possible trading signals.
#### History
The Donchian Channels (DC) indicator was created by the famous commodities trader Richard Donchian. Donchian would become known as _The Father of Trend Following_.
#### Calculation
For this example, a 20 day period is used which is a very commonly used timeframe.
Upper Channel = 20 Day High
Lower Channel = 20 Day Low
Middle Channel = (20 Day High + 20 Day Low)/2
#### The basics
Donchian Channels are one of the more straightforward indicators to calculate and understand. The indicator simply takes a user defined number of periods (20 Days for example) and calculates the Upper and Lower Bands. The Upper Band is the high price for the period. The Lower Band is the low price for the period. The Middle Line is simply the average of the two.
The main function of Donchian Channels is to measure volatility. When volatility is high, the bands will widen and when volatility is low, the bands become more narrow. When price reaches or breaks through one of the bands, this indicate an overbought or oversold condition. This can essentially result in one of two things. First, the current trend has been confirmed and the breakthrough will cause a significant move in price in the same direction. The second result is that the trend has already been confirmed and the breakthrough indicates a possible small reversal before continuing in the same direction.
#### What to look for
##### Trend Confirmation
Oftentimes, in a clearly defined trend, overbought or oversold conditions can be a significant sign of strength.
During a Bullish Trend price moving into overbought territory can indicate a strengthening trend.
During a Bearish Trend price moving into oversold territory can indicate a strengthening trend.
##### Overbought/Oversold
During a Bullish Trend, price may move into short-term oversold conditions. These oversold conditions can also indicate a strengthening trend.
During a Bearish Trend, price may move into short-term overbought conditions. These overbought conditions can also indicate a strengthening trend.
#### Summary
The Donchian Channels indicator (DC) measures volatility in order to gauge whether a market is overbought or oversold. What is important to remember is that Donchian Channels primarily work best within a clearly defined trend. During a Bullish Trend, movement into overbought territory may indicate a strengthening trend (especially if the movements occur frequently during the trend). During a Bearish Trend, frequent movement into oversold territory may also indicate a strengthening trend. Also, during an uptrend (downtrend), movements into oversold (overbought) territory may just be temporary and the overall trend will continue. That being said, being sure of the overall trend plays a major role in getting the most out of Donchian Channels. They could be used with additional technical analysis tools such as trend lines or the Directional Movement (DMI) indicator.
#### Inputs
##### Length
The time period to be used in calculating the Donchian Channels (20 is the Default).
Offset
Changing this number will move the Donchian Channels either Forwards or Backwards relative to the current market. 0 is the default.
Specifies
##### Timeframe
Specifies the timeframe that the indicator is calculated on. This option allows calculating VWAP based on a data from another timeframe, e.g. having VWAP calculated on 1H chart be displayed on a 5m chart.
##### Wait for timeframe closes
Specifies the behavior when the indicator's timeframe is higher than the chart's. When 'Wait for timeframe closes' is checked, higher timeframe values only come in and are interconnected on the chart when the higher timeframe completes.
#### Style
##### Basis
Can toggle the visibility of the Basis as well as the visibility of a price line showing the actual current price of the Basis. Can also select the Basis' color, line thickness and line style.
##### Upper
Can toggle the visibility of the Upper Band as well as the visibility of a price line showing the actual current price of the Upper Band. Can also select the Upper Band's color, line thickness and line style.
##### Lower
#####
Can toggle the visibility of the Lower Band as well as the visibility of a price line showing the actual current price of the Lower Band. Can also select the Lower Band's color, line thickness and line style.
##### Background
Toggles the visibility of a Background color within the Bands. Can also change the Color itself as well as the opacity.
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Elder's Force Index (EFI)
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# Elder's Force Index (EFI)
#### Definition
[Elder's Force Index (EFI)](https://www.tradingview.com/scripts/eldersforceindex/) measures the power behind a price movement using price and volume. The indicator can also be used to identify potential reversals and price corrections. The EFI is an oscillator that fluctuates between positive and negative values, above and below a Zero Line. Alexander Elder, the indicator's creator, believed that there are three components to a security's price movement. Those three components are: direction, extent and volume. All three of these components are combined by the EFI to generate the oscillator.
#### History
Elder's Force Index (EFI) was created by the famed professional trader and psychiatrist Alexander Elder. The indicator was introduced in his book _Trading For a Living: Psychology, Trading Tactics, Money Management_ which was published in 1993.
#### Calculation
(CurrentPeriodClose - (PreviousPeriod Close) X Volume = EFI
13 Period Exponential Moving Average of EFI = EFI (13)
#### The basics
The Elder Force Index (EFI) combines the previously mentioned three components. Here is a further breakdown.
1. Direction - A positive change in direction from one period to the next indicates that buys were stronger than sellers. A negative change in direction means that sellers were stronger than buyers.
2. Extent - A big advance in price shows high levels of buying pressure. A big decline in price shows high levels of selling pressure.
3. Volume - High levels of volume shows a strong commitment underlying the price movement.
Essentially, EFI's calculation takes these three components and produces an easily readable visual of the information.
#### What to look for
##### Trend Identification
EFI can be used to identify market trend. Different periods of EFI can be used to identify shorter or longer-term trends. Typically, a 13 period EFI can be used for a shorter-term trend. Something like a 100 Period EFI can be used for an intermediate or longer-term trend. Longer period EFI produces a smoother signal than shorter-term EFI.
##### Divergence
Divergences are a popular signal generated by many different indicators. The same is true for the Elder's Force Index indicator.
Bullish EFI Divergence occurs when price moves lower while the EFI moves higher.
Bearish EFI Divergence occurs when price moves higher while EFI moves lower.
EFI Divergences can be further reinforced by a Zero Line crossover. For example, when a Bullish Divergence is forming, EFI crossing the Zero Line into positive territory could further reinforce a signal of an impending reversal.
##### Price Corrections
During an uptrend, EFI can present buying opportunities in the form of price corrections. EFI can temporarily drop into negative territory when price dips before continuing the uptrend.
During a downtrend, EFI can present selling opportunities in the form of price corrections. EFI can temporarily rise into positive territory when price bounces before continuing the downtrend.
#### Summary
The Elder's Force Index indicator (EFI) combines both price action as well as volume to quantify a valuable metric. It is fairly versatile and can be used for a number of things. most notably trend confirmations and trading signals due to divergences and price corrections. That being said, as with most indicators it is best not to use the EFI as a stand-alone signal generator but in conjunction with additional indicators and technical analysis.
#### Inputs
##### Length
The time period to be used in calculating the EFI, 13 by default.
#### Style
##### Elder's Force Index
Can toggle the visibility of the EFI Line as well as the visibility of a price line showing the actual current value of the EFI Line. Can also select the EFI Line's color, line thickness and visual type (Line is the default).
##### Zero
Can toggle the visibility of the Zero Line. Can also select the Zero Line's value, color, line thickness and visual type (Dashes are the default).
##### Precision
Sets the number of decimal places to be left on the indicator's value before rounding up. The higher this number, the more decimal points will be on the indicator's value.
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Ease of Movement (EOM)
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# Ease of Movement (EOM)
#### Definition
The [Ease of Movement indicator](https://www.tradingview.com/scripts/easeofmovement/) is a volume based oscillator. It is designed to measure the relationship between price and volume and display that relationship as an oscillator that fluctuates between positive and negative values. The EOM fluctuates above and below a Zero Line. This is done in order to quantify the "ease" of price movements. A basic understanding is that when the EOM is in positive territory, prices are advancing with relative ease. When the EOM is negative, prices are declining with relative ease.
#### History
The Ease of Movement indicator (EOM) was developed and introduced by Richard Arms.
#### Calculation
There are four necessary steps when calculating Ease of Movement for this example we will calculate a 14 Period EOM which is very common:
1\. Calculate the distance moved.
((CurrentHigh + CurrentLow)/2 - (PreviousHigh + PreviousLow)/2) = Distance Moved
2\. Calculate the Box Ratio which take volume and high/low range to produce the denominator in EOM calculations.
((CurrentVolume/100,000,000) / (CurrentHigh - CurrentLow))
3\. Calculate a 1 Period EOM.
Distance Moved / Box Ratio = 1 Period EOM
4\. Calculate a 14 Period EOM.
14 Period Simple Moving Average of the 1 Period EOM = 14 Period EOM
#### The basics
As previously mentioned, EOM plots a line which fluctuates between positive and negative values. Simply put, when the values are positive, price is advancing. When numbers are negative, prices are declining. One has to remember from the above calculations that price distance moved determines whether the EOM line is positive or negative. The Box Ratio, (which is determined by (volume)) is what determines the strength or range of that move. Therefore, when it comes to analyzing EOM, keep two points in mind.
A wide range with low volume indicates a high level of ease of movement.
A narrow range with high volume indicates a low level of ease of movement.
Because of the role that volume plays in the Ease of Movement indicator, many technical analysts use a standard Volume indicator in conjunction with the EOM.
#### What to look for
##### Trend Direction
Identifying basic trend direction is the most straightforward way to use the Ease of Movement indicator.
##### Signal Confirmation
Ease of Movement can be used as a way to confirm signals generated by additional indicators.
#### Summary
The Ease of Movement (EOM) indicator is ideal for use as a complimentary indicator. The EOM generally follows price quite closely because the price distance moved from the previous period to the most recent period is what determines the direction. Where it really excels however, is confirming patterns or signals generated by more predictive indicators. EOM should not typically be used as a stand-alone indicator.
#### Inputs
##### Length
The time period to be used in calculating the EOM. 14 is the default.
##### Divisor
A value used to help produce a ratio number that’s not too big or too small. The more heavily the stock is traded, the higher the divisor should be so that the resulting indicator value is in single or double digits.
#### STYLE
##### EOM
Can toggle the visibility of the EOM Line as well as the visibility of a price line showing the actual current value of the EOM Line. Can also select the EOM Line's color, line thickness and visual type (Line is the default).
##### Precision
Sets the number of decimal places to be left on the indicator's value before rounding up. The higher this number, the more decimal points will be on the indicator's value.
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