Moving Averages(MA)

Moving averages (MAs) are one of the most basic and widely used technical indicators. They are calculated by averaging the closing prices of a security over a specified period of time. There are three main types of moving averages:

• Simple moving average (SMA): The SMA is calculated by simply averaging the closing prices of a security over a specified period. For example, a 10-day SMA would be calculated by averaging the closing prices of the past 10 days.
• Exponential moving average (EMA): The EMA gives more weight to recent prices than older prices. This is because the EMA is calculated by taking the average of the closing prices, but then multiplying the average by a weighting factor (usually between 0.05 and 0.20) and adding that product to the previous EMA. This makes the EMA more responsive to recent price changes.
• Weighted moving average (WMA): The WMA assigns different weights to different closing prices. For example, a WMA could be calculated by giving the most recent closing price a weight of 1.0, the second most recent closing price a weight of 0.9, and so on. This can be useful for giving more weight to more recent prices, or for giving more weight to prices that are closer to the current price.

How to use moving averages:

• Identifying trends: Moving averages can be used to identify trends in the price of a security. If the price of a security is above its moving average, then the security is in an uptrend. If the price of a security is below its moving average, then the security is in a downtrend.
• Generating trading signals: Moving averages can also be used to generate trading signals. For example, a trader could buy a security when its price crosses above its 200-day moving average, and sell a security when its price crosses below its 200-day moving average.

Bollinger Bands

Bollinger Bands are a volatility indicator that uses a moving average and standard deviation to measure the volatility of a security's price. The Bollinger Bands are plotted as two lines around the moving average, with the upper band being the moving average plus one standard deviation and the lower band being the moving average minus one standard deviation.

How to use Bollinger Bands:

• Identifying overbought and oversold conditions: Bollinger Bands can be used to identify overbought and oversold conditions. When the price of a security is close to its upper Bollinger Band, the security is considered to be overbought. This means that the price may be due for a correction. When the price of a security is close to its lower Bollinger Band, the security is considered to be oversold. This means that the price may be due for a rebound.
• Setting stop-loss orders: Bollinger Bands can also be used to set stop-loss orders. A stop-loss order is an order to sell a security if its price falls below a certain level. By setting a stop-loss order at the lower Bollinger Band, a trader can limit their losses if the price of the security falls sharply.

Relative Strength Index(RSI)

The Relative Strength Index (RSI) is a momentum indicator that measures the speed and magnitude of price movements. The RSI is calculated by comparing the average of up closes to the average of down closes. The RSI is expressed as a value between 0 and 100.

How to use the RSI:

• Identifying overbought and oversold conditions: The RSI can be used to identify overbought and oversold conditions. When the RSI is above 70, the security is considered to be overbought. This means that the price may be due for a correction. When the RSI is below 30, the security is considered to be oversold. This means that the price may be due for a rebound.
• Generating trading signals: The RSI can also be used to generate trading signals. For example, a trader could buy a security when its RSI crosses below 30, and sell a security when its RSI crosses above 70.

Stochastic Oscillator

The Stochastic Oscillator is a momentum indicator that compares the closing price of a security to its price range over a certain period of time. The Stochastic Oscillator is expressed as a value between 0 and 100.

How to use the Stochastic Oscillator:

• Identifying overbought and oversold conditions: The Stochastic Oscillator can be used to identify overbought and oversold conditions. When the Stochastic Oscillator is above 80, the security is considered to be overbought. This means that the price may be due for a correction. When the Stochastic Oscillator is below 20, the security is considered to be oversold. This means that the price may be due for a rebound.

• Generate trading signals: The Stochastic Oscillator can also be used to generate trading signals. For example, a trader could buy a security when the %K line crosses above the %D line, and sell a security when the %K line crosses below the %D line.

• Confirm trends: The Stochastic Oscillator can also be used to confirm trends. For example, if the price of a security is making new highs and the Stochastic Oscillator is rising, then the uptrend is confirmed. If the price of a security is making new lows and the Stochastic Oscillator is falling, then the downtrend is confirmed.

Average Directional Index(ADX)

The Average Directional Index (ADX) is a technical indicator that measures the strength and direction of a trend. The ADX is calculated using three directional indices:

• Positive Directional Index (+DI): The +DI measures the strength of upward price movements.
• Negative Directional Index (-DI): The -DI measures the strength of downward price movements.
• Directional Movement Index (DX): The DX is a measure of the overall strength of the trend.

The ADX is expressed as a value between 0 and 100. A higher ADX value indicates a stronger trend, while a lower ADX value indicates a weaker trend.

How to use the ADX:

• Identifying trends: The ADX can be used to identify trends. If the ADX is above 25, then the trend is considered to be strong. If the ADX is below 15, then the trend is considered to be weak.
• Confirming trends: The ADX can also be used to confirm trends. For example, if the price of a security is making new highs and the ADX is rising, then the uptrend is confirmed. If the price of a security is making new lows and the ADX is rising, then the downtrend is confirmed.

Commodity Channel Index(CCI)

The Commodity Channel Index (CCI) is a momentum indicator that measures the strength and direction of price movements relative to a moving average. The CCI is calculated using the mean price, typical price, and standard deviation of a security's price. The CCI is expressed as a value that can be above or below +100 or -100.

How to use the CCI:

• Identifying overbought and oversold conditions: The CCI can be used to identify overbought and oversold conditions. When the CCI is above +100, the security is considered to be overbought. This means that the price may be due for a correction. When the CCI is below -100, the security is considered to be oversold. This means that the price may be due for a rebound.
• Generating trading signals: The CCI can also be used to generate trading signals. For example, a trader could buy a security when its CCI crosses below -100, and sell a security when its CCI crosses above +100.

Average True Range(ATR)

The Average True Range (ATR) is a volatility indicator that measures the average range of a security's price over a certain period of time. The ATR is calculated using the true range, which is the greatest of the following:

• The current high minus the previous low
• The absolute value of the current high minus the previous close
• The absolute value of the current low minus the previous close

The ATR is expressed as a numerical value. A higher ATR value indicates higher volatility, while a lower ATR value indicates lower volatility.

How to use the ATR:

• Setting stop-loss orders: The ATR can be used to set stop-loss orders. A stop-loss order is an order to sell a security if its price falls below a certain level. By setting a stop-loss order at a multiple of the ATR, a trader can limit their losses if the price of the security falls sharply.
• Setting profit targets: The ATR can also be used to set profit targets. A profit target is a price at which a trader plans to sell a security for a profit. By setting a profit target at a multiple of the ATR, a trader can take profits when the price of the security has moved in their favor.