Tag: technical analysis indicators

Jul32015 by Editorial TeamNo Comments

Trading with Donchian Channels

The Donchian channels, also referred to as Donchian Bands, is one of the famous channel indicators besides the more popular Bollinger Bands. It is a trend following channel indicator and has given rise to many different trading strategies including the famed 'Turtle Trading Strategy' as well. The Donchian Band is primarily used to gauge the volatility of the markets (similar to Bollinger Bands) and can also be used as a break out indicator as well as a horizontal support and resistance indicator. This means that when prices are stable, the Donchian channels tend to contract or narrow and when volatility picks up, the Donchian channels widen. The Donchian Channel was developed by Richard Donchian a futures and commodities trader. Richard Donchian is also known within the trading f

Jul182014 by Editorial TeamNo Comments

Trading the Awesome Oscillator

Trading Indicators

The Awesome oscillator was developed by Bill Williams, part of his series of 'Chaos Theory'. Bill Williams went on to develop various indicators as part of this '5-market dimensions'. Some of the other well known indicators from Bill Williams include the Williams Fractal, Alligator, Awesome Oscillator. The Awesome oscillator is commonly found on many charting platforms and is used to measure momentum. The awesome oscillator is identified by its histogram which oscillates around the 0-line. When the awesome oscillator (AO for short) rises above the 0-line, it indicates positive momentum and when it drops below the 0-line, it indicates negative momentum. Trade signals are taken based in reference to the AO's 0-line. Calculating the Awesome oscillator The Awesome Oscillator calculates th...

Dec92013 by Editorial TeamNo Comments

What is the Standard Deviation Channel

Trading Indicators

Standard deviation channel is also alternatively referred to as the Linear Regression channel. In the course of this article, we will use both the words as they mean the same. As the name implies, the Standard deviation is a channel with an upper and lower range which are placed 'x' standard deviations away. The Standard deviation channel operates on the concept of reversal to the mean or price equilibrium. When it comes to plotting the standard deviation channel, traders must specify the time frame, or the number of bars for which they want the deviation channel to be plotted. Based on this input, if a trader selects 100 bars, then the standard deviation channel is automatically plotted. Ideally, the Standard deviation channel is used to find market tops and bottoms for the specifie...

Nov232013 by Editorial TeamNo Comments

Understanding Money Flow Index

Trading Indicators

The Money Flow Index, or MFI for short is a momentum based oscillator that was created Gene Quong and Avrum Soudack. The purpose of MFI was to measure the strength of institutional money flowing in and out of the security/instrument. It is quite similar to the RSI (Relative Strength Index) but differs in the fact that MFI also takes into account the volume, whereas RSI only considers the price. The MFI is ideally suited for securities or instruments where volume plays an important role and one which is measured accurately. Therefore, the MFI is ideal for trading the equity or futures markets as compared to forex, where the aspect of volume is questionable. Calculation of the Money Flow index The MFI oscillates between 0 - 100 and is based on an 'N-period' where N could be days/hours o...

Oct272013 by Editorial TeamNo Comments

Using the Envelopes Indicator for Trading

Trading Indicators

The envelopes indicator is a rather unique trading indicator. Unlike most trend following indicators such as moving averages, the envelopes indicator follows the mean reversion concept. The mean reversion is based on the principle that prices tend to revert to the mean when they deviate too far away. As such, the envelopes indicator provides traders a different way to trade the underlying markets. The envelopes indicator is comprised of 3 bands, namely a moving average and an upper and lower band. The outer bands are placed at a fixed percentage away from the moving average. How are Envelopes Indicator Calculated The envelopes indicator comprises of a band and a mean. The mean is usually an exponential moving average for a period that the trader can specify, while the upper and ...