Tag: trend following indicator

Trading with Donchian Channels

Trading with Donchian Channels

Trading Indicators
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
What is the Standard Deviation Channel

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...
Using the Envelopes Indicator for Trading

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 ...
Moving Averages – Everything you should know

Moving Averages – Everything you should know

Trading Indicators
The moving averages indicator is one of simplest yet widely used indicator across every markets including Forex, Futures and equities. It is one of the most popular indicator with many technical analysis relying heavily on the moving average. As the name indicates, the moving average indicator is nothing but a line that plots the average of price across the chart continuously. The average can be applied to Open/High/Low/Close or even to typical price, which is High/Low/Close or Median Price, which is High/Low and Weighted Close, which is High/Low/Close/Close. Moving Averages are used to not only gauge the trend of the underlying security, they also act as dynamic support and resistance levels. Therefore it is not uncommon to see prices stall near a moving average. The moving average ...
What is the Parabolic SAR Indicator

What is the Parabolic SAR Indicator

Trading Indicators
Parabolic SAR, short for Stop and Reverse is a technical indicator developed by J. Welles Wilder. The PSAR indicator is used to primarily determine the direction of price and the points at which price tends to reverse and move in the opposite direction. The Parabolic SAR can be identified by the 'dots' that are drawn on the charts, showing potential price points of reversal and are plotted either above or below the instrument's price. The PSAR trails price by plotting the dots either below the price during an uptrend or above the price during a down trend. These are also known as Rising SAR or Falling SAR. The Parabolic SAR is a free trading indicator that is usually available by default in most trading platforms. PSAR can be used to identify potential price reversals thus giving...