Trading Indicators

Detailed explanation of various trading indicators used in technical analysis.

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 ...
Trading with the Relative Vigor Index (RVI)

Trading with the Relative Vigor Index (RVI)

Trading Indicators
Among the many oscillator suite of indicators, the Relative Vigor Index, or RVI for short, is relatively less popular than its famous cousins such as the Stochastics or even the Relative Strength Index. A quick search reveals that most trading systems make use of the above two and there are hardly any popular trading systems that makes use of the RVI oscillator. However, that being said, the Relative Vigor Index makes for a fine indicator which when applied correctly can prove to be a valuable took for technical analysis. The RVI Indicator was developed by John Ehlers, who is widely known for his discovery of MESA (Maximum Entropy Spectrum Analysis), (Center of Gravity) COG indicator and other such unique indicators. Most of his work, and the resulting indicators were based off Ehle...
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 ...
Trading with Speed lines (Speed Resistance Lines)

Trading with Speed lines (Speed Resistance Lines)

Trading Indicators
Speed Resistance Lines or Speed lines for short is a trading concept that was developed by the late Edson Gould who was one of the pioneers as a stock market technician. In 1977, Forbes Magazine described Gould as "the dean of technicians." The speed resistance line concept is based upon the theory that trends can be divided into three equal parts and makes use of trend lines to divide the underlying trend which are then projected into the future to act as support and resistance lines. Although this method is quite reliable and tends to act better than plotting trend lines based on current price action, many traders do not make use of speed lines. Adding this technical analysis to your existing trading arsenal can greatly help the trader understand price action much better and especi...
Guide to understanding divergence trading

Guide to understanding divergence trading

Trading Indicators
Divergence trading is a well known/well used trading method used across various markets, especially in forex. While divergence trading is not a stand-alone concept of trading, it can be quite useful (and is widely used) as an additional confirmation of a trade signal/set up. In this article, we explain the basics of divergence, how it all started and how you can use divergence techniques to improve your trading system. Dow Theory - The origin of divergence Divergence trading is based off the well known Dow Theory, known as Dow Theory Divergence. The Dow Theory divergence analyses the relationship between the DJIA and the Dow Jones Transport Average. Charles Dow compared the Dow Jones Industrials against the transport average and came up with the logic that there was a close relationship ...