Trading Indicators

Detailed explanation of various trading indicators used in technical analysis.

Introduction to Average True Range

Introduction to Average True Range

Trading Indicators
ATR for short, the Average True Range is a technical analysis indicator used to measure volatility in the markets. Developed by J. Welles Welder, the ATR forms an important element in the larger trading systems. Besides ATR, J. Welles Welder is also attributed to other indicators such as the Average Directional index, Relative Strength Index and Parabolic SAR. Unlike other indicators, the ATR works in the opposite way. Meaning that when the market is at a low, the ATR usually peaks and vice-versa. When trading with the ATR indicator, the higher the value of the ATR, the greater the trend change is probable and conversely, lower the ATR value, the weaker is the trend. The ATR is not to be mistaken for price trend, but rather price volatility. And you might know that volatility rep...
Trading with Stochastics Oscillator

Trading with Stochastics Oscillator

Trading Indicators
Stochastics Oscillator or Stochs for short is a trend oscillator tool used in technical analysis of the markets. Stochastics measures overbought and oversold conditions in the markets, similar to Relative Strength Index or RSI. It is one of the default trading indicators available on most trading platforms and charting packages. While it isn't clear as to who discovered the Stochastics Oscillator, two names pop up prominently with this indicator. Namely, Dr. George Lane and Ralph Dystant. The Stochastics Oscillator looks identical to the MACD indicator and is made up of two lines where one is a faster signal line and works on the concept that while prices are in an uptrend, the price action tends to close at the high of the candle and vice versa when markets are in a downtrend. ...
Trading with Relative Strength Index

Trading with Relative Strength Index

Trading Indicators
RSI for short, Relative Strength Index is a technical analysis tool developed by J. Welles Wilder and was first published in his book, 'New Concepts in technical trading systems' during 1978. Welles Wilder is attributed to many other technical indicators such as the Average True Range, Parabolic SAR and Average Directional Index. Ever since its introduction, RSI has become one of the most important and commonly used indicator as part of a larger trading system or strategy. Due to its importance, the RSI indicator is available by default on most trading platforms or charting packages. The RSI indicator is a momentum indicator. The concept of momentum in trading is based on the principle that trends are usually followed by momentum. Higher the momentum, the more trending the market...
Trading with Bollinger Bands <sup>®</sup>

Trading with Bollinger Bands ®

Trading Indicators
Developed by John Bollinger in the 1980's, Bollinger Bands® is a technical analysis tool which comprises of two price channels (upper and lower bands) plotted two standard deviations (used to measure volatility) away from a moving average (the median line). Despite a decade since Bollinger bands was developed, it is still widely used amongst traders and market technicians to identify volatility and trends in the markets and can be used across different time frames. Bollinger Bands® are part of the standard technical analysis tools available by default and for free in most trading platforms. Also referred to as Bands, this technical analysis tool is used across various markets including Forex, Stocks and commodities. In this article, we'll take a look at Bollinger Bands® and how to imple
Commodity Channel Index – Understanding the basics

Commodity Channel Index – Understanding the basics

Trading Indicators
Commodity Channel Index, or CCI for short is an indicator in technical analysis, used in identifying the cyclic trends in security and is commonly used to analyze commodities. It measures the currency price relative to an average price level for a given time period. Donald Lambert developed the Commodity channel index and is used as a versatile indicator to identify new trends or warn the trade of volatile trading conditions. The Commodity Channel indicator can be used not only for commodity trading but can be equally used with trading ETF's, Indices, stocks and forex markets. The way the CCI works is quite simple. The CCI reading is relatively high when prices are far above their average and is low when prices fall below their average. Thus, CCI can be efficiently used for identifying ...