## Technical Analysis Indicators

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**Major Technical Analysis Indicators**

Technical indicators are mathematical calculations based on price volatility and volume activity. Technical indicators are used to confirm the price trend of a financial security but also to generate buy and sell signals. Indicators which are formed in a bounded range are called oscillators. Usually oscillators are formed in a range between zero and 100. Here are the most commonly used technical indicators.

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**1) Bollinger Bands**

Bollinger bands indicator consists of three bands which encompass the activity of a particular share price. These three bands are 1.The upper band (20-day moving average plus 2 standard deviations) 2. The lower band (20-day moving average minus 2 standard deviations) 3. A middle moving average (20-day moving average).

**2) Simple and Exponential Moving Averages**

A simple moving average is formed by calculating the average price of a financial security over a particular period. Exponential moving averages apply less weight to old prices and more weight to recent prices.

**3) MACD (Moving Average Convergence Divergence)**

MACD indicator is one of the most commonly used technical analysis indicators. MACD is a trend following momentum indicator. The MACD transforms two trend-following moving averages into a single momentum oscillator by subtracting the longer moving average from the shorter moving average.

**4) Relative Strength Index (RSI)**

Relative Strength Index (RSI) is a Momentum Oscillator commonly used among technical analysts. RSI measures the internal strength of a stock (between 0 and 100)

-If RSI is above 70 then a stock is considered overbought

-If RSI is below 30 a stock is considered oversold

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**5) Stochastic Oscillator **

Stochastic Oscillator is a momentum oscillator that indicates overbought and oversold levels. It presents the current close price level relative to the high / low range over a number of periods.

**6) ****Accumulation / Distribution**

It is an indicator that measures demand and supply by indicating whether investors are buying (accumulation) or selling (distribution) a financial security. Accumulation / Distribution indicator is formed as:

Accumulation / Distribution = {(Close Price – Low Price) – (High Price – Close Price)} / {(High Price– Low Price) X Volume Activity}.

**7) ****Put / Call Ratio**

A very simple and useful indicator formed by dividing Options Contracts put volume by Options Contracts call volume. This indicator usually signaling a possible trend alteration.

Put / Call Ratio = (Put Options Volume) / (Call Contracts Volume)

**8) ****Average Directional Index (ADX) **

Average Directional Index is evaluating the strength of a price trend. High readings of ADX indicate a strong trend and low readings a weak trend. ADX uses a scale of 1 to 100 and the standard measurement is set for 14 days.

-If ADX readings are above 30 it is a signal of a strong price trend

-If ADX readings are below 20 its is a signal of a changing trend

**9) ****Correlation Coefficient**

Indicates the correlation degree between two financial securities in a particular period.

**10) ****Chaikin Money Flow **

Chaikin Money Flow combines price and volume to measure the amount of money flow volume over a specific period.

**11) ****Balance Volume - OBV**

The on-balance volume (OBV) presents graphically the flow of volume in a stock activity. The OBV line is a cumulative total of the daily volume numbers. OBV line is adding volume on days when the closing price moving up and deducting volume when the closing price is moving down.

**12) William %R**

Williams %R is a momentum indicator that reflects the level of the close relative to the highest high for the look-back period.

William %R = {(Highest High - Close) / (Highest High - Lowest Low)} X ( -100)

**13) Volume-weighted Average Price (VWAP)**

Volume-weighted Average Price (VWAP) is used in intraday basis. This indicator is formed by dividing the total dollar value of all trades in a day by the total trading volume.

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