Saturday, March 27, 2010

Class Room 1

Some indicators explained

SMA – Simple Moving Average: A technical indicator that takes an average of the closing price over a given number of days to provide smoothed curve of the price data. Used in conjunction with a second moving average of a different duration to provide a cross over trigger point.

EMA – Exponential Moving Average: Similar to the Simple Moving Average in principle, however the exponential moving average gives greater relevance to the most recent prices.

MACD – Moving Average Convergence/Divergence: A trend-following momentum indicator that shows the relationship between two moving averages of prices. The MACD is calculated by subtracting the Period 1 EMA from the Period 2 EMA. Period 3 EMA of the MACD, called the 'signal line', is then plotted on top of the MACD. Where these lines cross provides the trigger information.

Stochastic: A technical indicator that compares a stock’s closing price to its price range over a given time period.

RSI – Relative Strength Index: A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine oversold and overbought conditions of stock.

Williams: A technical momentum indicator measuring overbought and oversold levels, similar to a stochastic oscillator. It compares a stock’s closing price to the high-low range over a certain period of time.

Rate of Change: A technical indicator that measures the percentage change between the most recent price and the price n periods in the past.

Breakout: A price movement through an identified level of support or resistance, which is usually followed by heavy volume and increased volatility. Traders will buy the underlying asset when the price breaks above a level of resistance and sell when it breaks below support.

Candlestick: Automatically identifies the most popular candlestick charting patterns to highlight the potential reversal or continuation of trends in advance of a market move.

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