A simple moving average is formulated by adding up the last X number of market days’ closing prices and dividing that total by X. For example, if you wanted to calculate a stock XYZ’s 3 day simple moving average. You would add up 3 day’s...
With simple averages the calculation is, well, simple. The simplicity of the calculation can sometimes cause a bit of a flaw to the SMA. The flaw is due to spikes in the price of a security. For example, if you were to calculate the 4 day SMA of stock XYZ...
Let us first summarize the exponential moving average. When choosing a moving average that can react quickly to price changes and trends, then the exponential moving average is the one to choose. Act fast in finding a trend and you act fast in making money....
This chapter looks at what are called Technical Indicators. Technical Indicators are defined as, “tools that are implemented by a technical analyst to in order to determine the likelihood and direction of future price move trends.” Technical Indicators : Table of Contents Introduction Bollinger Bands MACD...
Bollinger Bands ® help you to evaluate a stock’s volatility over time. When plotting Bollinger Bands ® on a chart will see one line above and one line below the price chart of the stock. When a stock is making major price movements or is very volatile its Bollinger...
The moving average convergence divergence indicator is commonly called the MACD. The MACD is designed to find up trends and down trends in a stock via its moving averages. MACD The MACD indicator is calculated using three attribute of the stock’s price movement. Those 3...
The technical indicator called Stochastics is used to determine patterns of uptrends and downtrends in a stock’s trading pattern. The oscillation of the Stochastics shows you when a stock is nearing or within an oversold area or nearing or within an overbought area. Stochastics come...
The RSI or Relative Strength Index is a technical indicator used to find when a stock has been oversold or overbought. The RSI is usually plotted below the chart and its number always ranges from 0 to 100. As you can see from the chart...
The Symmetrical Triangle chart pattern is formed when a stock’s highs and lows converge together to form a triangle shape. Therefore, the stock is having less and less price fluctuation. This is a stand off with the buyers and sellers. The Symmetrical Triangle pattern is...
Also called an Inverse Head and Shoulders Pattern. This is a mirrored version on the standard Head and Shoulders pattern, the Reverse Head and Shoulders pattern is formed with an initial valley (first shoulder), followed by a lower valley (the head) and finally a higher...