Accelerator/Decelerator Oscillator - AC

One of the last elements which is possible to change is price. When the price changes, the market driving force starts modification, and prior this process beginning, the force precipitation must slow and touch the zero reading. After that, it begins to rise backwards until the price direction takes another course.

Acceleration or deceleration of driving force can be measured by means of the technical indicator Acceleration/Deceleration, AC. The indicator changes its trend with the driving force adjustment, and the last one changes its direction with the price fluctuations. AC turns out to be a change signal, that gives a particular advantage.

The accelerating driving force balance is at zero level. Being above zero Oscillator Acceleration Deceleration, AC allows to move upwards more intensively (and conversely, when below zero). During the zero reading transit doesn't give any attention signal. For decision making and market monitoring it is necessary just to watch over the color changing. Worth keeping in mind that it is better not to buy with the help of AC, if the current column is green, and sell if it is red.

On buying only two colored green columns are required, and conversely, for selling – two colored red columns while accessing the market in the driving force direction. Opening a position if the driving force is on the opposite side, confirmation is required, that means additional column. That is to say, the indicator must show three red columns above zero, amid this, for the long position – three green columns below zero.

Price - is the last changing element. Before the price changes, the market driving force moves, and prior to this, the driving force acceleration must slow the pace and reach zero level. Thereafter, it starts accelerating in the opposite direction until the price begins fluctuating.

The technical indicator Acceleration/Deceleration, AC measures acceleration and deceleration of the current driving force. This indicator changes its trend prior to the driving force correction, and in its turn, the driving force changes its direction before the price moves. Comprehension of that AC is advancing attention signal gives obvious advantages. Zero line - practically it is a point where the driving force is balanced with acceleration. If Acceleration Deceleration, AC is above zero then, usually it is easier to continue the upward movement (and vice versa - when below zero). As against wesome scillator, the zero line cross-cut doesn't come as a sign. The only thing to do for monitoring the market and taking measures - is to keep an eye on color deviation. To avoid hard thinking, just remember: it is better not to buy using AC when the current column is red colored and not to sell when it is green. If you enter the market in the driving force direction (Acceleration/Deceleration indicator is above zero while making purchase, and below zero while selling), then for buying two green columns are needed (two red columns - to sell). If the driving force is against the position opened (the indicator is below zero on buying, above zero on selling), confirmation is required, so you need one more column. In this case, it is necessary the indicator to show three red columns above the zero line for the short position, and three green columns below zero for the long one.

Calculation

ADX = SUM[(+DI-(-DI))/(+DI+(-DI)), N]/N

Where:

N - the number of periods used in the calculation.

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Accumulation/Distribution - A/D

The price and volume variance are reflected by the technical indicator Accumulation Distribution, A/D. Measuring index when the price changes turns out to be the volume, when it increases, the price fluctuation affect on the indicator also rises.

This indicator is the analogue of more widespread indicator - On Balance Volume. These indexes are used for testing and confirming the price in terms of proper trading volume correction.

When Accumulation/Distribution (A/D) starts growing that means that you can begin purchasing or accumulating securities, as the trading volume part is related to the upside price movement. Sale or allocation of securities can be started at the moment when the indicator begins to fall, because the trading volume part is tightly concerned with the downward price motion.

It is possible to say about coming price adjustment in case of divergence between Accumulation/Distribution indicator and a stock. More often, in case of divergence the price changes its direction in accordance with the indicator. For example: if the index rises, the stock price ticks down, consequently, the price correction can be expected.

Calculation:

To/from the current indicator reading is added/deducted a certain part of day volume. If the closing price is near to the day maximum, then the size of addable part is bigger. If the closing price is near to the minimum – the deducted part is bigger. Being between a high and a low the indicator remains at the same level.

A/D(i) =((CLOSE(i) - LOW(i)) - (HIGH(i) - CLOSE(i)) * VOLUME(i) / (HIGH(i) - LOW(i)) + A/D(i-1)

meaning:

A/D(i) - Accumulation/Distribution indicator for the current bar;

CLOSE(i) – bar closing price;

LOW(i) – minimal bar price;

HIGH(i) – maximal bar price;

VOLUME(i) – volume;

A/D(i-1) - Accumulation/Distribution indicator for the previous bar.

The technical indicator Accumulation Distribution, A/D id determined by adjustment of price and volume. The volume appears to be a weighting index while price changing – the more big is the index (volume), the more significant will be the price correction influence on the indicator (for a certain period of time).

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Alligator

Most of the time the market does not move anywhere. Just 15–30% of all time the market forms some trends and the traders, who are not in the trading room, make their profit by the trend movements. My grandfather often said: «Even a blind chicken will find a corn if you feed it the same time every day». We call the trend trading «blind chicken market». Although, it took us several years to work out an indicator, which allows to «keep the gunpowder dry» until we reach the «blind chicken market».

Bill Williams

Alligator technical indicator - is a combination of Balance Lines (Moving Averages), they use fractal geometry and nonlineal dynamics.

Blue line (Alligator's jaw) - is a Balance Line for the temporary period, which is used for graph construction (13-period smoothed moving average advanced by 8 bars ahead)

Red line (Alligator's teeth) - is a Balance Line for a significant timeframe which is one level lower (8-period smoothed moving average advanced by 5 bars ahead)

Green line (Alligator's lips) - is a Balance Line for a significant timeframe one more level lower (5-period smoothed moving average advanced by 3 bars ahead).

Lips, teeth and jaws point to interaction of different time periods. The market trends can be distinguished only during 15–30% of time, and in the rest time you have to follow the trends and do not operate in the markets changing only within certain price periods.

Alligator is going to sleep or sleeping already if the jaw, teeth and lips are closed or interlaced. While Alligator is sleeping his hunger is getting stronger, the longer he sleeps the more hunger he will be when he will wake up. The first thing he does is yawning and opening its Jaw. After that he feels the smell of food - it is bull or bear's meat, and he begins hunting, after a little while Alligator eats his fill and losses appetite, i.e. during this time the Balance Lines come together, it is the time to start fixing the profit.

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Average Directional Movement Index - ADX

Average Directional Movement Index, ADX is a technical indicator which helps to determine price trends. J. Welles Wilder was the developer who has described in details this concept in the book "New concepts in technical trading systems".

Comparison of two directional indicators 14-period +DI and 14-period –DI allows to determine the trading method at the simplest level on the basis of Directional Movement system. For calculations, charts indicators are drawn on each other, or +DI is subtracted from –DI. It is worth buying if +DI gets higher than –DI, and selling when +DI gets lower than –DI, such method was proposed by W. Wilder.

The "Extreme point rule" is an addition to the trading rules of W. Wilder. It is applied for decreasing of deals and elimination of false signals. Principle of "extreme points" is that you should mark the cross point of +DI and –DI; it will be "extreme point". +DI getting above –DI, indicates the maximal price of the day when they cross. And vice versa, if +DI gets lower than –DI, then their cross point will be the minimal price of the day. The moment of entering the market is also determined by extreme point. Getting upper than extreme point, i.e. when +DI is above –DI, it is necessary to wait for the signal and then start buying. Short position should be kept in case the price level can not exceed the level of extreme point.

Calculation

ADX = SUM[(+DI-(-DI))/(+DI+(-DI)), N]/N

Where:

N - the number of periods used in the calculation.

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Average True Range - ATR

Indicator of market volatility is Average True Range, ATR. Welles Wilder has firstly presented this concept in the book "New concepts in technical trading systems". Afterwards this indicator is applied as one of other components of trading systems and indicators.

Often during the price fall, caused by the abundant sales, Average True Range reaches very high rates. During the horizontal movement, indicator is at the low level, it often occurs during consolidation at the top point of the market. It is determined by the same rules as other volatility indicators. The lower the indicator rate, the more probable the fact that trend direction will weaken, and vice versa, the higher the indicator rate, the more probable the fact that trend will reverse: this is the method of forecasting using Average True Range.

Calculation

True Range is the greatest of the following three values:

- difference between the current maximum and minimum (high and low);

- difference between the previous closing price and the current maximum;

- difference between the previous closing price and the current minimum.

The indicator of Average True Range is a moving average of values of the true range.

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Awesome Oscillator - AO

Indicator which is able to show what is happening with driving force of the market is technical indicator of Bill Williams Awesome Oscillator, AO. Indicator components: 34-period simple moving average constructed by the middle bar points (H+L)/2, which is subtracted from 5-period simple moving average, constructed by the middle bar points (H+L)/2.

Signals for buying

Saucer

Being above zero mark, histogram gives the only signal for buying.

Please note:

When histogram starts changing its direction from the lowest point to the highest one, when bar which is lower than the first one and red-colored, then "Saucer" signal appears.

For "Saucer" signal appearance it is necessary at least 3 bars of histogram.

Please note that using the "Saucer" signal for buying, Awesome Oscillator bars should be above zero line.

Zero crossing

When the histogram passes from negative rates to the positive ones, signal for buying appears.

Conditions:

only two bars are necessary for the signal;

one of the bars should be under zero level and the second one should cross it (pass from negative rate to the positive one).

There can be signal for buying and selling at the same time.

Two pikes

Being under the zero line the rate of histogram only in this case gives a signal for buying.

Please remember:

if the pike is downward (the lowest minimum), placed under the zero line and followed by another downward pike, which higher than the previous one (negative number which is less by absolute value, so it is close to zero line), it makes a signal.

Histogram must be placed between two pikes. Signal does not function in case histogram crosses zero line between the pikes. As soon as histogram crosses zero line, signal for buying appears immediately.

New pikes of histogram must be different by height, i.e. every new pike must be higher than previous one.

Additional signal for buying is formation of new higher pike; meanwhile histogram must not cross zero line.

Signals for selling

In Awesome Oscillator signals for selling are the same as signals for buying. Signal "Saucer" is inverted, placed lower than zero line. "Zero crossing" – first bar is higher than zero line, second bar is lower, i.e. descending. "Two pikes" is inverted and placed above zero line.

Calculation

AO is a 34-period simple moving average, plotted through the central points of the bars (H+L)/2, and subtracted from the 5-period simple moving average, graphed across the central points of the bars (H+L)/2.

MEDIAN PRICE = (HIGH+LOW)/2

AO = SMA(MEDIAN PRICE, 5)-SMA(MEDIAN PRICE, 34)

Where:

SMA - Simple Moving Average.

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Bollinger Bands - BB

Bllinger Bands, BB, are similar to Envelopes. There is a difference between them: bounds of the envelopes are above and under the curve of moving average at the fixed, put into percentage distance, but bounds of Bollinger bands are constructed on the basis of distances which are equal to a certain quantity of standard divergences. The value of standard divergence depends on volatility, so bands control their width: it increases, when market is not stable, and it decreases at the stable periods.

Bollinger Bands are usually drawn on the price chart, but they can be drawn on the indicator chart as well. As in case with moving average envelopes, interpretation of Bollinger bands is based upon the fact that prices usually stay in the range of upper and bottom bounds of a band.

Peculiarity of Bollinger Bands is their variable width conditioned by the price volatility. In the periods of considerable price changes (i.e. high volatility) bands widen giving the space for prices. In the periods of stagnation (i.e. low volatility) bands converge, keeping the prices within the bounds.

Peculiarities of Bollinger bands:

1. Sudden price changes usually occur after the band's stagnation indicating the decrease of volatility.

2. If prices transcend the band bounds, then the current trend will continue.

3. If after the peaks and cavities outside the band, the peaks and cavities inside the band follow, then the trend reverse is probable.

4. Price movement started from one of the band's bounds usually reaches the opposite bound. Last observation is useful for forecasting of the price targets.

Last observation is very useful for price targets forecasting.

Calculation

Bollinger bands are formed by three lines. The middle line (ML) is a usual Moving Average.

ML = SUM [CLOSE, N]/N

The top line, TL, is the same as the middle line a certain number of standard deviations (D) higher than the ML.

TL = ML + (D*StdDev)

The bottom line (BL) is the middle line shifted down by the same number of standard deviations.

BL = ML - (D*StdDev)

Where:

N - is the number of periods used in calculation;

SMA - Simple Moving Average;

StdDev - means Standard Deviation.

StdDev = SQRT(SUM[(CLOSE - SMA(CLOSE, N))^2, N]/N)

It is recommended to use 20-period Simple Moving Average as the middle line, and plot top and bottom lines two standard deviations away from it. Besides, moving averages of less than 10 periods are of little effect.

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Ichimoku Kinko Hyo

Technical Indicator Ichimoku Kinko Hyo is meant for determination of market trend, support and resistance levels and generation of buy and sell signals. It works the best at the weekly and daily charts.

Four time-frames of different length are used for defining of settings dimension. Rates of separate lines, composing this indicator are based upon these time-gaps:

Tenkan-sen shows average price for the first period, detected as a sum of maximum and minimum of this period divided into two;

Kijun-sen indicates average price for the second period;

Senku Span A shows the middle of distance between the previous two lines moved forward in the length of the second time period;

Senkou Span B shows average price of the third period moved forward in the size of the second time period.

Chinku Span indicates the closing price of the current bar moved backwards in the size of the second period. Distance between the Senkou lines is dashed on the chart by another color and called "cloud". If price is placed between these lines market is considered as non-trend and then borders of the cloud form support and resistance levels.

If price is above the cloud then its upper line becomes the first support level and second line – the second support level;

If price is under the cloud then down line becomes the first resistance level, and upper line – the second one;

If Chinkou Span crosses the price chart from the bottom upwards, it is the signal for purchase. If from the top downwards – signal for selling.

Kijun-sen is used as market movement ratio. If price is higher than Kijun-sen then prices will possibly continue rising. When price crosses the line, then trend reverse is probable. Another way of using Kijun-sen is giving signals. Signal for purchase is generated when Tenkan-sen line intersects Kijun-sen from the bottom upwards. From the top downwards – signal for selling. Tenkan-sen is used as market trend indicator. If this line rises or falls – trend exists. When it is horizontal – market came in the canal.

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Commodity Channel Index - CCI

Technical indicator which measures the deviation of instrument price from the average price is called Commodity Channel Index, CCI. Price is steep if indicator's value is high, and vice versa, if index has low rate, then price is understated. Commodity Channel Index can be applied not only to goods, but also to financial instruments.

Commodity Channel Index can be used in two ways:

1. Divergence search

Commodity Channel Index can not get higher than previous maximum, so when the new maximal price is reached, divergence appears. There is often price correction after that.

2. Oversold/overbought indicator

Commodity Channel Index fluctuation occurs between +100 and -100. When the rate of indicator is higher than +100, it indicates the overbought condition (probability of recession) and when the value is lower than -100 it shows oversold condition (probability of uprising).

Calculation

1. To find a Typical Price. You need to add the HIGH, the LOW, and the CLOSE prices of each bar and then divide the result by 3.

TP = (HIGH + LOW +CLOSE)/3

2. To calculate the n-period Simple Moving Average of typical prices.

SMA(TP, N) = SUM[TP, N]/N

3. To subtract the received SMA(TP, N) from Typical Prices.

D = TP - SMA(TP, N)

4. To calculate the n-period Simple Moving Average of absolute D values.

SMA(D, N) = SUM[D, N]/N

5. To multiply the received SMA(D, N) by 0,015.

M = SMA(D, N) * 0,015

6. To divide M by D

CCI = M/D

Where:

SMA - Simple Moving Average;

N - number of periods, used for calculation.

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DeMarker - DeM

Technical Indicator DeMarker (DeM) is based on the comparison of the current and previous bars maximums. When the current maximum is situated above the previous one, the difference between them is registered. When the current maximum is situated at the same level with the previous one or above, zero volume is registered. Then, values received for a certain period of time are summed up, the result is a numeral indicator DeMarker which is divided by the same value plus the sum of differences between price minimums of the previous and current bars. When price minimum is above the previous level zero level is fixed.

When DeMarker falls below 30 the bullish price reversal expected. In case DeMarker indicator rises above 70 the bearish price reversal is expected.

The usage of the longer periods for calculations lets catch the long-term tendency in the market development. Indicators with the short periods let enter the market with the least risk and plan the moment of the deal making so that it will be in the tide of the main tendency.

Calculation

The value of the DeMarker for the "i" interval is calculated as follows:

The DeMax(i) is calculated:

If high(i) > high(i-1) , then DeMax(i) = high(i)-high(i-1), otherwise DeMax(i) = 0

The DeMin(i) is calculated:

If low(i) <>

The value of the DeMarker is calculated as:

DMark(i) = SMA(DeMax, N)/(SMA(DeMax, N)+SMA(DeMin, N))

Where:

SMA - Simple Moving Average;

N - the number of periods used in the calculation.

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