Technical Indicator

Relative Strength Index (RSI) Indicator

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The Relative Strength Index (RSI) oscillator is a technical analysis tool that is used to measure the strength and momentum of a financial asset, such as a stock or a currency pair. It was developed by J. Welles Wilder Jr. in 1978 and is widely used by traders and investors. It is one of the most popular and helpful oscillators used in technical analysis. Their values ​​are obtained by comparing the gains against the losses of previous sessions (14 is the period recommended by Wilder).

The RSI oscillator ranges from 0 to 100, with readings above 70 indicating an overbought condition and readings below 30 indicating an oversold condition. Traders and investors use these levels to identify potential buying or selling opportunities.

The RSI oscillator is often used in conjunction with other technical analysis tools, such as moving averages and trend lines, to help confirm signals and identify potential trading opportunities.

History of the RSI oscillator

The Relative Strength Index (RSI) was developed by J. Welles Wilder Jr. and first introduced in his book “New Concepts in Technical Trading Systems” in 1978. Wilder was a mechanical engineer and trader who became interested in the stock market and technical analysis in the 1950s. He went on to develop a number of technical indicators, including the Average True Range (ATR) and the Parabolic SAR.

The original RSI formula used a 14-day period to calculate the average gains and losses. Wilder recommended using the RSI in conjunction with other technical analysis tools, such as trend lines and moving averages, to confirm signals and identify potential trading opportunities.

Since its introduction, the RSI has become one of the most widely used and popular technical indicators. It has been incorporated into many trading platforms and is used by traders and investors around the world to help identify potential buy and sell signals. Despite its popularity, the RSI, like all technical indicators, is not infallible and should be used in conjunction with other tools and analysis to make informed trading decisions.

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Relative Vigor Index (RVI) Indicator

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The Relative Vigor Index or RVI is a technical indicator used to measure the strength or conviction or a recent price action and the possibility of this movement to continue. This indicator was first described in the magazine TechnicalAnalysis of Stocks and Commodities in an article titled “Something Old, Something New – Relative Vigor Index (RVI)” by John Ehlers. Basically the RVI combines old concepts of technical analysis with modern theory of digital signal processing and filters so that it is an indicator that is both useful and practical.

The base of the RVI is simple: prices tend to close higher compared to the market opening in a bullish market (a market with an uptrend) and close lower than the opening in a bearish market (a market with and a downtrend). The energy or force of the movement is thus established by the point or level where the price closes compared with the opening price. In this case the RVI is essentially based on the measuring of the average difference between the closing and opening prices, normalized to the average daily trading range.

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RSI Indicator Guide For Forex Traders

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This technical indicator is one of the most used in Forex strategies. I will explain below how you can better read the movements that the indicator makes to make better decisions.

What is the RSI indicator?

The Relative Strength Index (RSI) is a well-know oscillator used in technical analysis and multiple markets, including Forex, which shows the price momentum by comparing bullish and bearish movements of closing prices of a specific asset.

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Accumulation/Distribution Line Indicator

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The Accumulation/Distribution Line is a technical analysis indicator that is used to measure the buying and selling pressure of a security. It is based on the concept that the volume of trading activity is a key indicator of market sentiment and that a change in volume often precedes a change in price. The Accumulation/Distribution Line calculates the cumulative flow of … Read more

Detrended Price Oscillator Indicator (DPO) – Definition and Examples

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What is the DPO indicator?

The Detrended Price Oscillator, also known by its acronym DPO, is an indicator used in technical analysis which is designed to provide information on the price of an asset taking into account market fluctuations in the short-term but no in broader movements in the medium and the long term. This indicator eliminates the effect of the market movement trend. This simplifies the process of determining cycles and overbought / oversold levels.

In other words, we can say that the DPO does not take into account the price trend and focuses on fluctuations in the trend. The Detrended Price Oscillator is calculated by subtracting from the current closing price the value of the simple moving average of n days or periods. n (the period for the moving average) is calculated by dividing the period chosen between two and adding one.

For example, the calculation of the DPO (20) in a daily chart is the following:

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DeMarker Indicator

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DeMarker – A good tool for market trends analysis

DeMarker indicator (DI) is a technical indicator (specifically an oscillator) created by Tom Demark and it is used to analyze the trend of the price of an instrument such as a currency pair (Forex) in the market. It can also be used to study the trends of other instruments such as stocks and commodities for example. It is an oscillator created to identify new buying and selling opportunities. In some way, is similar to the Directional Movement Indicators developed by Welles Wilder. In general, Demark goal was to create an indicator that overcome the problems normally associated with other technical indicators and tools used to identify overbought and oversold trading conditions in the market.

This indicator tracks the market sentiment of an asset by comparing the asset’s present price with the price of the previous period. The basic concept behind the DI is that it can be used to detect changing market interest in an asset and by doing so identify market highs and lows.

Demark designed this forecasting method to predict the beginning of a trend in the medium and long term, and is based on specially designed coefficients.

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Momentum Indicator

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Momentum is one of the indicators used regularly in technical analysis. This indicator measures the acceleration in prices by comparing the closing price of the last session with the closing price of past sessions. The fact that it allows to observe the speed of movement in prices – in its graphical representation this would be seen as a change in … Read more

Alligator Technical Indicator

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This indicator was designed to detect market trends by reading the distance between three moving averages. The Alligator is a very dynamic and easy to use technical indicator. It was discovered by Bill Williams who presented it in the book Trading Chaos (published 1995 by Marketplace Books, Inc.). This is a powerful indicator that combines moving averages, nonlinear dynamics and fractal theory in a technical indicator that is widely used by traders for confirmation of market trends in many financial markets such as Forex.
 

Most of the time, the market remains stationary. In fact, it is estimated that only 15 -30 percent of the time, the market moves with a clear trend either up or down, which are the periods when most traders take their profits. For this reason, the famous Bill Williams sought to develop an indicator that would serve precisely to provide entry signals in the periods when the market is most active, mainly those in which the price moves with a definite trend.

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Fractals Indicator – How to use the Fractals Indicator?

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What are fractals?

Fractal geometry, defined by mathematician Benoit Mandelbrot,  is a geometric figure that can be decomposed into parts, each one of these parts identical on a smaller scale to the original figure. However, the “fractal finance” applied to technical analysis is a geometric pattern that can be observed regardless of the time frame used, either 1 hour, 30, 15 or 1 minute. There are some books on this subject and one of the most popular is “Trading Chaos” that was written by Dr. Bill Williams. In this book, Dr. Williams entered two important concepts, the  “Fractal UP” and “Down Fractal”,  which can be used as support and resistance respectively.  When both formations are crossed by the price, that indicate new levels for prices in both bull and bear markets.

The “Fractal Up” (it indicates a possible resistance), defined by Williams (Using a bar chart) is one pattern where the central bar has a maximum price that is greater than the maximum of the two bars to the right and higher than the maximum of the two bars on the left. On the other hand, the “Fractal Down” (it indicates a  possible support) is one pattern where the central bar has a minimum price that is less than the minimum of the two bars to the right and less than minimum of two bars on the left. We can observe the ideal fractal in the image:

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Disparity Index Indicator

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The Disparity Index is a technical indicator that measures the relationship between the current price of an asset over its moving average. Its development is attributed to Steve Nison based on his book Beyond Candlestick.
The Disparity Index can take positive and negative values​​. A positive value indicates that the asset price is increasing rapidly, while negative values ​​indicate that the price is falling. A value of zero indicates that the current price of the asset moves in line with the moving average.
When the Disparity Index crosses the zero level that reflects a rapid change in price direction and thus it can be taking an early indicator of increased momentum (force) in the direction indicated.

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