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%R Larry Williams

Utility: Identifying Overbought / Oversold Market Levels

Standard Settings: 14 Periods

Williams %R is momentum oscillator as RSI. Williams % R is widely used for its ability to identify overbought and oversold market levels.

 

Important Notes Regarding the use of the Oscillator

□ Williams % R indications from 0 to -20 are alerting overbought market levels in ranging markets. In trading markets these levels may indicate a short correction before the trend continuous.

□ Williams % R indications from -80 to -100 are alerting oversold market levels in ranging markets. In trading markets these levels may indicate a short correction before the trend continuous.

□ Momentum failures occur when the price of an overbought / oversold asset fails to come back into the previous overbought / oversold territory may signify strong price movements in the opposite direction (reversals).

%R Larry Williams

 

Calculating Williams % R

■ Williams % R = HC / HL * - 100

Where,

HC = Highest High (in R Periods) – Last Closing Price
HL = Highest High (in R Periods) – Lowest Low (in R Periods)

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Awesome Oscillator (AO)

Utility: Identifying Momentum

Standard Settings: 5 and 34 Periods SMAs

The Awesome Oscillator shows the recent market momentum compared to the momentum of a larger number of previous periods. The Awesome Oscillator is an indicator that uses two Simple Moving Average of median prices.

 

The default settings of the Awesome Oscillator involve 2 SMAs (5-periods SMA and 34-periods SMA).

Awesome Oscillator (AO)

Calculating The Awesome Oscillator

The Awesome Oscillator is actually a 34-period SMA (simple moving average) subtracted from a 5-period SMA.

■ The Awesome Oscillator = SMA (Median Price of 5 periods) – SMA (Median Price of 34 periods)

Where:

■ The Median Price = ( High Price + Low Price ) / 2

 

Awesome Oscillator's Trade Signals

The Awesome Oscillator's trade signals (source: Oanda).

Trade Signals to buy

  • The Saucer – This occurs if the bar chart is above the 0-line, and the bar chart has reversed its direction from downward to upward. The saucer occurs if, in any three columns, the second column is lower than the first and colored red and the third column is higher than the second and colored green.
  • The Line Crossing - Occurs when the bar chart crosses the 0-line in a positive direction. That is, it passes from the area of negative values to that of positive values.
  • Two pikes - Occurs when a pike below the 0-line pointing downwards (the lowest minimum) is followed by another downward-pointing pike that is somewhat higher (closer to the 0-line). This is the only signal to buy that falls below the 0-line.

Trade Signals to sell

  • The Reversed Saucer – The saucer signal reversed (concave downwards) and below the zero-line.
  • The Reversed Line Crossing -The Line Crossing on the decrease - the first column over the 0-line, the second under it.
  • Two pikes signals above the 0-line and the pikes pointing upwards (the first one higher than the second).

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Rate of Change (ROC)

Utility: Identifying the Trend

Standard Settings: 21, 63, 125, 250 Periods

The rate of change consist the simplest form of a technical analysis oscillator and can be also usually found as momentum.

It can simply measure the percentage change between the current price of an asset and its price before a certain period. For example the (%) change between the current price and the price before 250 days or before 21 days.

 

The Trading Year Breakout

There are 250 trading days in a single year or 125 trading days per half year. There are trading 63 days per quarter and 21 trading days per month. In general, a trend reversal commence when the shortest timeframe spreads gradually to the other timeframes.

 

How ROC defines the Long-Term Trend –Conditions of Bulls and Bears

□ When ROC of 21 periods and ROC of 63 periods is above the 125 periods ROC and the 250 periods ROC then the long-term trend is considered bullish.

□ When ROC of 21 periods and ROC of 63 periods is below the 125 periods ROC and the 250 periods ROC then the long-term trend is considered bearish.

 

Calculating ROC

■ ROC = [(Close – Close n periods ago)/ (Close n periods ago)] * 100

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Trading with the DeMarker Indicator

Utility: Evaluating the Trend / Determines Timing

Standard Settings: 14 Periods

The Demarker indicator was developed by Tom Demarker.

What makes this indicator different from others is its ability to evaluate areas of likely price trend formation or price exhaustion prior to their occurrence.

 

The DeMark Indicator is not focusing solely on market direction but also on the potential of perfect timing.

Trading with the DeMarker Indicator

 

Calculating DeMarker Indicator

The DeMarker indicator is the sum of all price increment values recorded during the "i" period divided by the price minima:

■ 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) < low (i-1),

then DeMin (i) = low (i-1) – low (i),

otherwise DeMin (i) = 0

■ DeMarker value is calculated as:

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

Where:

T= the number of periods

SMA = Simple Moving Average

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Gator Oscillator (GO)

Utility: Identifying Strong Directional Action

Standard Settings: 13 Periods (13,8,5)

The Gator Oscillator is based on the Alligator Oscillator which was developed by Bill Williams.

 

The Gator Oscillator is presented as a histogram below the main price chart and aims to identify strong directional action. The bars found above zero represent the absolute difference between the long-term moving average and the medium-term moving average. The bars below the zero represent the absolute difference between the medium-term moving average and the short-term moving average.

There are four Gator Activity Periods:

(i) Gator awakes

The bars on different sides (naught line) are colored differently

(ii) Gator eats

Green bars on both sides (naught line)

(iii) Gator fills out

Single red bar during the second (eating) phase

(iv) Gator sleeps

The bars on both sides are red

Gator Oscillator (GO)

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StochRSI and DTosc

StochRSI is an oscillator based on RSI, created by Tushar Chande and Stanley Kroll. Actually StochRSI ‘is an indicator of an indicator’. StochRSI aims to increase the sensitivity of RSI readings and generate more trading signals than the common RSI.

Utility: Identifying Overbought / Oversold Levels

Standard Settings: RSI (14) periods

 

StochRSI Calculation

■ StochRSI = (RSI - Lowest Low RSI) / (Highest High RSI - Lowest Low RSI)

StochRSI measures the level of RSI compared to its high-low range and fluctuates between the values zero (0) and one (1).

 

RSI

StochRSI

Overbought

Above 70

Above 0.8

Oversold

Below 30

Below 0.2

The StockRSI centerline is at value = .50. When StochRSI is above 0.50, it reflects an uptrend. When StockRSIis is below 0.50, it reflects a downtrend.

 

StochRSI Interpretation

For RSI=14 periods, here are some interpretations for StochRSI::

  • StochRSI = 0 {RSI is at its lowest point for 14 days}
  • StochRSI = 1 {RSI is at its highest point for 14 days}
  • StochRSI = .5 {RSI is in the middle of its 14-day high-low range}
  • StochRSI = .2 {RSI is near the low of its 14-day high-low range}
  • StochRSI = .80 {RSI is near the high of its 14-day high-low range}

 

StochRSI Buy and Sell Signals

StochRSI Buy Signals

Buy signals occur when the StochRSI crosses above the Oversold Line Level (20).

StochRSI Sell Signals

Sell signals occur when the StochRSI crosses below the Overbought Line Level (80).

Smoothing the Results of StockRSI

As StochRSI is higly volatile, the use of a short-term moving average can smooth the results. A 10-day Simple Moving Average (SMA) of StockRSI can highlight the direction of the master trend, here is how:

■ 10-day SMA of StochRSI above .50 then UPTREND

■ 10-day SMA of StochRSI below .50 then DOWNTREND

Multi-Timeframe Confirmation

Multiple timeframes may be used to confirm the signals produced by StochRSI, as follows:

  • M15 signals on H1 timeframe (intraday signals)
  • D1 signals on W1 timeframe (swing signals)
  • W1 signals on M1 timeframe (long-term signals)

The larger timeframe is used for pointing the direction of the trade and the smaller timeframe for triggering the trade.