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Technical indicators


Absolute Price Oscillator (APO)#

This indicator entails a simple calculation that provides powerful insights at the same time. It combines trend and momentum components and is calculated by obtaining the difference between two EMAs.

This indicator can be used in two different ways, to pinpoint the momentum of the price or to spot divergences. The indicator is displayed by a line oscillating around zero. When it crosses above the zero line, the fast moving average is above the slow one, suggesting that the price is gaining bullish momentum and sending a buy signal. In the same way, when the APO crosses below the zero line, the bearish pressures are dominating the price and it generates a sell signal.

Aroon#

Aroon can be considered a momentum oscillator, but it is also used to spot trends. Aroon is represented by two lines, Aroon up and Aroon down, and fluctuate between 0 and 100.

Aroon up measures the frequency of new highs during uptrends. If the price is continuously rising and making new highs, Aroon up will be 100 and Aroon down 0. However, when the price is not making new highs, it means that the uptrend is fading out and we can have a correction or trend reversal. If it starts making new lows, Aroon down will be 100 and Aroon up 0.

It generates buy and sell signals through crossovers. When Aroon up crosses Aroon down upwards, the price can be initiating a positive trend and it signals a buy. On the other hand, when Aroon down crosses Aroon up upwards, it will send a sell signal.

Average Directional Movement (ADX)#

The ADX is a volatility indicator that was invented by J. Welles Wilder. It measures the current volatility in the market.

When the market is not volatile, it will remain low and very probably with a value below 20. However, when the volume starts entering the market and the price becomes more volatile, the ADX will rise.

This indicator is commonly used to anticipate the end of ranging markets and the beginning of a trend.

The ADX generates signals when it rises above a specific threshold. When it's above the threshold, the indicator will send a confirmation signal. This signal will let the other indicator(s) open or close a position. Likewise, if the ADX is below the threshold, no confirmation signal will be sent and it won't let the other indicator(s) to open or sell a position.

Average True Range (ATR)#

The ATR was invented by J. Welles Wilder in the late seventies. It is a volatility indicator. When the volatility of the market increases, the ATR line goes up.

This indicator analyses the volatility of the asset. When the market is rather ranging, it remains low. However, when the market starts moving quickly in one direction, doesn't matter if it's up or down, the ATR will start rising.

It can be a very good indicator to spot when the big investors are entering the market to buy or sell.

We have added a moving average of the ATR line to generate signals. In this way, when volume starts flooding the market and the volatility peaks, the ATR line will rise above its moving average. Likewise, when the volatility falls and the market ranges, the ATR line will fall below its moving average.

Last but not least, unlike with other indicators, the ATR does not generate buy or sell signals since it measures the volatility of the market. Therefore, the price can be going up or down.

Then, how can you use this indicator in your automated strategy? It can be described as a volatility filter. When the ATR line goes above the moving average, the market is more volatile and the price is moving, then the ATR will let another indicator(s) to give a buy or sell signal. However, when the volatility is low and the price is ranging, the ATR is below its moving average, and it won't let another indicator(s) to give any buy or signal.

Therefore, it filters out trades when the market volatility is low and the price doesn't move much and let your strategy trade when the market is volatile and the price is trending.

Bollinger Bands (BB)#

The Bollinger bands, created by John Bollinger in the eighties, measures the volatility of the price through the deviation of two bands, an upper and lower band, from the moving average.

The upper and lower lines shrink when the price barely changes during a specific time frame. However, if there is high volatility, both two lines widen to capture these volatility levels.

This indicator has different applications. Among them, traders frequently use the upper and lower bands to carry out their strategy.

The lower band is used for the buying strategy. Once the price has broken it, the indicator suggests that the likelihood of the price retracing or initiating an upward trend is high. On the other hand, the upper band will help you to pinpoint sell or short points.

Chaikin A/D Oscillato#

Marc Chaikin invented the Chaikin Accumulation/Distribution oscillator. It is an indicator of an indicator since it uses the Accumulation/Distribution line in the calculation.

It is a momentum indicator that adds volume to its analysis. As many traders say, price follows volume, and this indicator is used to analyze the current momentum of the price to predict future price movements.

The Chaikin A/D Oscillator fluctuates around the value zero. Every time that the indicator crosses goes changes from positive to negative, it suggests that the momentum of the price is changing.

When the indicator crosses the zero line upwards, it means that the price is gaining bullish momentum, and a buy signal is generated. Likewise, when it crosses the zero line downwards, the bearish momentum is taking over, signaling sells.

Commodity Channel Index (CCI)#

The CCI was developed by Donald Lambert in 1980. It measures the momentum of the price with a line at the bottom of the chart.

The CCI measures the current price with respect to an average of the price during a period of time.

It fluctuates around the value zero. Then, when the price rises above its average, the CCI line increases, and viceversa when the price decreases below the average.

The CCI is mainly used through overbought and oversold crossovers and divergences.

Therefore, when the CCI goes into the oversold zone, it suggests that the price has deviated too much from its average, and it is likely to go back up, then signalling a buy. When the CCI crosses the overbought zone, the opposite happens and it generates a sell signal.

Directional Movement Index (DMI)#

The DMI was created by J. Welles Wilder and has two lines, the positive and negative directional movement.

The two lines measure the strength of positive and negative trends. When the positive directional movement line is above the negative one, the bullish pressure is larger than the bearish one. And if the negative line is above, the bears will be dominating the market.

This strategy is commonly implemented through crossovers. Bullish crossovers take place when the positive line crosses the negative one upward, offering buy points. Likewise, when a bearish crossover takes place, the DMI finds exit or shorting opportunities.

Double Exponential Moving Average (DEMA)#

The DEMA is a trend indicator. Its main characteristic is a faster reaction to price movements. Therefore, it reduces the lag between the price and moving average.

As we argued in the EMA video, it is faster than a normal SMA. The DEMA increases to a greater extent the speed of the EMA. So, if you would like to use a very fast moving average, the DEMA can be a good option.

Like other moving averages, the DEMA is usually traded through crossovers between the fast and slow moving average.

When the fast moving average crosses the slow one upwards, the price is likely to begin a bullish trend and a buy signal is generated. Likewise, when the fast moving average crosses the slow one down the opposite happens, the bears are taking over and it sends a sell signal.

Elder Ray#

The Elder Ray is an oscillator and combines components of trend and momentum indicators to measure the strength of the bullish and bearish trends. This indicator labels both trends as "bull power" and "bear power".

It combines exponential moving averages (EMA) to generate signals and pinpoint the dominant power of the market. Its reasoning is based on the direction of the trend of an asset. When it's upward, most of the traders become bullish, and when it's downward, bearish.

The Elder Ray signals a buy when the bull power is larger than the bear power. Likewise, it gives a sell signal or opens a short when the bear power is larger than the bull power.

Exponential Moving Average (EMA)#

An EMA is a very common trend indicator. It reacts quicker than the Simple Moving Average to price changes.

How does it do it? The EMA gives greater weight to the latest closing prices of the moving average. That is, the most recent price levels will determine to a greater extent the development of the moving average.

Like the SMA, traders use this indicator to spot trends and trend reversals. This is done by crossovers between a fast and a slow moving average.

When the fast moving average crosses the slow one upwards, a buy signal will be generated since the price can be starting a bullish trend. On the other hand, when the fast moving average crosses the slow one downwards the opposite happens, the bears are taking over and a sell signal is open.

Hull Moving Average#

Developed by Alan Hull, the Hull Moving Average is a very fast trend indicator.

Moving averages are used to smooth price fluctuations and spot changes in the trend direction. In this case, the Hull moving average is much faster than an EMA or WMA. It gives more weight to recent price levels. Therefore, it will react very quickly to changes in the price direction.

The Hull moving average, as other similar indicators, generate signals by crossovers between a fast and slow moving average.

When the fast moving average crosses the slow one upwards, the price is bullish and a buy signal is generated. However, when the fast moving average crosses the slow one downwards, the bears are taking over and a sell signal is sent.

Ichimoku Cloud#

The Ichimoku Cloud was created by Goichi Hosada in 1969. It has components of trend and momentum indicators and is compound by five lines.

It includes several moving averages of which two create the so-called cloud. The cloud is the key component of this indicator, and all the entry and exit points will depend on it.

The Ichimoku Cloud has different applications. The most common one generates buys and sells when the price crosses the cloud up and downwards.

When a candle breaks the cloud upwards and closes above it, the price is gaining bullish momentum and generates a buy signal. Likewise, if the price breaks the cloud downwards and closes below it, the price is likely to fall. Therefore it will close a position or open a short.

Kaufman's Adaptive Moving Average (KAMA)#

Developed by Perry Kaufman, the KAMA is a trend indicator used to identify the overall trend. It does this by smoothing out the noise when the price fluctuates.

In order to account for the volatility of the market, KAMA introduces a so-called efficiency ratio. This factor will reduce the moving average fluctuations when the volatility is peaking. In other words, it will give less importance to trends with very high volatility.

This indicator is frequently used to spot trends and trend reversals.

As the other moving averages we've previously seen, buys and sell signals are generated through bullish and bearish crossovers. A bullish crossover takes place when the fast moving average crosses the slow one upwards, which would open a position. Bearish crossovers are the opposite, and will close a position or open a short.

MESA Adaptive Moving Average#

The MESA adaptive moving average is a trend-following indicator. It adapts to price movements in a very unique way, based on the rate of change (ROC), as measured by the Hilbert Transform Discriminator.

Like other moving averages, traders use this indicator to spot trends and trend reversals. This is done by crossovers between a fast and a slow moving average.

When the fast moving average crosses the slow one upwards, a buy signal is generated, and will hold this signal until a bearish crossover takes place. Likewise, when the fast moving average crosses the slow one downwards, it will signal a sell until a bullish crossover takes place.

Unlike other moving averages, MESA won't only give a signal when the crossover between moving averages has taken place. It will signal a buy or a sell until the next crossover occurs.

Momentum Indicator#

As its name suggests, this indicator purely analyzes the momentum of the price. It is measured by comparing the current price to it a specific number of periods ago.

If the current price is higher than it was, for example, ten periods ago, the momentum line increases. On the other hand, when the current price is lower than the one in the past, the line decreases.

A trader can obtain buy and sell signals when the momentum changes its sign.

The Momentum indicator switches from positive to negative, and the other way around, depending on price changes.

When it changes from negative to positive, the bulls are more present in the market and the indicator signals a buy. However, if the momentum line goes the negative area, it means that the bears are taking over, which generates a sell signal.

You can easily combine the Momentum with other indicators in the section Strategy.

Money Flow Index (MFI)#

Also known as "the RSI that accounts for volume". MFI is an indicator that combines volume and price to carry out its analysis.

It is a momentum indicator and can also be considered as a volume one. It measures the flow of money into and out of an asset together with price changes to identify oversold and overbought zones.

Overbought zones are areas where the price and volume have risen a lot in a small interval of time. Then, suggesting that the price is overbought and that it can have a trend reversal or correction. Therefore, signaling sells.

Oversold zones are the opposite. They are areas where the price and volume have decreased suddenly. Usually, they are interpreted as buy points since the price is likely to gain bullish momentum after that fall.

Moving Average Convergence Divergence (MACD)#

The MACD indicator was created in the late seventies by Gerald Appel, the Moving Average Convergence/Divergence, or MACD, is a combination of a trend and momentum indicator.

It compounds two lines, the MACD and signal lines. Both lines oscillate around the zero line, which is a key component of this indicator.

The zero line separates the bullish and bearish sentiment. When the MACD is in positive territory, the price is bullish. And when it is in the negative, the bears are leading the market.

On Balance Volume (OBV)#

The OBV is a momentum and volume indicator. It combines price and volume in its calculation, and is represented with a line at the bottom of the chart.

This indicator can give crucial insights into the volume of a market. It will rise once the volume and price are increasing hand in hand. However, as soon as the price starts going down, the line will decrease since it assumes that the volume is more likely to be supply.

We can conclude that every time that the OBV line increases, the volume is pushing the price up, which can be used to generate buy signals. On the other hand, when it decreases, the price is losing momentum and it is likely to go down, which can give a selling opportunity. In order to generate buy and sell signals, we added a moving average to the OBV. In this way, when the OBV crosses its moving average upwards, it means that the price and volume are increasing and a buy signal is generated. Likewise, when the OBV line crosses downward its moving average, the price is starting to fall and the indicator sneds a sell signal.

You can find this indicator in TradingView by typing "Cryptohopper OBV".

Parabolic SAR#

The Parabolic SAR is a trend following indicator invented by J. Welles Wilder, who also brought us the RSI and ATR.

The Parabolic SAR is displayed by a series of dots above or below the price. If the dots are below the price, the trend direction is bullish, and when they are above it, the bears are driving the price down.

The indicator helps to determine the trend direction and when it can reverse. Therefore, it can be used for entry and exit points in trending markets.

As J. Welles Wilder recommends, the Parabolic SAR tells us about the trend direction. But, to find stronger buy or sell points within the trend, we would need to make use of an additional indicator.

Percentage Price Oscillator (PPO)#

The PPO is very similar to the MACD. It measures the momentum of the price and includes moving averages in its calculation.

Like the MACD, this indicator has a signal line. It is the nine periods EMA of the PPO line, which is obtained from the subtraction of a fast and slow EMA.

The PPO can generate buy and sell signals in two different ways: through PPO line and signal crossovers, or through signal line crosses between the positive and the negative region, that is, the zero line.

The zero line separates the bullish and bearish sentiment. When the signal line goes from below it to above it, it gives a buy signal. On the other hand, if the signal line goes from positive to negative, the indicator suggests that the bears are in charge.

Rate Of Change (ROC)#

The Rate of Change is a momentum indicator. It measures the percentage change between the current price and the price a specific number of periods in the past.

This indicator is commonly used to spot trading opportunities based on divergences and changes between positive and negative momentum. In order to detect the sentiment change of the price, the ROC separates positive and negative regions to generate signals.

In this way, when it crosses from negative to positive, the indicator suggests that the momentum of the price is increasing and signals a buy. On the other hand, when it goes from positive to negative the opposite happens, and it generates a sell signal.

Relative Strength Index (RSI)#

The RSI was invented by J. Welles Wilder in the late seventies. It measures the momentum of the price. When it is increasing, the bulls are taking over the market. If it decreases, the bears are in charge.

The RSI can be used in different trading styles and for various purposes. Usually, traders all around the globe use the indicator by defining overbought and oversold zones.

Overbought zones are identified as areas where the price has risen a lot in a small interval of time. Then, suggesting that the price is overbought and that it can have a trend reversal or correction. Therefore signaling a sell point.

Oversold zones are the other side of the coin. They are areas where the price has decreased suddenly in a relatively small period of time. They are usually interpreted as buy points since the price is likely to go back up.

RSI With Region Crossovers The RSI with region crossovers is simply the RSI, but used in a different way. As it's described in the Relative Strength Index video, the RSI gives a buy signal when it's in oversold and a sell signal when it's overbought. However, with this indicator this works slightly different.

It has two modes: Signal on region IN (default) and Signal on region OUT.

Signal on region IN:

Instead of, for example, signaling a buy when the RSI is oversold, it will only signal a buy when the RSI goes from the oversold zone back into the neutral zone. That is, when the RSI crosses the oversold limit and becomes neutral again.

In this way, a buy signal is generated once the RSI starts recovering positive momentum and the price has already started going up. The same logic applies to sell signals.

Signal on region OUT:

Instead of, for example, signaling a buy when the RSI is oversold, it will only signal a buy when the RSI goes from the neutral zone to the oversold zone. That is, when the RSI crosses the neutral limit and becomes oversold.

In this way, a buy signal is generated once the RSI is falling very quickly. The same logic applies to sell signals.

Simple Moving Average (SMA)#

The Simple Moving Average is a commonly used tool by traders to analyze the general trend of the price. The SMA is a trend indicator that smooths price movements to filter out the noise of an asset.

Traders frequently use this indicator to open and close trades through moving averages crossovers, and to find supports and resistances in different time frames.

These crossovers are generated by predefining two moving averages, a slow and a fast one. The slow SMA takes into account a larger amount of periods, then catching the general trend of the asset. And the fast SMA is calculated with fewer periods, reacting quicker to price movements.

During a bearish trend, when the fast SMA crosses the slow one upward, the trend is likely to have a reversal or correction and signals a buy. However, in a bullish trend and the fast SMA crosses the slow one downward, we will get a selling point.

Stochastic (Stoch)#

The Stochastic is a momentum indicator that was developed by George C. Lane in the fifties and is similar to the RSI, but more volatile.

It compares the closing price of a candle with previous price levels to determine if the price is overbought or oversold. When it increases, the bulls drive the price up, and when it decreases the bears are more present in the market.

Overbought zones are areas where the price has increased a lot in a small period of time. Then, assuming that the price is overbought and that it can have a trend reversal or correction. Therefore signaling a sell.

Likewise, oversold zones are areas where the price has decreased sharply in a relatively small interval of time. They are interpreted as buy points because the price is likely to increase afterwards.

Stochastic RSI (StochRSI)#

The Stochastic RSI indicator works very similarly to the Stochastic. As its name describes, it combines the indicators "Stochastic" and "RSI" in its calculation, making it an indicator of an indicator.

Specifically, the StochRSI applies the Stochastic formula to RSI values instead of price data. This new calculation results in a more volatile indicator than its primitive version, which will generate trades.

As the Stochastic and RSI, the StochRSI is based on overbought and oversold zones. When it goes from the neutral to the oversold zone, the StochRSI interprets it as a buy point since the price is likely to correct upwards.

Likewise, when the indicator crosses the overbought zone, the bears can take over the market to push the price downwards after a sudden rise.

Stochastic With Region Crossovers The Stochastic with region crossovers is simply the Stochastic, but used in a different way. As it's described in the Stochastic video, the Stochastic gives a buy signal when it's in oversold and a sell signal when it's overbought. However, with this indicator this works slightly different.

It has two modes: Signal on region IN (default) and Signal on region OUT.

Signal on region IN:

Instead of, for example, signaling a buy when the Stochastic is oversold, it will only signal a buy when the Stochastic goes from the oversold zone back into the neutral zone. That is, when the Stochastic crosses the oversold limit and becomes neutral again.

In this way, a buy signal is generated once the Stochastic starts recovering positive momentum and the price has already started going up. The same logic applies to sell signals.

Signal on region OUT:

Instead of, for example, signaling a buy when the Stochastic is oversold, it will only signal a buy when the Stochastic goes from the neutral zone to the oversold zone. That is, when the Stochastic crosses the neutral limit and becomes oversold.

In this way, a buy signal is generated once the Stochastic is falling very quickly. The same logic applies to sell signals.

StochRSI With Region Crossovers The StochRSI with region crossovers is simply the StochRSI, but used in a different way. TheStochRSI gives a buy signal when it's in oversold and a sell signal when it's overbought. However, with this indicator this works slightly different.

It has two modes: Signal on region IN (default) and Signal on region OUT.

Signal on region IN:

Instead of, for example, signaling a buy when the StochRSI is oversold, it will only signal a buy when the StochRSI goes from the oversold zone back into the neutral zone. That is, when the StochRSI crosses the oversold limit and becomes neutral again.

In this way, a buy signal is generated once the Stochastic starts recovering positive momentum and the price has already started going up. The same logic applies to sell signals.

Signal on region OUT:

Instead of, for example, signaling a buy when the Stochastic is oversold, it will only signal a buy when the StochRSI goes from the neutral zone to the oversold zone. That is, when the StochRSI crosses the neutral limit and becomes oversold.

In this way, a buy signal is generated once the Stochastic is falling very quickly. The same logic applies to sell signals.

The Ultimate Oscillator (UO)#

The Ultimate Oscillator is a momentum indicator developed in 1976 by Larry Williams. The Ultimate Oscillator combines short, medium and long-term periods to analyze the momentum of the price.

By using three different time frames the indicator is less volatile, and due to this larger number of filters, it generates fewer signals.

This indicator is commonly used by traders to spot buy and sell signals based on divergences and oversold-overbought thresholds.

Overbought zones are areas where the price has increased a lot in a small period of time. Then, assuming that the price is overbought and that it can have a trend reversal or correction. Therefore signaling a sell. Oversold zones are the opposite. When the price has decreased sharply in a small time span, it is likely to go back up as a trend reversal or correction.

Tilson Moving Average (T3)#

Developed by Tim Tillson, the Tilson Moving Average (T3) is a trend indicator with the advantage of having less lag than other ones. That is, a faster moving average.

The T3 moving average is an indicator of an indicator since it includes several EMAs of another EMA. Unlike any other moving average, it adds the so-called volume factor, a value between 0 and 1.

Like the SMA, traders typically use this indicator to spot trends and trend reversals. It is mainly done by crossovers between a fast and a slow moving average.

When the fast moving average crosses the slow one upwards, a buy signal is generated due to the price shows bullish signs. However, when the fast moving average crosses the slow one down the opposite happens, the bears are taking over and produces a sell signal.

Time Series Forecast (TSF)#

The Time Series Forecast is a trend indicator that uses a linear regression to calculate the trend of the price.

It reduces the lag of a normal moving average due to it tries to forecast the price of the next period through statistical calculations with past data.

This indicator's interpretation is identical to a moving average. It generates signals through crossovers between the Time Series Forecast line and a moving average.

When the Time Series Forecast line crosses the moving average upwards, the price is bullish and the indicator would open a position. When the opposite happens, it sends a sell signal to close the position or to open a short.

Triangular Moving Average (TMA)#

The Triangular Moving Average is a trend indicator that has been averaged twice. That is, it is the simple moving average of a simple moving average.

This creates a very smooth moving average that doesn't react quickly to market volatility, therefore, filtering out the noise of the price and pinpointing the main trend of an asset.

Like a standard SMA, this indicator to spot trends and trend reversals. It is done by crossovers between a fast and a slow moving average.

In this way, when the fast moving average crosses the slow one upwards, the price can be starting a bullish trend and it generates a buy signal. When the fast moving average crosses the slow one downwards the opposite happens, the bears are in charge and it a sell or short in open.

Triple Exponential Moving Average (TEMA)#

The TEMA was developed by Patrick Mulloy. It is a moving average that includes several EMAs in its calculation to smooth price fluctuations, but without the lag that characterizes trend indicators.

It is one of the fastest, and possibly the fastest, moving average available in trading. It would react quicker to price movements than any other moving average like DEMA or WMA.

The TEMA will spot entry and exit opportunities through crossovers between a fast and a slow moving average.

Therefore, when the fast moving average crosses the slow one upwards, the price is more likely to be bullish and it generates buys. When the opposite happens, the fast moving average crosses the slow one downwards, the bears are more present, which gives a sell signal.

Weighted Moving Average (WMA)#

The WMA is a trend indicator. This moving average is considered as one of the fastest amongst them.

Its quick reaction to price movements is produced by assigning greater weight to the most recent periods and prices. To illustrate it, it reacts faster to price changes than the SMA and EMA. However, it is somewhat slower than the Double EMA or DEMA.

Like most of the moving averages, traders use this indicator to spot trends and trend reversals. This is done mainly by crossovers between a fast and slow moving average.

If the fast moving average crosses the slow one upwards, the price is rather bullish and buy signal will be generated. However, when the fast moving average crosses the slow one downwards, the bears are taking over and a sell signal is open.

Williams Percentage R (%R)#

Developed by Larry Williams, Williams % R is a momentum indicator that determines overbought and oversold zones, which oscillates between minus one hundred and zero.

The indicator compares the highest and lowest point within a number of periods. The overbought zone is between minus twenty and zero, which means that the price is close to the highest point of the range. It will be oversold when it lies between minus a hundred and minus eighty, therefore, being close to the lowest point of the range.

We can make use of the overbought and oversold zones to generate buy and sell signals. When the Williams R lies in the oversold zone, it can reverse upwards or have a correction, which produces a buy signal. However, when it is in the overbought zone, it would generate a sell signal.


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