
Charting Indicators A  Z
 Accumulation/ Distribution
 Accumulation Distribution tracks the
relationship between price and volume and acts as a leading
indicator of price movements. It provides a measure of the
commitment of bulls and bears to the market and is used to
detect divergences between volume and price action  signs
that a trend is weakening.
Accumulation Distribution is an enhancement of the On
Balance Volume indicator. It first compares opening and
closing prices to the trading range for the period, the
result is then used to weight the volume traded.
 Average True Range
 Average True Range is an indicator from J.
Welles Wilder that measures commitment by comparing the
range for each successive day. Expanding and contracting
ranges signal eagerness in a trending market.
Please note
that Wilder does not use the standard moving average formula
and the time period may need adjustment.
 Bollinger Bands
Bollinger Bands were invented by John Bollinger. Used to
confirm trading signals, normally from a Momentum Indicator,
the bands indicate overbought and oversold levels relative
to a moving average.
Bollinger Bands are calculated at a specified number of
standard deviations above and below the moving average,
causing them to widen when prices are volatile and contract
when prices are stable.
Bollinger originally used a 20 day exponential moving
average and set the bands at 2 standard deviations, suited
to intermediate cycles.
 Candlesticks
 The Japanese have been using candlesticks
since the 17th century to analyze rice prices. Candlesticks
were introduced into modern technical analysis by Steve
Nison in his book Japanese Candlestick Charting
Techniques.
Candlesticks contain the same data as a normal bar chart
but highlight the relationship between opening and closing
prices. The narrow stick represents the range of prices
traded during the period (high to low) while the broad
midsection represents the opening and closing prices for
the period.
 If the close is higher than the open  the
midsection is hollow or shaded blue/green.
 If the open is higher than the close  the
midsection is filled in or shaded red.
Chaikin Money Flow
 Another popular indicator by Marc Chaikin
based on the Accumulation Distribution line. The indicator
often warns of breakouts and provides useful trend
confirmation.
Chaikin Money Flow is based on the observation that
buying support is normally signalled by increased volume and
frequent closes in the top half of the daily range.
Likewise, selling pressure is evidenced by increased volume
and frequent closes in the lower half of the daily range.
Chaikin Money Flow is calculated by summing Accumulation
Distribution for 21 periods and then dividing by the sum of
volume for 21 periods.
 Chaikin Oscillator
 Marc Chaikin uses the Chaikin Oscillator to
monitor the flow of money in and out of the market 
comparing money flow to price action helps to identify tops
and bottoms in short and intermediate cycles. He suggests
that it be used in conjunction with a 21 day price envelope
and an overbought/oversold indicator (such as Momentum or
RSI).
The Chaikin Oscillator is calculated by subtracting a 10
period exponential moving average from a 3 period
exponential moving average of the Accumulation Distribution
line.
 Chaikin Volatility
 Marc Chaikin measures volatility as the
trading range between high and low for each period. This
does not take trading gaps into account as Average True
Range does.
Chaikin Volatility should be used in conjunction with a
moving average system or price envelopes.
 Commodity Channel Index
 The Commodity Channel Index measures the
position of price in relation to its moving average. This
can be used to highlight when the market is
overbought/oversold or to signal when a trend is weakening.
The indicator is similar in concept to Bollinger Bands but
is presented as an indicator line rather than as
overbought/oversold levels.
The Commodity Channel Index was developed by Donald
Lambert and is outlined in his book Commodities Channel
Index: Tools for Trading Cyclic Trends.
 Comparative Performance
 The Price Comparison (or comparative
performance) is useful for comparing the performance of
one stock relative to another (or to an index).
Price Comparison plots the closing price of a second
stock (or index) onto the price chart. The scale of the
second stock (or index) is adjusted so that both price lines
commence at the same point.
 Coppock Indicator
 Edwin Coppock developed the Coppock Indicator
with one sole purpose: to identify the commencement of bull
markets. The indicator was devised for use on the Dow Jones
Industrial Average but is suitable for use on other market
indices or averages.
Although often late, the Coppock Indicator has produced
very reliable signals in the past.
 Detrended Price Oscillator
 first discovered the Detrended Price
Oscillator in Steven Achelis' Technical Analysis AZ.
Since then it has become a firm favourite. Used to
isolate shortterm cycles, Detrended Price Oscillator
compares closing price to a prior moving average,
eliminating cycles longer than the moving average
 Directional Movement
 The Directional Movement System is a fairly
complex indicator developed by Welles Wilder and explained
in his book, New Concepts in Technical Trading Systems.
Most indicators have one major weakness  they are not
suited for use in both trending and ranging markets. The key
feature of the Directional Movement System is that it first
identifies whether the market is trending before providing
signals for trading the trend.
Directional Movement System measures the ability of bulls
and bears to move price outside the previous day's trading
range. The system consists of three lines:
 The Positive Direction Indicator (+DI)
summarizes upward trend movement;
 The Negative Direction Indicator (DI)
summarizes downward trend movement; and
 The Average Directional Movement Index (ADX)
indicates whether the market is trending or ranging.
Ease of Movement
 Ease of Movement was developed by Richard W
Arms and performs a similar function to Equivolume charts.
It highlights the relationship between volume and price
changes and is particularly useful for assessing the
strength of a trend.
The indicator shows:
 high positive values when prices move upward on
light volume;
 high negative values when prices move down on light
volume;
 low values if price is not moving or if it takes
heavy volume to move prices, signalling distribution or
accumulation.
Elder Ray Index
 Developed by Dr Alexander Elder, the Elderray
indicator measures buying and selling pressure in the
market. The Elderray is often used as part of the Triple
Screen trading system but may also be used on its own.
Dr Elder uses a 13day exponential moving average (EMA)
to indicate the market consensus of value. Bull Power
measures the ability of buyers to drive prices above the
consensus of value. Bear Power reflects the ability of
sellers to drive prices below the average consensus of
value.
Bull Power is calculated by subtracting the 13day EMA
from the day's High. Bear power subtracts the 13day EMA
from the day's Low.
 Envelopes
 Price envelopes (or percentage bands)
are plotted at a set percentage above and below a moving
average. They are used to indicate overbought and oversold
levels and can be traded on their own or in conjunction with
a momentum indicator.
The length of the moving average should be varied
according to the cycle that you are trading.
The Percentage should be set so that about 90% of price
activity is contained within the bands. Adjust the band
width if volatility increases over time.
 Equivolume
 Volume plays an important role in confirming
price movements. It is sometimes difficult to track this
relationship on a normal bar chart with volume plotted in a
separate slot below. This is overcome by plotting price and
volume activity on a single chart.
Equivolume was invented by Richard W Arms Jr. and
introduced in his book Volume Cycles in the Stock Market.
 Force Index
 Developed by Dr Alexander Elder, the Force
index combines price movements and volume to measure the
strength of bulls and bears in the market. The raw index is
rather erratic and better results are achieved by smoothing
with a 2day or 13day exponential moving average (EMA).
 The 2day EMA of Force is used to track the strength
of buyers and sellers in the short term;
 The 13day EMA of Force measures the strength of
bulls and bears in intermediate cycles.
If the Force index is above zero it signals that the
bulls are in control. Negative Force index signals that the
bears are in control. If the index whipsaws around zero it
signals that neither side has control and no strong trend
exists.
 The higher the positive reading on the Force index,
the stronger is the bulls' power.
 Deep negative values signal that the bears are very
strong.
 If Force index flattens out it indicates that either
(a) volumes are falling or (b) large volumes have failed
to significantly move prices. Both are likely to precede
a reversal.
The 2day Force index is used as part of Dr Eder's Triple
Screen trading system.
 MACD
 The MACD is basically a refinement of the two
moving averages system and measures the distance between the
two moving average lines. Signals are taken when MACD
crosses its signal line, calculated as a 9 day exponential
moving average of MACD.
The indicator is primarily used to trade trends and
should not be used in a ranging market.
MACD was developed by Gerald Appel and is discussed in
his book, The Moving Average Convergence Divergence
Trading Method
 MACD Histogram
 The signals from the MACD indicator tend to
lag price movements. The MACD Histogram attempts to address
this problem by plotting the distance between MACD and its
signal line. Because of this, the histogram signals trend
changes well in advance of the normal MACD signal, but is
less reliable and should be confirmed by other indicators.
Only trade with Histogram signals when the market is
trending.
The MACD Histogram can also be used to track longer
cycles, using weekly or monthly data.
 Mass Index
 The Mass Index attempts to predict reversals
by comparing the trading range (High minus Low) for each
period. Reversals are signalled by a bulge in the index
line.
The Mass Index was invented by Donald Dorsey.
Median Price
 Median Price is merely the midpoint of the
trading range for each period.
Calculated as: ( High + Low ) / 2
The line is plotted on the price chart and can be used as
a filter for trend indicators.
Median Price is featured in Steven Achelis' book,
Technical Analysis AZ.
 Momentum
 Momentum measures the rate of change in
closing prices and is used to detect trend weakness and
likely reversal points. It is often underrated because of
its simplicity.
High Momentum readings (positive or negative) occur when
a trend is at its strongest. Lower readings are found at the
start and end of trends.
Overbought and oversold levels are set separately for
each security, based on the performance of the indicator
over past cycles.
 Money Flow Index
 The Money Flow Index is a volumeweighted
version of the Relative Strength Index, used to warn of
trend weakness and likely reversal points. The indicator
compares the value traded on updays to value traded on
downdays.
 Moving Average Envelopes
 Price envelopes (or percentage bands)
are plotted at a set percentage above and below a moving
average. They are used to indicate overbought and oversold
levels and can be traded on their own or in conjunction with
a momentum indicator.
The length of the moving average should be varied
according to the cycle that you are trading. See Moving
Averages for details.
The Percentage should be set so that about 90% of price
activity is contained within the bands. Adjust the band
width if volatility increases over time.
 Moving Averages
 Moving averages provide an objective measure
of trend direction by smoothing the price data. Normally
calculated using closing prices, moving averages can also be
used on median, typical and weighted closing prices as well
as other indicators.
Shorter length moving averages (MA's for short)
are more sensitive and identify new trends earlier, but also
give more false alarms. Longer moving averages are more
reliable but only pick up the big trends.
It is best to use a moving average that is half the
length of the cycle that you are tracking. If the
peaktopeak cycle length is roughly 30 days then a 15 day
MA is appropriate. If 20 days, then a 10 day MA is
appropriate. You will, however, often find traders using 14
and 9 day MA's for the above cycles in the hope that they
will generate signals slightly ahead of the market.
 Multiple Moving Averages
 The Multiple Moving Average indicator was
devised by Daryl Guppy and consists of five shortterm and
five longterm exponential moving averages. The shortterm
MA's are 3, 5, 7, 10 and 15 days and the longterm MA's are
30, 35, 40, 50 and 60 days but these can be varied according
to the Time Frame being traded.
 Negative Volume Index
 The Negative Volume Index was introduced (in
Stock Market Logic) by Norman Fosback and is often used
in conjunction with Positive Volume Index to identify bull
markets. The two indicators are based on the assumption that
the smart money dominates trading on quiet days and
that the uninformed crowd dominates trading on active
days.
Negative Volume Index is based on days when volume is
down from the previous day. Positive Volume Index is based
on days when volume is up on the previous day.
On Balance Volume
 The On Balance Volume (OBV) indicator
was developed by Joseph Granville and is explained in his
book Granville's New Strategy of Daily Stock Market
Timing for Maximum Profit.
On Balance Volume attempts to measure the level of
accumulation or distribution by comparing volume to price
movements. Volume is added to the indicator if closing price
moves up and subtracted if closing price moves down. No
adjustment is made if closing price is unchanged.
Parabolic SAR
 Parabolic SAR was developed by J. Welles
Wilder Jr. and is described in his book New Concepts in
Technical Trading Systems. SAR stands for stop and
reverse.
Parabolic SAR should only be employed in trending markets
 when it provides excellent entry and exit points. It is
plotted in a rather unorthodox fashion: a stop loss is
calculated for each day using the previous days data. The
advantage is that the stop level can be calculated in
advance of the market opening.
 A stop level below the current price indicates that
your position is long. The stop will move up every day
until activated (when price falls to the stop level).
 A stop level above the current price indicates that
your position is short. The stop moves down every day
until triggered (when price rises to the stop level).
Point & Figure
 Point and Figure charts are used to identify
support levels, resistance levels and chart patterns. The
charts ignore the time factor and concentrate solely on
movements in price  a column of X's or O's may take one day
or several weeks to complete.
By convention, the first X in a column is plotted one box
above the last O in the previous column (and the first O in
a column is plotted one box below the highest X).
 Positive Volume Index
 The Positive Volume Index was introduced (in
Stock Market Logic) by Norman Fosback and is often used
in conjunction with Negative Volume Index to identify bull
and bear markets.
Positive Volume Index is based on the assumption that the
uninformed crowd dominates trading on active days.
Negative Volume Index assumes that the smart money
dominates trading on quiet days.
Positive Volume Index highlights days when volume is up
on the previous day. Negative Volume Index highlights days
when volume is down.
 Price and Volume Trend
 Price and Volume Trend (PVT) is a variation of
On Balance Volume, used to determine the strength of trends
and warn of reversals.
 Price Comparison
 The Price Comparison (or comparative
performance) is useful for comparing the performance of
one stock relative to another (or to an index).
Price Comparison plots the closing price of a second
stock (or index) onto the price chart. The scale of the
second stock (or index) is adjusted so that both price lines
commence at the same point.
 Price Differential
 Price Differential (or yield differential)
is used to compare bond yields or interest rates, which
share the same price axis, by merely subtracting the one
rate/yield from another.
 Percentage Bands
 Price envelopes (or percentage bands)
are plotted at a set percentage above and below a moving
average. They are used to indicate overbought and oversold
levels and can be traded on their own or in conjunction with
a momentum indicator.
The length of the moving average should be varied
according to the cycle that you are trading. See Moving
Averages for details.
The Percentage should be set so that about 90% of price
activity is contained within the bands. Adjust the band
width if volatility increases over time.
 Price Envelope
 Price envelopes (or percentage bands)
are plotted at a set percentage above and below a moving
average. They are used to indicate overbought and oversold
levels and can be traded on their own or in conjunction with
a momentum indicator.
The length of the moving average should be varied
according to the cycle that you are trading. See Moving
Averages for details.
The Percentage should be set so that about 90% of price
activity is contained within the bands. Adjust the band
width if volatility increases over time.
 Price Ratio
 Price envelopes (or percentage bands)
are plotted at a set percentage above and below a moving
average. They are used to indicate overbought and oversold
levels and can be traded on their own or in conjunction with
a momentum indicator.
The length of the moving average should be varied
according to the cycle that you are trading. See Moving
Averages for details.
The Percentage should be set so that about 90% of price
activity is contained within the bands. Adjust the band
width if volatility increases over time.
 Rate of Change (Price)
 ROC is a refinement of Momentum  readings
fluctuate as percentages around the zero line. Further
details are given at Construction.
The indicator is designed for use in ranging markets  to
detect trend weakness and likely reversal points. However,
when combined with a trend indicator, it can be used in
trending markets.
 Rate of Change (Volume)
 Rate of Change Volume (ROCV) is an oscillator
applied to volume rather than price and is calculated in the
same manner as the Rate of Change (Price) indicator.
ROCV highlights increases in volume, which normally occur
at most significant market tops, bottoms and breakouts
 Relative Strength (Comparative)
 The Price Ratio (or relative strength 
comparative) serves a similar purpose to Price
Comparison  it compares the performance of one stock
relative to another (or to an index). Some traders use the
Price Ratio as a general tool to select outperforming
stocks.
Price Ratio is calculated by dividing the closing
price of the first stock by the second.
Unlike Price Comparison, Price Ratio is plotted in a
separate indicator panel.
 Relative Strength Index
 Relative Strength Index (RSI) is a popular
momentum oscillator developed by J. Welles Wilder Jr. and
detailed in his book New Concepts in Technical Trading
Systems.
The Relative Strength Index compares upward movements in
closing price to downward movements over a selected period.
Wilder originally used a 14 day period, but 7 and 9 days are
commonly used to trade the short cycle and 21 or 25 days for
the intermediate cycle. Please note that Wilder does not use
the standard moving average formula and the time period may
need adjustment.
Relative Strength Index is smoother than the Momentum or
Rate of Change oscillators and is not as susceptible to
distortion from unusually high or low prices at the start of
the window. It is also formulated to fluctuate between 0 and
100, enabling fixed Overbought and Oversold levels.
 Single Moving Average
 This is the simplest of the moving average
systems. The system needs to be combined with a system that
identifies ranging markets, when price whipsaws back and
forth across the Moving Average, resulting in losses.
 Smoothed Rate Of Change
 Smoothed Rate of Change was first introduced
by Fred G Schutzman in Futures magazine, April 1991.
The oscillator performs a similar function to the Momentum
and Rate Of Change indicators but avoids some of the
weaknesses:
 Because of the smoothing the indicator is less
erratic and gives fewer false signals;
 The exponential moving average ensures that the
indicator only "barks" once.
Smoothed Rate of Change (SROC) first calculates a 13day
exponential moving average of closing price. Then calculate
a 21day Rate of Change of the exponential moving average.
 Slow Stochastic Oscillator
 The Slow Stochastic applies further smoothing
to the Stochastic oscillator, to reduce volatility and
improve signal accuracy.
 Stochastic Oscillator
 The Stochastic Oscillator was developed by Dr.
George Lane to track market momentum.
The indicator consists of two lines:
 %K compares the latest closing price to the recent
trading range.
 %D is a signal line calculated by smoothing %K.
Three Moving Averages
 The Three Moving Average system attempts to
identify ranging markets which are then avoided as they tend
to be unprofitable when traded with trend indicators.
 TRIX Oscillator
 TRIX is an oscillator designed for trading
trends. Select a TRIX indicator period appropriate to
the time frame that you are trading. The indicator will keep
you in trends that are shorter or equal to the window
period.
Based on a triplesmoothed moving average of
Closing price, the indicator eliminates cycles shorter than
the selected indicator period. Triple smoothing reduces
volatility and minimizes the chance of false signals shaking
you out of a trend too early.
TRIX was developed by Jack Huton, publisher of
(Technical Analysis of) Stocks and Commodities magazine.
 Twiggs Money Flow
 Twiggs Money Flow is my own derivation, based
on the popular Chaikin Money Flow indicator, which is in
turn derived from the Accumulation Distribution line. We are
all indebted to Marc Chaikin and Larry Williams for the
contribution they have made to the field of technical
analysis and pricevolume oscillators.
Twiggs Money Flow warns of breakouts and provides useful
trend confirmation. It is based on the observation that
buying support is normally signalled by:
 increased volume and
 frequent closes in the top half of the daily range.
Likewise, selling pressure is evidenced by:
 increased volume and
 frequent closes in the lower half of the daily range
Two Moving Averages
 An alternative approach to using filters is to
use a fast moving average to represent the price line. The
fast moving average used is normally 5 days and the slow
moving average is selected according to the length of the
cycle being traded.

 Typical Price
 Typical Price is another approximation of
average price for each period and can be used as a filter
for moving average systems.
Calculated as: (High + Low + Close) / 3
 Vertical Horizontal Filter
 Vertical Horizontal Filter (VHF) was created
by Adam White to identify trending and ranging markets. VHF
measures the level of trend activity, similar to ADX in the
Directional Movement System. Trend indicators can then be
employed in trending markets and momentum indicators in
ranging markets.
Vary the number of periods in the Vertical Horizontal
Filter to suit different time frames. White originally
recommended 28 days but now prefers an 18day window
smoothed with a 6day moving average.
 Volatility
 This is a statistical measure of volatility
called the coefficient of variation. It measures the
standard deviation of closing price from its simple moving
average.
Volatility is normally used to measure the risk profile
of managed funds.
 Volatility Ratio
 This ratio is derived from the Volatility
Ratio introduced by Jack Schwager in Technical Analysis
to identify wideranging days.
Designed to highlight breakouts from a trading range,
this VR compared to true range for the indicator period
 Volatility Ratio (Schwager)
 This ratio is similar to one used by Jack
Schwager in Technical Analysis to identify
wideranging days.
 Volume
 Volume is used to highlight unusual trading
activity in a security. It can be displayed as a separate
indicator in Daily, Weekly or Monthly format.
 Volume Oscillator
 The Volume Oscillator (VO) identifies
trends in volume using a two moving average system.
The Volume Oscillator measures the difference between a
faster and slower moving average (MA).
 If the fast MA is above the slow MA the oscillator
will be positive.
 If the fast MA is below the slow MA then the
oscillator will be negative.
 The Volume Oscillator will be zero when the two MA's
cross
Weighted Close
 Weighted Close is similar to Typical Price 
the only difference being that the weighted close, as the
name implies, place greater weighting on closing price. Both
indicators approximate the average price traded for a period
and are used as filters in moving average systems.
Weighted Close is calculated as: (High + Low +
Close * 2 ) / 4
Weighted Close is featured in Steven Achelis' book,
Technical Analysis AZ.
 Williams Accumulate/ Distribute
 Steven Achelis, in his book Technical
Analysis AZ, omits volume from the Williams
Accumulation Distribution formula and several other
websites/software programs appear to follow this approach.
For the benefit of investors accustomed to Achelis'
approach, we have provided both indicators.
Williams Accumulate Distribute, Achelis' version, is not
a volume indicator despite the name. It is a cumulative
measure of trading range for each period.
Williams Accumulate Distribute is traded on divergences.
When price makes a new high and the indicator fails to
exceed its previous high, distribution is taking place.
When price makes a new low and the WAD fails to make a new
low, accumulation is occurring.
The original indicator was created by Larry Williams
 Williams Accumulation/ Distribution
 Williams Accumulation Distribution is traded
on divergences. When price makes a new high and the
indicator fails to exceed its previous high, distribution is
taking place. When price makes a new low and the WAD fails
to make a new low, accumulation is occurring.
Williams Accumulation Distribution was created by Larry
Williams.
 Williams %R
 Williams %R was developed by Larry Williams
to indicate overbought and oversold levels.
The indicator is very similar to Stochastic %K  except
that Williams %R is plotted using negative values ranging
from 0 to 100. Details of the formula can be found under
Construction.
The number of periods used to calculate Williams %R can
be varied according to the time frame that you are trading.
A rule of thumb is that the indicator window should be half
the length of the cycle (14 days is popular for the
intermediate cycle).
Overbought and Oversold levels are normally set at 20
and 80.
 Yield Differential
 Price Differential (or yield differential)
is used to compare bond yields or interest rates, which
share the same price axis, by merely subtracting the one
rate/yield from another.