Technical Indicators in Finance
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Questions and Answers

Which oscillator measures the relative position within the range of the lookback period?

  • Ultimate Oscillator
  • Twiggs Money Flow
  • Stochastic Oscillator (correct)
  • True Strength Index

    • What is the main concept behind the Tick Volume Oscillator?

  • Measuring the position within the range of the lookback period
  • Evaluating buying pressure and true range
  • Confirming price direction with double-smoothed volume (correct)
  • Using squared differences between two EMAs

    • Which oscillator is based on the concept of comparing two EMAs in a stochastic fashion?

  • Relative Vigor Index (correct)
  • Volume Accumulator
  • TRIX
  • Stochastic Oscillator

    • What is the main characteristic of the True Strength Index?

    <p>It has less lag and is very smooth</p> Signup and view all the answers

    Which oscillator uses the concept of William's Buying Pressure and Wilder's True Range?

    <p>Twiggs Money Flow</p> Signup and view all the answers

    What is the main concept behind the Ultimate Oscillator?

    <p>Calculating a ratio over 7, 14, and 28 periods</p> Signup and view all the answers

    Which oscillator is a triple-smoothed exponential moving average?

    <p>TRIX</p> Signup and view all the answers

    Which oscillator reacts to changing volatility?

    <p>Short Cycle Indicator</p> Signup and view all the answers

    What is the formula to calculate the Chaikin Accumulation Distribution?

    <p>Volume x ([close - low] - [high - close]) / (high - low)</p> Signup and view all the answers

    What is the main purpose of the Chaikin Money Flow?

    <p>To create a ratio between the Chaikin AD and total volume</p> Signup and view all the answers

    What is included in the Chaikin Oscillator?

    <p>Bollinger Bands and a 10-day EMA</p> Signup and view all the answers

    What is the formula to calculate the Directional Movement Index (DMI)?

    <p>DMI+ = (+DM / 14-period ATR) + (-DM / 14-period ATR)</p> Signup and view all the answers

    What is the main purpose of the Elastic Volume-Weighted Average Price (VWAP)?

    <p>To calculate the volume-weighted average price</p> Signup and view all the answers

    What is used to calculate the Elastic Volume-Weighted Average Price (VWAP)?

    <p>The ratio between the number of outstanding shares, the current price, and the volume</p> Signup and view all the answers

    What is the main characteristic of the Bollinger Bands?

    <p>They are used to measure the volatility of the market</p> Signup and view all the answers

    What is the formula to calculate the Divergence Index?

    <p>DI = (Fast MA - Slow MA) / (SD(Price(today) - Price(today-1), Slow Period))^2</p> Signup and view all the answers

    Which breadth indicator uses the ratio of advancing volume to declining volume?

    <p>Arms Index</p> Signup and view all the answers

    What is the most simple breadth measure?

    <p>Advance-Declines</p> Signup and view all the answers

    Which breadth indicator calculates the ratio of advancers to advance plus decline?

    <p>Breadth Thrust</p> Signup and view all the answers

    What is a characteristic of the Breadth Thrust indicator?

    <p>It uses a MACD type expression to smooth the ratio</p> Signup and view all the answers

    Which breadth indicator considers the net advancing stocks compared to the number of stocks that were unchanged?

    <p>Bolton-Tremblay</p> Signup and view all the answers

    What is the name of the indicator that uses a MACD type expression to smooth the ratio of advancers to advance plus decline?

    <p>Breadth Thrust</p> Signup and view all the answers

    Which breadth indicator is a price-based sentiment indicator?

    <p>New Highs &amp; Lows</p> Signup and view all the answers

    What is the characteristic of the Shultz indicator?

    <p>It only considers advances as a percentage of the total number of stocks</p> Signup and view all the answers

    What is the primary function of the Chaikin Accumulation Distribution indicator?

    <p>Measuring buying and selling pressure</p> Signup and view all the answers

    What is the primary focus of the Chaikin Accumulation/Distribution indicator?

    <p>Analyzing the volume and price action of a stock</p> Signup and view all the answers

    Which indicator is used to determine the strength of a trend?

    <p>Average Directional Index (ADX)</p> Signup and view all the answers

    How does the Weighted Moving Average calculate its average?

    <p>By giving more weight to recent data</p> Signup and view all the answers

    What is the primary concept behind the Bollinger Bandwidth Indicator?

    <p>Measuring volatility through bandwidth</p> Signup and view all the answers

    What is the relationship between the DX and ADX values?

    <p>DX is the absolute difference between the DMI+ and DMI-, while ADX is the moving average of the DX values</p> Signup and view all the answers

    What is the primary purpose of the Volume indicator?

    <p>Confirming significant reversal points</p> Signup and view all the answers

    What is the primary function of the Average Directional Index (ADX)?

    <p>Determining trend strength and direction</p> Signup and view all the answers

    How does the Wilder Moving Average calculate its average?

    <p>By using the formula ((Periods - 1) x (Yesterday's MA) + Price) / Periods</p> Signup and view all the answers

    What is the primary concept behind the AutoCorrelation indicator?

    <p>Looking for relationships within the same dataset</p> Signup and view all the answers

    What is the primary characteristic of the Triangular Moving Average?

    <p>Gives more weight to the middle of the period</p> Signup and view all the answers

    Which indicator uses the concept of averaging the average of the bar range?

    <p>Keltner Channels</p> Signup and view all the answers

    What is the primary function of the Speed Lines?

    <p>Calculating vertical targets</p> Signup and view all the answers

    What is the primary function of the Aspray's Demand Oscillator?

    <p>Measuring buying and selling pressure</p> Signup and view all the answers

    What is the primary purpose of the Variable EMA?

    <p>Adapting to changing volatility</p> Signup and view all the answers

    How does the Volume Weighted Average Price calculate its average?

    <p>By examining every tick in the period and weighting by total volume</p> Signup and view all the answers

    Which of the following indicators uses the ratio of advancing volume to declining volume?

    <p>Arms Index</p> Signup and view all the answers

    What is the most simple breadth measure?

    <p>Advance - Declines</p> Signup and view all the answers

    Which breadth indicator calculates the ratio of advancers to advance plus decline?

    <p>Breadth Thrust</p> Signup and view all the answers

    Which breadth indicator is a price-based sentiment indicator?

    <p>New Highs &amp; Lows</p> Signup and view all the answers

    Which breadth indicator considers the net advancing stocks compared to the number of stocks that were unchanged?

    <p>Bolton-Tremblay</p> Signup and view all the answers

    What is the characteristic of the Breadth Thrust indicator?

    <p>Uses a MACD type expression to smooth the ratio</p> Signup and view all the answers

    Which breadth indicator is similar to the OBV indicator?

    <p>Advance Decline Index</p> Signup and view all the answers

    What is the name of the indicator that uses a MACD type expression to smooth the ratio of advancers to advance plus decline?

    <p>Breadth Thrust</p> Signup and view all the answers

    What is the primary function of the Speed Lines indicator?

    <p>To identify the reversal points</p> Signup and view all the answers

    Which indicator uses the concept of buying and selling pressure to separate volume into Buying Power and Selling Power?

    <p>A/D Oscillator</p> Signup and view all the answers

    What is the primary concept behind the Vertical Target (P&F) indicator?

    <p>Accumulation/Distribution</p> Signup and view all the answers

    Which indicator looks for relationships within the same dataset by increasing the lookback interval and doing a correlation on a linear regression?

    <p>AutoCorrelation</p> Signup and view all the answers

    What is the primary function of the Bollinger Bandwidth Indicator?

    <p>Measuring volatility</p> Signup and view all the answers

    Which indicator uses the concept of accumulation and distribution to identify the buying and selling pressure?

    <p>Chaikin Accumulation Distribution</p> Signup and view all the answers

    What is the primary function of the Average Directional Index (ADX) indicator?

    <p>Measuring the strength of a trend</p> Signup and view all the answers

    Which indicator is a type of measuring indicator that draws lines from the start through the end of Fibonacci Retracement?

    <p>Retracements</p> Signup and view all the answers

    What is the primary characteristic of the True Strength Index?

    <p>Double smoothed with less lag than expected</p> Signup and view all the answers

    Which oscillator is a triple-smoothed exponential moving average?

    <p>TRIX</p> Signup and view all the answers

    Which oscillator reacts to changing volatility and uses high and low prices?

    <p>Short Cycle Indicator</p> Signup and view all the answers

    What is the main concept behind the Twiggs Money Flow oscillator?

    <p>Uses William's Buying Pressure and Wilder's True Range concepts</p> Signup and view all the answers

    Which oscillator is used to confirm price direction?

    <p>Tick Volume Oscillator</p> Signup and view all the answers

    Which indicator substitutes volume for time on the x-axis?

    <p>Equivolume</p> Signup and view all the answers

    What is the formula for the Horizontal Target (P&F)?

    <p>Ht = Pl + (WxR)</p> Signup and view all the answers

    Which indicator calculates a ratio based on the position of the close to the average price of the intra-day data?

    <p>Volume Accumulator</p> Signup and view all the answers

    Which breadth indicator uses the ratio of advancing volume to declining volume?

    <p>Upside/Downside Ratio</p> Signup and view all the answers

    Which oscillator uses high and low prices and measures relative position within the range of the lookback period?

    <p>Stochastic Oscillator</p> Signup and view all the answers

    Which oscillator is double smoothed and has less lag than expected?

    <p>True Strength Index</p> Signup and view all the answers

    What is the name of the indicator that represents the number of shares being held short?

    <p>Short Interest</p> Signup and view all the answers

    Which indicator is used to identify potential reversals in a trend?

    <p>Fibonacci Retracements</p> Signup and view all the answers

    What is the name of the indicator that measures the number of outstanding futures contracts that need to be traded before contract expiry?

    <p>Open Interest</p> Signup and view all the answers

    Which indicator uses Sine and Cosine to break up all cycles into their components?

    <p>Periodogram</p> Signup and view all the answers

    Which indicator is a price-based sentiment indicator?

    <p>Thrust Oscillator</p> Signup and view all the answers

    What is the main purpose of the Chaikin Money Flow indicator?

    <p>To identify the accumulation and distribution of volume</p> Signup and view all the answers

    Which of the following oscillators uses the concept of comparing two exponential moving averages?

    <p>Chaikin Oscillator</p> Signup and view all the answers

    What is the primary function of the Elastic Volume-Weighted Average Price indicator?

    <p>To calculate the average price of a security based on volume</p> Signup and view all the answers

    Which oscillator uses the Chaikin Accumulation Distribution value and divides it by the total volume?

    <p>Chaikin Money Flow</p> Signup and view all the answers

    What is the formula for the Chaikin Accumulation Distribution indicator?

    <p>Volume x ([close - low] - [high - close]) / (high - low)</p> Signup and view all the answers

    Which of the following indicators is a trend-following tool that operates well in markets with a well-defined cyclical pattern?

    <p>Chaikin Oscillator</p> Signup and view all the answers

    What is the main purpose of the Chaikin Accumulation Distribution indicator?

    <p>To identify the accumulation and distribution of volume</p> Signup and view all the answers

    Which oscillator uses the concept of a 3-day EMA and a 10-day EMA?

    <p>Chaikin Oscillator</p> Signup and view all the answers

    Study Notes

    Oscillators

    • Chaikin Oscillator: trend-following tool that operates well in markets with a well-defined cyclical pattern
    • Chaikin Money Flow (CMF): calculates the ratio of the Chaikin Accumulation Distribution value to the total volume
    • Cycle Channel Index: reveals sub-cycles by measuring the difference between the 40-period SMA and price
    • Divergence Index: uses the ratio between the number of outstanding shares, the current price, and the volume of both the next and previous periods
    • Elastic VWAP: measures the range from the open to the close and divides by range
    • Relative Vigor Index: uses the squared difference between two EMAs and compares them in a Stochastic fashion
    • Short Cycle Indicator: based on the squared difference between two EMAs, reacts to changing volatility
    • Stochastic: measures the relative position within the range of the lookback period
    • Tick Volume Oscillator: double-smoothed, used to confirm price direction
    • TRIX: EMA of an EMA of an EMA, triple-smoothed exponential
    • True Strength Index: double-smoothed, has less lag than expected, corrects potential flaws in CMF
    • Twiggs Money Flow: uses William's Buying Pressure and Wilder's True Range concepts
    • Ultimate Oscillator: calculates a ratio based on the position of the close to the average price of the intra-day data over 7, 14, and 28 periods
    • Volume Accumulator: calculates a ratio based on the position of the close to the average price of the intra-day data

    Breadth

    • Advance Decline Index: uses the AD value and accumulates it like OBV
    • Advance-Declines: most simple breadth measure, # of Advancers LESS # of Decliners
    • Arms Index: ratio of 2 Ratios, ratio of stocks advancing and declining & a ratio of volume of advancing volume to declining volume
    • Bolton-Tremblay: considers the net advancing stocks compared to the number of stocks that were unchanged
    • Breadth Thrust: calculates ratio of Advancers to Advance + Decline, smoothed with a 10-period SMA
    • McClellan Oscillator: uses a MACD type expression to further smooth
    • New Highs & Lows: price-based sentiment indicator
    • Shultz: considers Advances as a percentage of the total number of stocks, R = Reversal Value

    Measuring

    • Pivot Points: calculated by comparing current bar to previous high & low
    • Retracements: drawn lines from the start through the end of Fibonacci Retracement Levels
    • Speed Lines: drawn lines from the start through the end of Fibonacci Retracement Levels
    • Vertical Target (P&F): calculated by comparing current bar to previous high & low, Vt = Pl + (FRxRC)

    Trend

    • Geometric Moving Average: uses a concept of buying pressure and selling pressure
    • Keltner Channels: calculates the average of the bar range
    • Simple Moving Average: average of the previous 10 values
    • STARC Bands: uses traditional ATR's in the calculation
    • Trend Line: manually drawn, under troughs uptrend, above peaks in downtrend
    • Triangular Moving Average: takes a SMA & calculates a SMA with half the period length
    • Triangular Weighted Moving Average: gives more weight to the middle of the period
    • Variable EMA: adapts to volatility, slows down when prices are congested
    • Volume Weighted Average Price: examines every tick in the period, prices are weighted by the total volume at that price
    • Weighted Moving Average: gives extra weight to recent data, most recent price (in 10 period) is multiplied by 10
    • Wilder Moving Average: ( (Periods - 1) x (Yesterday's MA) + Price ) / Periods

    Indicators

    • Pivot Points: Calculated by comparing current bar to previous high & low.
    • Retracements: Drawn lines from the start through the end of Fibonacci Retracement.
    • Speed Lines: Levels; Vt = Pl + (FRxRC); Vt = Vertical Target; Pl = Lowest Box Price; FR = Size; RC = Reversal Count.
    • Vertical Target (P&F): Measuring the size of First Reversal (Box Count x Box Size); Accumulation/Distribution.
    • A/D Oscillator: Measures buying and selling pressure using direction to separate volume into buying and selling pressure.
    • Aspray's Demand Oscillator: Looks for relationships within the same dataset by increasing the lookback interval and doing a correlation on a linear regression.
    • AutoCorrelation: Measures relationships within the same dataset by increasing the lookback interval and doing a correlation on a linear regression.
    • Average Directional Index (ADX): Measures the strength of the trend while DMI's show direction.
    • Bollinger Bandwidth Indicator: Measures volatility based on the distance between the high and low band.
    • Chaikin Accumulation/Distribution: Uses buying and selling pressure; Last Updated: 8:39 12/1/2020 EST.

    Breadth

    • Advance -Declines: Simple breadth measure; # of Advancers LESS # of Decliners.
    • Arms Index: Ratio of 2 Ratios; Ratio of stocks advancing and declining & a ratio of volume of advancing volume to declining volume.
    • Bolton-Tremblay: Considers the net advancing stocks compared to the number of stocks that were unchanged.
    • Breadth Thrust: Calculates ratio of Advancers to Advance + Decline; Smooth with a 10-period SMA.
    • McClellan Oscillator: Uses a MACD type expression to further smooth; See calculation Slide 9, Breadth.
    • New Highs & Lows: Price Based Sentiment Indicator; See calculation Slide 13, Breadth.
    • Shultz: Only considers Advances as a percentage of the total number of stocks; CAD.

    Oscillators

    • Chaikin Money Flow: CMF = (Sum of Chaikin A/D) / (Sum of Total Volume).
    • Chaikin Oscillator: Takes the Chaikin AD and applies a 3-day EMA and a 10-day EMA; Also includes Bollinger Bands for which signals to follow.
    • Cycle Channel Index: Trend-following tool that operates well in markets with a well-defined cyclical pattern.
    • Cycle Difference: Reveals sub-cycles; Add a 40-period SMA and then measure the difference between the average and price.
    • Directional Movement Indicator: DMI+ is the ratio between +DM & 14-period ATR; DMI- is the opposite.
    • Divergence Index: DI = (Fast MA - Slow MA) / (SD (Price(today) - Price(today-1), Slow Period)^2; Band = SD(D1, Slow Period).
    • Elastic VWAP: Measures the range from the open to the close and divides by range from high to low.
    • Relative Vigor Index: Uses a ratio between the number of outstanding shares, the current price & the volume of both the next and previous periods.
    • Short Cycle Indicator: Reacts to changing volatility; See calculation Slide 32, Cycles Analysis.
    • Stochastic: Uses High and Low prices and measures relative position within the range of the lookback period.
    • Tick Volume Oscillator: Used to confirm price direction; Tick Volume is double smoothed.
    • TRIX: EMA of an EMA of an EMA; Triple Smoothed Exponential.
    • True Strength Index: Double Smoothed; Has less lag than expected and is still very smooth; Corrects potential flaws in CMF by using Wilder's True Range.
    • Twiggs Money Flow: Usines William's Buying Pressure & Wilder's True Range concepts.
    • Ultimate Oscillator: Uses William's Buying Pressure & Wilder's True Range concepts over 7, 14, & 28 periods.
    • Volume Accumulator: Calculates a ratio based on the position of the close to the average price of the intra-day data; See calculation Slide 8, Shultz.

    Breadth (continued)

    • Sibbett's Demand Index: Smooths volume by using the avtivity of past N-days; See calculation Slide 6, Breadth.
    • Thrust Oscillator: Considers the net of advancing and declining stocks as well as their volume; See calculation Slide 12, Breadth.
    • Upside/Downside Ratio: UDR = Advancing Volume / Declining Volume; 0-1 is the limit of the downside range when stocks are declining; Upside is not bounded when stocks are advancing.

    Chart

    • Equivolume - Richard Arms': Takes the unique view of substituting volume for time on the x-axis; Bars with more volume are wider.

    Cycles

    • Periodogram: Uses Sine and Cosine to break up all cycles into their components.

    Fundamental

    • Short Interest: Represents the number of shares being held short.
    • Open Interest: Number of outstanding futures contracts that need to be traded before contract expiry; Unique to futures markets.

    Measuring

    • Fibonacci Retracements: Watch retracement levels for signs of reversal.
    • Horizontal Target (P&F): Ht = Pl + (WxR); Ht = Upside Target; Pl = Lowest Box Price; W = Width of Formation.

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    Description

    This quiz covers various technical indicators used in finance, including the Chaikin Oscillator, Chaikin Money Flow, Cycle Channel Index, and Divergence Index. These indicators are used to analyze market trends and make informed investment decisions.

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