Indicators for Stock Trading PDF

INDICATORS Ing. Radovan Dráb, PhD. Ing. Viliam Vajda, PhD. ENVELOPES  Envelopes Envelopes indicator on price The premise of the indicator is fact that prices (of the stocks) have tendency to oscillate around their moving average Envelopes could be used in every...

INDICATORS Ing. Radovan Dráb, PhD. Ing. Viliam Vajda, PhD. ENVELOPES  Envelopes Envelopes indicator on price The premise of the indicator is fact that prices (of the stocks) have tendency to oscillate around their moving average Envelopes could be used in every parameters of the moving averages, but with decreasing of the parameter, the volatility of the moving average is „close“ to the real volatility of the price. At this stage Envelopes should indicate false signals. Calculation Upper Envelope = EMAx + X % Lower Envelope = EMAx - X % EMAx – Exponential moving average with parameter x X – percentage deviation from moving average  Envelopes If the price crosses Upper Envelope, the price is out of its „typical“ range and have tendency to move back to its moving average. This is signal for Selling position. If the price crosses Lower Envelope, the price is out of its „typical“ range and have tendency to move back to its moving average. This is signal for Buying position. Attention – this fact (and also trading) is good when prices/market is in the side- way move. In the trending market, the indicator have tendency to move in the range, from the moving average to the Envelope, in the move of the trend. In this case, the indicator should be use in the "move of the trend". Buying position – the price pull back from Upper Envelop to the Moving average. Selling position – the price pull back from Lower Envelop to the Moving average. KELTNER CHANNEL  Keltner Channel Indicator of volatility Keltner Channel – indicator on the price Typical Envelope indicator based on volatility Calcultion KC centre = EMAx KC upper envelope = KC centre + (ATR * Deviation) KC lower envelope = KC centre – (ATR * Deviation) EMAx – EMA with parameter x ATR - Average True Range Deviation – selected number – multiplication of standard deviation(e.g. 2*)  Keltner Channel The moment when the stock is overbought is the moment when the price "jump" up above Upper Envelope. The moment when the stock is oversold is the moment when the price "jump" down below Lower Envelope. When the price "jump" out of the range, the price have tendency to move back to its moving average or eventually to the opposite Envelope and this is signal for entering position. Price "stagnation" in one side of the KC should indicate the beginning of the new strong trend and its necessary to take care for entering "again trend" positions. TNX 4 ATT