Technical Studies
Pressing the Technical Studies button brings up the list of technical studies available:
The first set of technical studies in the drop down menu is the upper studies, which overlays onto the price chart. A maximum of 2 upper studies can be overlaid onto the chart at any one time. A checkmark will appear on the left of the technical study chosen. To cancel a study, simply select it again and it will be unchecked and erased from the chart. The reference calculations of the upper technical are displayed on the upper-left corner of the chart.
The middle set in the menu is the lower studies, which appends to the bottom of the price chart, thus shrinking the height of the price chart. A maximum of 3 lower studies can be added to the chart at any one time. A checkmark will appear on the left of the technical study chosen. To cancel a study, simply select it again and it will be unchecked and erased from the chart.
The last set is the input parameter used to calculate each technical study. Historically, technical analysts have used the last price for their calculations. The chart provides one more proprietary input parameter: ProSticks' Modal Point. You may thus compare and see which input parameter best suits your analysis. This is for the daily, weekly and monthly time intervals only.
Upper Technical Studies:
Moving Average – Simple (SMA) - The average price of a
given time period, (5, 10 min., daily, etc.) where each of the
chosen periods carries the same weight for the average. Example:
Day 1 close, USD/JPY 124.00 Day 2 close, 126.00 Day 3 close 125.00.
The 4 day SMA is 125.00
Moving Average – Exponential (EMA) - Here, the averages
are calculated with the recent data carrying more weight applying
to the overall average. For example: In a 10 day moving average,
the last 5-10 days will have more value than the first 5 with
the idea this will provide stronger and earlier trend direction.
Bollinger Bands (BOL) - The basic interpretation of Bollinger
Bands is that prices tend to stay within the upper- and lower-band.
The distinctive characteristic of Bollinger Bands is that the
spacing between the bands varies based on the volatility of the
prices. During periods of extreme price changes (i.e., high volatility),
the bands widen to become more forgiving. During periods of stagnant
pricing (i.e., low volatility), the bands narrow to contain prices.
The bands are plotted two standard deviations above and below
a simple moving average. They indicate a "sell" when above the
moving average and a "buy" when below it. The bands are used in
conjunction with other analyses, including RSI, MACD, CCI, and
Rate of Change.
Parabolic Stop-and-Reversal (SAR) - The Parabolic SAR (stop-and-reversal)
is a time/price trend following system used to set trailing price
stops. The Parabolic SAR provides excellent exit points. You should
close long positions when the price falls below the SAR and close
short positions when the price rises above the SAR. If you are
long (i.e., the price is above the SAR), the SAR will move up
every day, regardless of the direction the price is moving. The
amount the SAR moves up depends on the amount that prices move.
Keltner Channels - A volatility based 'envelope' indicator that measures the movement of stocks in relation to an upper and lower moving-average band.
Lower Technical Studies:
Relative Strength Index (RSI-SMA)
Relative Strength Index (RSI-EMA) - The RSI is a price-following
oscillator that ranges between 0 and 100. A popular method of
analyzing the RSI is to look for a divergence in which the currency
price is making a new high, but the RSI is failing to surpass
its previous high. This divergence is an indication of an impending
reversal. When the RSI then turns down and falls below its most
recent trough, it is said to have completed a "failure swing."
The failure swing is considered a confirmation of the impending
reversal.
Stochastic (STC) - Stochastic studies are based on the premise
that as prices rise, closing prices tend to be near the high value.
Conversely, as prices fall, closing prices are near the low for
the period. Stochastic studies are made of two lines, %D and %K,
that move between a scale of 0 and 100. The %D line is the moving
average over a specified period of time of the %K line. The %K
line measures where the closing price is compared to the price
range for a given number of periods.
Momentum (MTM) - Designed to measure the rate of price change,
not the actual price level. Consists of the net difference between
the current closing price and the oldest closing price from a
predetermined period. The Momentum indicator can be used as either
a trend-following oscillator similar to the MACD or as a leading
indicator.
Moving Average Convergence Divergence and Histogram (MACD) - Consists
of two exponential moving averages that are plotted against the
zero line. The zero line represents the times the values of the
two moving averages are identical. The MACD is calculated by subtracting
a 26-day moving average of a currency's price from a 12-day moving
average of its price. The result is an indicator that oscillates
above and below zero. When the MACD is above zero, it means the
12-day moving average is higher than the 26-day moving average.
This is bullish as it shows that current expectations (i.e., the
12-day moving average) are more bullish than previous expectations
(i.e., the 26-day average). This implies a bullish, or upward,
shift. When the MACD falls below zero, it means that the 12-day
moving average is less than the 26-day moving average, implying
a bearish shift.
Modal Count (MC) - the number of discrete 5-minute intervals the market has spent trading at the Modal Point. For example, if the market has traded at the Modal Point of $100 at 10:20-10:25, 11:00-11:05, and 12:05-12:10, the Modal Count of $100 is 3.
Directional Movement Index (DMI) - An indicator for identifying when a definable trend is present in an instrument. That is, the DMI tells whether an instrument is trending or not.
Williams %R - A momentum indicator that measures overbought/oversold
levels. The interpretation of Williams' %R is very similar to
that of the Stochastic Oscillator, except that %R is plotted upside-down
and the Stochastic Oscillator has internal smoothing. Readings
in the range of 80 to 100% indicate oversold, while readings in
the 0 to 20% range suggest overbought.
Rate of Change (ROC) - The speed at which a variable changes over a specific period of time.
Volatility (VOLA) - Measures the overall volatility of a given
market, time period.