Go to EquityTrader Chart section.
1: Selected Symbol's Performance
2: Selected Symbol
3: Selected Symbol's Potential
4: Symbol's Parent Performance
5: Symbol's Parent Symbol
6: Symbol's Parent Potential
7: Color Selector for Multiple Symbols
8: Print Chart
9: Help Menu
10: Structure Tree
11: Ratings Analysis Menu
12: Indicators Menu
13: Chart Options Menu
15: Plot Button
16: Bollinger Bands Fill On/Off Switch
17: Range Shortcut Buttons
18: Signals On/Off Switch
19: Hips/Lops Count Switch
20: Hips/Lops On/Off Switch
21: News On/Off Switch
22: Percentage Change of Current Chart Range
23: Absolute Change of Current Chart Range
24: Update Button for Redrawing the Chart to New Selected Range
25: Manual End Date Input Field
26: Manual Start Date Input Field
27: Trendlines Menu
28: Price Chart
29: Current Horizontal Tracker Value
30: Performance History Bar
31: Negative Powershift
32: News Box
33: Potential History Bar
34: Positive Powershift
35: Indicator Chart
36: Hip(High Point)
37: Lop(Low Point)
38: Mouse Pointer Cross Hair
39: History Selected Range Window
40: History Bar
41: Quote Line Corresponding to Cross Hair Location
42: Price Chart Cross Hair Indicator Data
43: Bollinger Bands Fill
44: Single Bollinger Bar
45: Lower Bollinger Band Indicator Line
46: Symbol Input Field
EquityTrader's Advanced Charts are powered by Flash technology and are fully dynamic. All the Classic Chart features remain plus many more including zooming in and out, chart drag in time, re-ordering using drag and drop, history charts, customizable TrendLines, automated Expert Analyzer, etc...
The charts span a longer data range which makes zooming in and out and moving the chart window in time possible. In other words, the initial snapshot is only a fraction of the total data loaded. You can change the range without having to refresh or request new data. This also makes possible the use of a history window, which shows where the current snapshot is with respect to the total data loaded. You can resize the current chart snapshot by dragging the left and right borders of the history window and if you drag that window the snapshot will be updated to reflect those changes.
The latest Adobe Flash Player is required for our Advanced Charts. Most browsers have this plugin already installed. If not, download for free from the Adobe website.
To plot an Advanced Chart, select a symbol and click the Plot button and the chart reloads displaying the chart with the selected options. You may adjust the chart options and indicator selection by clicking corresponding option tab at the top of the chart.
The chart data is streamed automatically. You may rearrange the position of the charts displayed by dragging and dropping the different charts into the positions you prefer.
Our charts merge technical analysis with news from news publishers such as Wall Street Journal, MarketWatch.com, TheStreet.com, CNBC, Forbes, Associated Press, Reuters and others. You can monitor equity charts and the latest news relating to a specific symbol as it occurs.
One new feature for Professional subscribers is BBScript. BBScript is a web based programming language for Technical Analysis. A BBScript editor and interpreter have been integrated with our advanced charts. Using the editor, a script can be entered and executed to create and display programmable indicators that have the same interactivity and functionality as our other advanced charts built in indicators. Using BBScript you can easily create nearly any indicator you can imagine and test your ideas with our new integrated Backtester. The Backtester allows you to build, test and automate your own trading strategies with the help of trade reports, equity curves, and many other tools. Learn more about it.
Another new exciting feature is the Bollinger Band® Expert. This is an artificial intelligence system that analyzes a stock or fund and prepares a report that may be read or listened to. Learn more about it.
Advanced Chart Settings
The first line of the price chart contains a list of shortcut range links. Simply click on the "9m" link to display the last 9 months of data.
The second line contains input fields for the user to adjust the start and end date manually for the currently displayed range. Press the Enter button of the "Update" hyperlink to reload the selected range. The absolute price change as well as the percentage price change of the entire displayed range will be shown.
It also contains four control switches in this line:
The next line contains the quote for the currently selected point in time. It reflects the data for the point on the chart where the mouse is hovering. A cross hair will be displayed to mark that point on the chart. On the right side of the price chart, the interpolated value reflecting the horizontal tracker level of the mouse location will be displayed.
- News: News references are placed in the corresponding date of publishing as flags over quote bars and are labeled alphabetically. They can be turned on and off. Rolling over a label will pop up the title and description of that news article. To open the article, click on the corresponding label.
- H/L:A switch to show Hips and Lops. The number inside the parenthesis is the "order" of the HIPs and LOPs; it determines the number of days on each side of the HIP or LOP that are counted. Click the number to choose between 1,2 and 3
- Signals:A switch to show
PoswerShifts and Pivots.
- BB Fill: A switch to add a color fill between the upper and lower Bollinger Bands.
It can be turned on and off and is only available for single symbol plots.
- TrendLines:A switch to turn on/off Auto Trendlines.
The last 2 lines in the price chart header contain indicator quote for the currently selected point in time. This includes Bollinger Bands, moving averages and stops.
Main Chart Menu
The main chart menu contains the following buttons and controllers:
Color Selector, Symbol Input Field, Plot Button,Random Symbol Plot Button, Navigator, Expert, Chart, Indicators, BBScript Editor,
and the Print Button.
The More Option launches the Ratings Analysis, Structure Tree and Help Menu.
A detailed explanation for each is presented below.
Chart Options Tab:
- Bar Length: Daily, weekly & monthly. The default setting is for a chart of daily closing prices. By selecting from the other options you will get a chart with closing weekly prices or closing monthly prices.
- Chart Type: Bollinger Bars, line, candlesticks, traditional bars (accessible only by ET Pro subscribers & disabled for indices)
- Overlay1: Choice of Bollinger Bands or moving averages (accessible only by ET Pro subscribers & disabled for indices)
Bollinger Bands ®, Bollinger Envelopes ™, Simple Moving Average, Exponential Moving Average and none.
- Overlay2: Choice of up to 3 simple or exponential moving averages. (accessible only by ET Pro subscribers & disabled for indices)
- Price Magnet ™: Check and enter threshold to plot Price Magnet™
- Scale: Linear or logarithmic scale (single input symbols only & disabled for indices)
- Chart Width: There are three different chart sizes - small, medium, and large - that can be displayed. This is helpful if you want to see more details or are viewing the charts on a smaller screen so that you don't have to scroll horizontally to see the entire chart
- Zig Zag: Use Zig Zag to eliminate short-term "noise"
- Plot: Click the Plot button after new chart settings
Color Selector Button:
This button will pop up the color menu for multiple symbol plots so you can select the colors for each symbol series line on the chart. It will populate the menu with all the symbols currently in the symbol input field.
This button is only enabled when more than one symbol is entered in the symbol input field. Otherwise the button is disabled.
Symbol Input Field:
Enter the symbol to plot. A symbol lookup assistant is displayed to match with the name or symbol of the characters that are entered. You can plot multiple symbols by separating the symbols with a comma, semicolon or space. You can enter up to 10 different symbols for plotting. For single symbol plots, the selected symbol and its parent symbol, if available, can always be seen in the ratings table on top of the chart.
Group Structure Navigator:
A feature unique to EquityTrader is an innovative Navigator that allows you to visit a stock's parent industry group (click on top navigator arrow), or to visit the other securities in the same industry group (click on the right navigator arrow to go to the stocks with the next strongest rating in its industry group. Click on the left navigator arrow to go to the next weakest stock). When viewing the chart of an industry group, the Navigator allows you to review individual stocks in the group by clicking on the bottom navigator arrow. The center circle will plot the current selected symbol.
This feature is disabled for indices and multiple symbols input.
The navigator arrows navigate the GroupPower structure.
For a stock its group is its parent and the other stocks in its group are its siblings.
For a group its sector is its parent and the other groups in its sector are its siblings.
For a sector its market is its parent and the other sectors in its market are its siblings.
The stronger and weaker siblings arrows take you to the next strongest or next weakest issue in the group/sector/market based on our Potential ratings.
The children bottom arrow takes you to a chart of the strongest rated child of the market, a sector or a group.
Bollinger Band® Expert Analysis:
The Bollinger Band® Expert is an artificial intelligence system that analyzes a stock or fund and prepares a report that may be read or listened to.
There are two versions, one for general users and one for Professional subscribers.
The general report covers the condition of the stock, its relation to the Bollinger Bands and certain key averages and indicators.
The Squeeze, accumulation / distribution and EquityTrader rankings are also considered.
The subscriber's report adds trading information, buys and sells for various Bollinger Band systems including the Ice Breaker, W Bottoms and Squeeze breakouts.
Our versions of the Alphier signals and Pivots/PowerShifts are also reported along with changes in rankings.
The idea is the same regardless of the version, to provide you with a thumbnail portrait of the technical status of the stock or fund in a short, easy to digest, format.
To run the Expert Analysis, click the "Expert" button highlighted above in the chart main menu.
Once the Expert Button is clicked a menu will pop up with the following options: Audio, Text and Cancel.
The "Audio" option will analyze the chart and play an audio version of the report. This will allow you to continue using the chart application without any interruptions or visual obstructions.
The "Text" option will output the expert text report in a pop up window as shown below. The "Cancel" option cancels the selection and closes the menu.
This tab opens the BBScript editor. For more on BBScript, refer to the BBScript tutorial section.
The last button in the main chart options menu prints the currently displayed chart without the top and side menus.
EquityTrader charts offer customizable TrendLines that are created, edited and deleted manually by users with mouse interaction. There is also the option of automatically generating trend lines such as channels in up and down trends. If you select to show them, these trend lines are generated automatically without user interaction and cannot be edited. They use a specific algorithm to generate them. You always have the option to hide or show them on the chart using a settings switch similar to signals, BB fill or hip/lops switch.
This powerful feature brings interactive technical analysis tools to our Advanced Charts. TrendLines can be created and customized to suit your needs and preferences. The location, range and form of each TrendLine are determined interactively with your mouse on the chart.
To create TrendLines all you have to do is click the mouse pointer on the chart in "create mode". You can select between several popular varieties of TrendLines and place them in the desired locations on the chart, choosing the starting and ending coordinates with your mouse.
Usually TrendLines are anchored to significant points. Thus, the anchoring points can be snapped to significant points of interest such as a high, low, close, open, moving average, upper band, lower band, etc. on the price chart. When the mouse is positioned close to a significant point, the anchor point will snap to it.
You can switch to "edit mode" by clicking the Edit Mode button to re-size or re-anchor your TrendLines by dragging the anchor points. In Edit Mode you can drag the body of the TrendLine to relocate it on the chart or delete it. In addition, you can edit any parameters specific to a TrendLine by double clicking it.
When you switch back to "chart mode" by clicking the Chart Mode button the TrendLines will be remembered as you go back and forth in the history timeline.
In "edit and create mode", the news menu, price-chart dragging in time, as well as price-chart dragging for re-ordering are disabled. However, dragging the history window will still allow you to adjust the time window. In chart mode, the news can be re-enabled and the news boxes are placed on the top chart layer with the TrendLines on the layer beneath.
The TrendLine menu is located directly below the main chart menu and allows for creating different types of TrendLines, editing them and switching back to chart mode. There are six buttons to control TrendLine modes: The following six buttons switch the chart to TrendLine create mode:
- Closed Start, Closed End: Using mouse drag and drop action, you can draw a TrendLine between two fixed anchor points.
- Open Start, Closed End: Using mouse drag and drop action, you can draw a TrendLine originating from the right anchor point and extended towards negative infinity from the left anchor point.
- Closed Start, Open End: Using mouse drag and drop action, the user can draw a trend line fixed at the left side anchor point but continues towards positive infinite at the right side anchor point.
- Open Start, Open End: Using mouse drag and drop action, you can draw a TrendLine that is extrapolated to negative infinity from the left side anchor point and positive infinity from the right side anchor point.
- Growth Line: Allows for the construction of the growth TrendLine. When selected, it pops up the growth line menu which allows for 2 input parameters: The open end check box and the annual rate value at which the line grows per year. If the former parameter is checked, the line will continue to grow in time beyond the right side anchor point. The annual rate is a number between +10 and -1. Enter 0.15 for 15% annual rate. The line is then drawn like the previous lines via drag and drop mouse actions.
- Fibonacci Support/Resistance Multi-line: Allows for the construction of multiple support/resistance lines initially set at Fibonacci level ratios or ratios of your own choice. When selected, it pops up the multi-line menu which allows for several input parameters, the open end check box and up to nine ratio levels between -10 and +10. If the former parameter is checked, the lines will extend horizontally in time beyond the right side anchor point. This grid line is drawn via drag and drop mouse actions.
Users can delete TrendLines in create mode by pressing the Delete keyboard button, which will delete the last drawn TrendLine every time it is pressed. The remaining two buttons are the edit and chart mode:
- Edit Mode Button: This button switches the chart to TrendLine edit mode. You can drag any anchor point on any TrendLine to resize it. You can also drag the whole TrendLine and reposition it on the chart by grabbing its body. In this mode TrendLines can be deleted by clicking on any desired object, which highlights it in red, and pressing the Delete keyboard button. Double clicking a multi-line grid or growth line will display its respective properties menu for editing its parameters. After submission, TrendLines will update accordingly to the newly updated parameters.
- Chart Mode Button: This button returns to normal chart mode. All previously drawn TrendLines remain visible on the screen, the news mode is enabled and on-chart time drag is enabled.
Historical Potential Bar:
In between the price and indicator charts is a colored bar that depicts the history of the Potential rating. Just look under each price bar and note the color of the history. If the history is all green there the rating was a 1, green/yellow = 2, all yellow = 3, yellow/red = 4 and all red = 5.
Historical Performance Bar:
On the top edge of the price chart is a colored bar that depicts the history of the Performance rating. Just look above each price bar and note the color of the history. If the history is all green there the rating was a 1, green/yellow = 2, all yellow = 3, yellow/red = 4 and all red = 5.
Indicators Options Tab:
The indicator popup menu offers a wide range of indicators to help you interpret the price chart. For Professional subscribers, all indicators are enabled, fully customizable and accessible. For other users, only the Normalized Volume, Momentum, Money Flow Index, Comparative Relative Strength, Accumulation Distribution and Intraday Intensity indicators are enabled with fixed parameters.
Click here to see a list describes the different categories of indicators and their underlying indicators (all available to Professional subscribers).
Ratings Analysis Tab:
- The Performance Rating is the risk-adjusted return ranking of a selected symbol. We examine the past two years of data and calculate the annualized return. Then we measure the selected symbol's susceptibility to downside market action and penalize the return if it exhibits greater than normal downside volatility. For example, a selected symbol that rose in a straight line at a 15% annualized rate would rate higher than one that rose at a 15% rate but covered a great deal of ground doing so.
- Positive Alpha: The unique return of a stock in a positive environment.
- Positive Beta: The sensitivity of a stock to the market in a positive environment.
- Negative Alpha: The unique return of a stock in a negative environment.
- Negative Beta: The sensitivity of a stock to the market in a negative environment.
- Risk Adjusted Historical Return: Annualized historical return divided by negative beta. This is the number the Performance rating is based on.
- Two-Year Weighted Return. The annualized rate of gain for a stock, measured over the prior two years.
The parent group, sector and market ratings (performance and potential) are also included.
- The Potential Rating is the heart of the system. It is our assessment of the current potential for the selected symbol. We employ a fuzzy-logic engine to evaluate 54 rules to determine the potential. Both fundamental and technical factors are considered in arriving at our Potential Rating.
- 50-day Moving Average: A 50-day average of the closing price, recalculated each day to reflect the most recent 50 days.
- Point and Figure Swing: + or - whether price is rising or falling using the classic point and figure technique (using our own box-size algorithm) which considers price action without reference to time.
- Persistency of Money Flow: The percent of days in the prior six months on which money flow was positive.
- P/E Ratio: Price divided by the past year's earnings.
- Historically Normalized P/E Ratio: Where we are in relation to the P/Es that have prevailed over the prior two years. 100 means that the p/e is currently the highest of the past two years, 0 the lowest.
- Normalized Float: The percentile rank of this stock in relation to all stocks in our universe. 100 being the biggest, 0 the smallest.
Tree Structure Tab:
A graphical tree representation of a symbol's group structure. The top symbol is the root and all the symbols that branch out are children of that symbol. It shows the current selected symbol with its node highlighted in dark blue and all its children, its siblings, as well as its ancestry which includes: parent, grandparent and great grandparent.
You can select any symbol by clicking its node. Each node displays the symbol, name and potential rating of that symbol.
You can sort the way siblings are displayed by their symbol, potential or performance rating. You can also reverse the order of that sequence.
Hover over the symbol node and a summary of that symbol is displayed. This includes name, number of children in parenthesis for groups, sectors and market types, potential and performance ratings numbers. For SECTORS, the number in parenthesis next to the name is the number of GROUPS within the sector. For GROUPS, the number in parenthesis next to the name is the number of STOCKS within the group.
This tab provides instructions, explanations and tutorials on how to use the main features of the EquityTrader chart application.
Detailed Explanations of Overlays and Indicators
Prices on the chart are represented with bars. Each bar consists of the open, high, low and close for the period. The green portion indicates that the close was greater than the open, and the red portion indicates that the close was less than the open. Blue portions are the tick's range.
Bar (Traditional): All bars black.
Bar (Interday Color): Color of bars based on current tick's change. If current tick's last price is greater than previous tick's close, bar is green.
Bar (Intraday Color): Color of bars based on intraday action. If last is greater than open, bar is green. If last is less than open, bar is red.
H: High point (current high greater than prior 1, 2 or 3 highs and succeeding 1, 2 or 3 highs)
L:Low point (current low less than prior 1, 2 or 3 lows and succeeding 1, 2 or 3 lows)
You can choose between 1, 2 or 3 samples to look back and forth when testing for hips/lops.
HIPs and LOPs are HIgh Points and LOw Points. HIPs and LOPs are often called pivots, but as we use that term already we'll stick with HIPs and LOPs.
A HIP is a bar with a high that is higher than the bar before it or the bar after it. On the charts, a HIP is represented by a "H" above the day it occurred.
A LOP is a bar with a low that is lower than the bar before it or the bar after it. On the charts, a LOP is represented by a "L" below the day it occurred.
HIPs and LOPs are one of the oldest and most basic technical tools. Careful study of these crucial markers will reward you with a better understanding of the basic structure of price and market dynamics.
The origin of the concept is most likely Henry Wheeler Chase's ringed highs and lows from the 1930s. In that era traders recorded prices on columnar pads for analysis and circled a high that was higher than the high above it or below it, or a low that was lower than the low above it or below it.
What it does:
In an upswing HIPs and LOPs will occur in an orderly progression higher and vice versa. In a consolidation they will form no discernible pattern.
identifying short-term resistance and support and can be used as markers in a swing trading approach. They can also be used to identify stop levels and as trend identifiers in the wake of a Squeeze. They are also useful in pattern recognition. For example, most W bottom patterns will consist of a LOP, a HIP and then a LOP.
The number in the drop-down list is known as the "order" of the HIPs and LOPs; it determines the number of days on each side of the HIP or LOP that are counted. For example, if you choose 2, only HIPs with two or more lower highs before and after will be marked. Please note that HIPs and LOPs are forward looking and need a number of periods equal to their order before they can be plotted.
The Bollinger Bands are calculated by default with 20 periods of data and are plotted two standard deviations above and below a simple moving average. If current tick's last price is less than previous tick's close, bar is red.
Depicted by red (negative) or green (positive) triangles. These occur when a security becomes severely overbought/oversold and then demonstrates enough weakness/strength to potentially break the trend.
Depicted by a + or a - sign. A minor corollary of PowerShifts often triggered at the end of the first bounce/decline after an important top or bottom. They do not have to be preceded by a PowerShift, but often are.
- Bollinger Bands ®Bollinger Bands are adaptive trading bands that answer the question "Are prices high or low?" on a relative basis. The adaptive mechanism is volatility. The middle band is a simple moving average with a default period of 20. The upper and lower bands are spread above and below the middle band by a multiple of standard deviation, with the default multiplier being two.
MiddleBB = Average(close, 20)
UpperBB = MiddleBB + 2.0 * StandardDeviation(close, 20)
LowerBB = MiddleBB - 2.0 * StandardDeviation(close, 20)
If you change the calculation period and wish to have the bands contain a consistent amount of data consider using the following multipliers: 10 periods, 1.9; 50 periods, 2.1.
There are many uses for Bollinger Bands, amongst the most popular are pattern recognition and discrete buy and sell setups in combination with other indicators. See the book "Bollinger on Bollinger Bands" for a full explanation.
- Bollinger Envelopes ™Bollinger Envelopes are a variation on Bollinger Bands that focus on the extremes of price action. While Bollinger Bands are centered on a moving average, usually of closing prices, Bollinger Envelopes are anchored by the highs and the lows. The upper Bollinger Envelope is constructed from a moving average of the highs and the standard deviation of the highs; the lower Bollinger Envelope is constructed from a moving average of the lows and the standard deviation of the lows. The formulas are:
UpperBE = Average(high, 20) + 1.5 * StandardDeviation(high, 20)
LowerBE = Average(low, 20) - 1.5 * StandardDeviation(low, 20)
Since there is no middle band in the calculation, we imply one by taking the mean of the upper and lower envelopes.
MiddleBE = (UpperBE + LowerBE) / 2
Bollinger Envelopes are particularly useful where the trading session is not well defined, in periods of extreme market action and are used in the Ice Breaker trading system.
- Simple Moving AverageThe simple moving average is perhaps the most elemental technical analysis tool. It is the sum of the data for a given number of data points divided by the number of the data points. In statistics it is known as the arithmetic mean. The word "moving" means that as each new data point becomes available the calculation window advances creating a new average.
Simple Moving Average = sum(close, n) / n
Often used to generate buy and sell signals when it is crossed, it is perhaps better used as a measure of trend direction when the period (n) is set to describe the intermediate-term trend. For the stock market using daily data, we find 20 periods to be a good starting default value for n.
- Exponential Moving AverageThe simple moving average can be problematic due to its sensitivity to old data points leaving the calculation window. This is especially true for short-term averages. For example, when using a 10-period average if there was a large change in the data ten periods ago, the value of the average will change the next period even if price remains unchanged. A popular smoothing technique that avoids this problem is the exponential average. The calculation uses a portion of today's data and a portion of yesterday's average to arrive at today's average. This has the effect of increasing sensitivity to the most recent data and reducing sensitivity to older data.
The weight to use is found via the formula exp = 2 / (n + 1), where n is the number of periods in a comparable simple moving average. For 10 periods 2 / (10 + 1) = 0.18.
Exponential Moving Average = exp * close + (1 - exp) * prior average
John Bollinger's Price Magnet ™:
Early market technicians often constructed artificial or synthetic prices as trading tools. There were three main approaches: synthetics designed to reflect where the security "should have been" trading, where it would trade in the future, or as indications of support and resistance.
One example of synthetic prices that is still in use are the "floor trader's numbers":
See Marc Fisher on ACD and Pivots in his book "Logical Trader" for more on current usage. There are lots of other examples in the history of technical analysis.
- Mid Point = (High + Low + Close) / 3 (the typical price)
- Upper Pivot = 2 * Mid Point - Low
- Lower Pivot = 2 * Mid Point - High
"In doing some work on zero-lag moving averages I was reminded of the calculations for synthetic prices. I saw similar ideas reflected in Jim Alphier's work, so I thought I'd give the idea a spin. I didn't want a simple bracket, Bollinger Bands already served well in that role. What I wanted was a sense of the most probable direction of prices. After a lot of staring at the ceiling, Price Magnets were born. The idea is simple and robust; the calculated prices act as 'magnets', 'pulling' prices higher or lower. You can think of them as a natural bias or tendency based on recent market action. The point plotted above or below today's bar is a forecast for tomorrow's direction. The threshold eliminates the Price Magnets plotted close to the current period's close. Set this to 0.0 to see all of the Price Magnets or to a larger value to see fewer Price Magnets; 2 or 4 are good choices for many stocks. Enjoy." JB
The Zig Zag is a filtered price plot that eliminates short-term "noise". A Zig Zag plot connects swings of magnitudes greater than the user-selected percent threshold. If 10% is selected then the Zig Zag connects the highest highs and lowest lows that are separated by more than 10%. Zig Zag plots represent idealized price paths and are useful for clarifying price patterns and for trend identification. For example, if there is a high at 100, a 10% Zig Zag will ignore any price action until price falls to 90. If a a new high is made it will re-anchor to that high and wait for a 10% drop from the new anchor. After a 10% drop it will ignore anything short of a 10% rally or a new low. Our version is based on Arthur Merrill's work published in "Filtered Waves".
Bollinger Band ® Indicators
Volume Indicators - Standard
%b, Percent b™: %b (Percent b) was one of the first two indicators derived from Bollinger Bands. It employs a variation on the formula for Stochastics. %b depicts the location of the most recent close within the Bollinger Bands. At 1.0, the close is at the upper band, at 0.0 the close is at the lower band and at 0.5 the close is at the middle band. A %b reading of 1.1 means that you are above the upper band by 10% of the width of the bands.
-0.2 means that you are below the lower band by 20% of the width of the bands. To make analysis easier, we give you the opportunity to plot two smoothings of %b: %b1 and %b2. %b1 is a three period smoothing of %b and %b2 is a three period smoothing of %b1. These are similar to the smoothings used for Stochastics except that we use exponential averages.
%b is a useful tool for identifying divergences, diagnosing tops and bottoms, and pattern recognition. %b is also used extensively in trading system construction. It is perfect for detecting when a new high or low is a new absolute extreme, but not a new extreme relative to the Bollinger Bands.
BandWidth™: BandWidth was one of the first two indicators derived from Bollinger Bands. BandWidth depicts how wide the Bollinger Bands are as a function of the middle band. The formula is (upperBB - lowerBB) / middleBB.
The most popular use of BandWidth is to identify The Squeeze, which is a 125-period low for the indicator, and is very helpful in diagnosing the beginning of trends. The opposite of The Squeeze, The Bulge, is useful in diagnosing the end of trends.
In addition to the BandWidth line, we draw two reference lines to give a sense of where the current BandWidth stands in relation to history. The upper line represents the highest BandWidth in the past 125 periods (The Bulge when touched). The lower line represents the lowest BandWidth in the past 125 periods (The Squeeze when touched).
Finally there is an option to plot a three period smoothing of BandWidth to help identify and clarify turning points.
BBImpulse™: BBImpulse is derived from %b. Its value is the periodic change of %b, so if %b was 0.45 this period and 0.20 last period the present value of BBImpulse is 0.25. We present two reference levels on the chart, an alert level and an impulse level. Generally the market moves in the direction of the latest alerts and/or impulses except towards the end of a move where one can take advantage of exhaustion/reversal signals from this indicator. Ian Woodward employs BBImpulse for his Kahuna signals using key levels of 0.24 and 0.40. (See the description for the indicator Stochastic Impulse.)
BandWidth Delta™: BandWidth Delta depicts the momentum of BandWidth and is useful in diagnosing the peaks and troughs in BandWidth as markers of potential trend changes. This indicator is especially useful when trying to analyze the potential for consolidations or reversals after large moves. You can think of BandWidth Delta as a magnifying glass for BandWidth.
Percent Bandwidth™: %BandWidth (Percent BandWidth) uses the formula for Stochastics to normalize BandWidth as a function of its n-day look-back period. 125-periods is the default, but you may choose your own look-back period. 1.0 equals the highest BandWidth in the past n periods, while 0.0 equals the lowest BandWidth in the past n periods. If you use 125 as the look-back period, then 0.0 = The Squeeze and 1.0 = The Bulge. The interpretations are similar to BandWidth, but some find the normalized, or closed presentation more intuitive. %BandWidth, along with %b, are two primary building blocks for Bollinger Band trading systems.
BBIndex™: BBIndex is a classic overbought/oversold indicator similar in application to the Commodity Channel Index (CCI). Indeed, it can be seen as a 'modern' version of CCI. Match the period to the trend that you are trading, 20 is the default, and use plus/minus 2.0 as the basic overbought/oversold reference levels with plus/minus 3.0 as extreme levels. BBIndex is also a superb divergence tool, and as such is helpful in identifying the beginnings and ends of trends.
BBMomentum™: BBMomentum measures price moves as a function of the width of the Bollinger Bands. BBMomentum's value is the n-period change in price divided by the upper band minus the lower band. A good starting value for n is half the length of the Bollinger Band calculation. So, if you are using 20-period Bollinger Bands, try 10 periods for BBMomentum.
BBMomentum normalizes momentum using the width of the Bollinger Bands. In volatile times it takes a large change in price to create the same BBMomentum reading than a much smaller change would create in calm times. BBMomentum can be thought of as a form of volatility-normalized momentum and can be used the way any other momentum indicator is used.
BBTrend™: BBTrend takes advantage of the ways in which Bollinger Bands of different lengths interact to determine whether the market is trending or not. Amongst commonly used technical indicators, Average Directional Movement Index (ADX) and Choppiness Index serve similar purposes.
You can select the two time periods, short and long. 20 and 50 are the defaults, but 10 and 30 or 40 may be more attractive for shorter-term traders.
Unlike the traditional trend indicators, BBTrend combines directional information with the trend information. Readings below zero are indicative of negative trends and readings above zero indicate positive trends. The farther the reading away from zero the stronger the trend.
BBAccumulation™: BBAccumulation combines three volume indicators, Accumulation-Distribution (AD), Intraday Intensity (II) and On Balance Volume (OBV) in a Bollinger Band framework. First the indicators are normalized with %b, then they are combined. OBV examines the periodic change, II examines the closing location in the periodic range and AD examines the relationship between the open and close to the periodic range. When normalized so they are comparable, taken together they give an excellent picture of the supply demand characteristics of a security.
BBPersist™: BBPersist is simple, elegant counting application that counts highs above the upper Bollinger Band and lows below the lower Bollinger Band and nets them to create an indicator. BBPersist displays the balance between strength and weakness over time and is very helpful in diagnosing that difficult analytical problem, the walk up or down the bands.
In general volume indicators are meant to clarify the supply demand relationships in the market. Two modes of analysis are common, trend and divergence. For the standard versions, trend analysis is usually the first step with warnings being generated as divergences between price and indicator action develop.
Volume Indicators - Oscillators
Volume: This is a simple bar plot of the transaction volume recorded for each period plotted on the chart above. A moving average is included to help identify high and low volume periods. You may specify the number of periods in the average; 50 is the default.
Normalized Volume: Normalized volume is volume divided by an average. This plot has two main uses; it allows you to judge whether volume is high or low on a relative basis and it allows the comparison of volume levels from issue to issue. You may specify the number of periods in the average; 50 is the default. The horizontal line at 100 is where volume for that period equals its n-period average. It may be helpful to think of volume as high when it is above 125 and low when it is below 80.
On Balance Volume: On-Balance Volume (OBV) is one of the oldest and best known of all the volume indicators. OBV was popularized by Joe Granville and is a good trend indicator. OBV adds volume to a running sum when price advances and subtracts volume from the running sum when price declines. It is meant to model the basic forces of supply and demand that drive the market. An exponential smoothing is available.
Price-Volume Trend: Price-Volume Trend (PVT) is David Markstein's variation on On-Balance Volume (OBV) in which the percentage changes from period to period are used to parse volume. An exponential smoothing is available.
Accumulation-Distribution: Accumulation-Distribution (AD) was created by Larry Williams to track buying pressure (accumulation) and selling pressure (distribution). AD compares the range between the open and close to the range of the day. It is a concept very closely related to Japanese candlestick charts. An exponential smoothing is available.
Intraday Intensity: Intraday Intensity (II) was developed by the economist David Bostian. This indicator uses the position of the close in relation to the high and low to parse volume. It is meant to track the activities of institutional traders; large blocks move the market in the direction of their order flow -- increasingly so toward the close. An exponential smoothing is available. (In some programs this indicator is known as Money Flow.)
Wynia Volume Profile: This indicator was developed by Fred Wynia and uses a zig zag function to filter price and then compares the volume in up swings versus down swings. The indicator value is the ratio of the volume in the up swings to the volume in the down swings or vice versa. This indicator is useful for detecting rallies or declines that haven't sufficient backing to continue.
Sponsored Volume: Sponsored Volume (SV) is a version of Intraday Intensity (II) from Jim Alphier that uses true highs and lows instead of periodic highs and lows in its calculation. If you trade something that has frequent and/or large gaps, you may want to use this version of II. An exponential smoothing is available.
Interday Accumulation: Interday Accumulation (IA) is a version of Accumulation-Distribution (AD) that uses true highs and lows instead of periodic highs and lows in its calculation. If you trade something that has frequent and/or large gaps, you may want to use this version of AD. An exponential smoothing is available.
Converting volume indicators into oscillator form increases the focus on the short-term situation rather than the trend analysis that is more common with the standard versions. Divergences are more important here, as well as alerts generated when the upper Bollinger Band ® is tagged and the indicator is below zero or vice versa. For many of these indicators the simple guideline of bullish above zero and bearish below zero can be quite useful.
Trending versus Trading Range
Accumulation-Distribution %: Accumulation-Distribution % (AD%) is the closed form of Accumulation-Distribution(AD). AD% is calculated by taking the n-period sum of AD and dividing by the n-period sum of volume; the result is a normalized AD that is now comparable from issue to issue. 20 is the default period.
Intraday Intensity %: Intraday Intensity % (II%) is the closed form of Intraday Intensity (II). II% is calculated by taking the n-period sum of II and dividing by the n-period sum of volume; the result is a normalized II that is now comparable from issue to issue. 21 is the default period. (In some programs this indicator is known as Money Flow or Money Flow %.)
Sponsored Volume %: Sponsored Volume % (SV%) is the closed form of Sponsored Volume (SV). SV% is calculated by taking the n-period sum of SV and dividing by the n- period sum of volume; the result is a normalized SV that is now comparable from issue to issue. 21 is the default period.
Interday Accumulation %: Interday Accumulation % (IA%) is the closed form of Interday Accumulation (IA). IA% is calculated by taking the n- period sum of IA and dividing by the n-period sum of volume; the result is a normalized IA that is comparable from issue to issue. 20 is the default period.
Money Flow Index (MFI): Money Flow Index (MFI) compares volume on up periods to volume on down periods in a manner similar to Relative Strength Index. The typical price, (high + low + close) / 3, is used to separate up periods from down. The periods are averaged and a ratio of up to down is taken. You may specify the number of periods used in the calculation. 14 is the default period.
Volume-Weighted MACD: VWMACD was created by Buff Domeier and uses the same calculation as MACD, but volume-weighted averages are used instead of exponential averages. The periods used are 12, 26, 9 (signal). Treat exactly as you would MACD.
Volume Oscillator: This indicator considers nothing but volume. It is the difference between a short moving average of volume and a longer one. It is used to confirm volume patterns in relation to price patterns. For instance, it can be used to assess whether there is sufficient volume to support a rally or a decline. You may specify the number of periods used in the averages; 10 and 20 are the defaults.
Volume Price Confirmation Indicator:
VPCI is Buff Dormeier's effort to codify the old technical analysis concept of price-volume confirmation in a technical indicator. VPCI won the Dow Award in 2007. You can read the paper complete with examples of usage here. http://tinyurl.com/8clzjhq
There are four price/volume confirmation possibilities that this indicator encompasses:
Rising price and volume, strong demand, bullish.
Falling price and volume, weak supply, bullish.
Rising price and falling volume, weak demand, bearish.
Falling price and rising volume, strong supply, bearish.
Directional Movement Index: Created by Wells Wilder, these indicators parse the price structure into the positive and negative components, DMI+ and DMI-, which many use for buy and sell signals. However, the most interesting feature is a derivative of the DMI indices called Average Directional Movement Index, ADX. ADX indicates whether the data is trending or not. Values above 18 indicate trending markets while values below 18 are associated with trading-range markets. The direction of the line is also important, rising equals increasing trend strength and falling, decreasing. You may select the look-back period. 14- and 18-day calculation periods are quite common.
Vertical Horizontal Filter: Tushar Chande's trend analysis tool compares the distance traveled within a range to the range itself. In a perfectly trending market the distance traveled and the range will be the same. The formula is range / distance. As it takes ever more travel to cover the range, the value of VHF falls. A 14-day period is the default.
Choppiness Index: Choppiness Index, developed by E.W. Dreiss, uses chaos principles to measure "choppiness" or directionality of the market, whether prices are trending, or if we are in a consolidation period. The core idea is to compare the combined length of all the bars in a range (the ink) with the periodic range. Low values (below 38) indicate trending markets (up or down) and high values (above 62) indicate significant consolidations in price.
Aroon Indicator: Aroon was developed by Tushar Chande and is designed to identify direction and magnitude of a trend. Aroon consists of 3 lines: Aroon Up, line above 70 indicates an up trend; Aroon Down, line above 70 indicates a down trend and Aroon Oscillator, line near zero indicates a consolidation phase (no trend). The idea is to count the number of days since the high of the range (this is the up line) and the low of the range (this is the down line), another simple concept that can produce surprisingly deep market insight.
The Range Indicator: Published by Jack L. Weinberg in the June 1995 issue of Technical Analysis of Stocks & Commodities, The Range Indicator (TRI) compares high minus low (the range) with close versus close (the change). Look for trends to start from low levels of TRI when range and change are in gear and for trends to end from high levels of TRI when range and change are out of gear.
Trend Identification - Moving Average
Deviation from Average: Deviation from Average is the most basic overbought/oversold tool. It expresses how far prices have deviated from the mean as measured by an n-period average. The actual value is the percent deviation from the average. A 50-period average is the default, though 10- and 20-period averages are commonly used as well.
Commodity Channel Index: CCI is an overbought/oversold tool that uses volatility as its gauge and an old scaling convention derived from its commodity-futures-market heritage. 20 periods is the default. See BBIndex for a modern version of this indicator.
Momentum - Simple
Departure Chart: The Departure Chart is one of the oldest technical studies. It measures the difference between two moving averages of price, one short and one long. Its primary use is as a trend identification tool, but it may be employed to identify overbought and oversold conditions as well. 10 and 20 are the default periods.
MACD: Gerald Appel created MACD, a departure chart with an additional average added that acts as a signal line. The MACD line itself is the difference between a short-period and a long-period exponential average. The signal line is a n-period exponential average of the MACD line. The default periods for the short, long and exponential average are 12, 26, and 9, respectively. MACD Histogram is the difference between the MACD line and the signal and is used as an early alert system for changes in trend.
Momentum - Up versus Down
Momentum: Momentum is the point change of price over a specified time period and may be the most elemental indicator in the technician's tool chest. Futures traders are said to prefer MTM over Rate of Change, which depicts the percent change, as it models their profit and loss better. The second period is for an exponential moving average of MTM. 12 is the default period for MTM and 10 is the default period for the smoothing, though you may want to try three.
Rate of Change: Rate of Change is the percent difference of price over a specified period. Stock traders are said to prefer ROC over Momentum as it is directly comparable from issue to issue and time to time. 12 is the default period for ROC.
Chande Momentum Oscillator: CMO is Tushar Chande's attempt to capture "pure momentum". The idea is to separately sum up and down momentum over a given period and compare them with a normalized ratio. You may specify the look-back period; 14 is the default.
Relative Momentum Index: This is Roger Altman's momentum variation on Welles Wilder's Relative Strength Index, RSI. Instead of accumulating +/- price changes, RMI accumulates +/-changes in momentum. Over 70 is considered overbought and under 30 is oversold. The first parameter is the days for calculating momentum, the default is 4. The second parameter is the time frame, the default is 14. (NOTE: RMI = RSI when time frame is the same and RMI momentum set to 1.)
Relative Strength Index: Welles Wilder's Relative Strength Index, RSI, is a classic technical-analysis tool that compares strength on up days to weakness on down days. The fixed values of 70 (overbought) and 30 (oversold) are most often used as signal levels. However, in a bullish environment 80 and 40 may be better suited and 60 and 20 are often used in bear markets. Many analysts use the swings of RSI through various levels to define bull and bear markets.
Normalized RSI: See RSI. Plotting 50-day, 2.1 standard deviation Bollinger Bands on RSI allows the analyst to dispense with fixed levels and focus on indicator action. The upper band serves the same role as RSI 70 (overbought) and the lower band serves the same role as RSI 30 (oversold). Here we go one step further and create a Normalized RSI by plotting %b of RSI using 50-day Bollinger Bands. The formula is:
Normalized RSI = (RSI - LowerBB(RSI)) / (upperBB(RSI) - lowerBB(RSI))
So now 0.0 serves as oversold and 1.0 serves as overbought.
Stochastic RSI: Stochastic RSI is the result of a marriage of two indicators, Stochastics and the Relative Strength Index. Interpretation is simpler and clearer than for RSI alone. The general rules are the same as for RSI, Stochastics or any other over-bought / over-sold index. Divergence analysis is particularity useful. Mathematically Stochastic RSI is an n-period Stochastic of an m-period RSI. The defaults for n and m are usually 14. Please see Normalized RSI for our version of this approach in which RSI is normalized with Bollinger Bands. Stochastic RSI was written by Tushar Chande.
Qstick: Qstick is a moving average of the bodies of Japanese candlesticks, the relationship between the open and the close. Qstick is negative when the closes have been less than the opens on average and positive when the closes have been greater than the opens an average. Thus it is a look at the internal trend of the price structure. 5-10 day periods are most common. Qstick is distantly related to Accumulation- Distribution.
Ultimate Oscillator: This is Larry Williams' weighted momentum oscillator. The Ultimate Oscillator is a combination of three different individual oscillators of varying time frames. This is usually the smoothest of our momentum tools. You may specify the time frames for the three underlying oscillators; 5, 10, and 20 are the defaults.
Comparative Relative Strength: Relative strength compares two price series over time by taking a ratio of one to the other. An RS line is most often used to compare the performance of a stock to the market or its industry group. A rising RS line indicates out-performance, while a falling RS line indicates under-performance. For example, IBM / SPY shows the performance of IBM versus the S&P 500 Index ETF.
Stochastics %K %D: This is George Lane's Stochastics, an indicator of the position of current price relative to the price range of the past n-periods.
%k = (last price - lowest(low, n) / (highest(high, n) - lowest(low,n)) * 100
%d = n-period sma of %k
The first input sets the look-back period for lowest low and highest high, the second input sets the length of the average(s). The fast Stochastic presents %k and an average of %k. The slow Stochastic presentation drops the raw calculation and adds a second smoothing.
Signal: %d line is generally used as the signal line.
Overbought/Oversold: Above 80 means the current price is near the top of its n-day high-low range and below 20 means it's near the bottom of the range. Values above 80 are considered overbought and values below 20 as oversold. Prices may persist at these levels, so pattern recognition is employed to identify trading opportunities.
Bullish Reversal - price is trending down, Stochastic is bottoming and turning up.
Bearish Reversal - price is trending up, Stochastic is peaking and turning down.
Stochastic Impulse: Stochastic Impulse is a BBands.com exclusive indicator. It is a variation on BBImpulse that depicts the changes in Stochastics rather than the changes in %b. Another way of saying this is that BBImpulse measures impulse strength in relation to the Bollinger Bands and Stochastic Impulse measures impulse strength in relation to range. (See BBImpulse.)
Williams %R: This is a variation on Stochastics that some prefer. %R depicts where you are in the range of the past n-days without smoothing. Note that the scale is inverted from that for Stochastics. A 10- or 20-day period is a good starting place for stocks.
Average True Range: The True Range of an issue for a given period is the high minus the low plus any gap in price that formed between sessions. It is the range as it might have been had trading continued for 24 hours. Average True Range is an n-period average of True Range. This is a basic volatility tool that is often used in trading systems, position sizing and the setting of stops such as Chandelier stops.
The late Jim Alphier passed away unexpectedly in 1990. He was a portfolio manager, market historian and a master technician that took most of his knowledge with him to the grave. Fortunately all was not lost and I was able to learn three of Jim's indicators from Fred Wynia: Expectations, Psychology and Conviction. We feel that these three are amongst his most important contributions and we are confident that these versions are reasonably true to his conceptions. (See Sponsored Volume in the volume indicators section for a rare Alphier contribution to volume analysis.)
Alphier Psychology: This is a short-term component of the Expectations curve that is more sensitive than Expectations. It is shorter-term in outlook and can be used on its own or to help anticipate changes in the Expectations curve.
The Expectations curve is a supply-demand calculation along the lines of Accumulation-Distribution or Intraday Intensity. It is executed with Jim's unique flair and there isn't really anything else in technical analysis quite like it. Use it as you would any other supply-demand tool - volume is not a factor - or follow the rules we have implemented on the chart.
Expectation Chart rules:
1. 40 and 160 delimit the oversold and overbought zones.
2. Alerts & Signals
- Red Minus signs (-) are Sell Alerts
Green Minus signs (-) are Buy Alerts
Alerts are precursors to Signals. They can act as signals for aggressive investors.
- Red Plus signs (+) are Regular Sell Signals
Green Plus signs (+) are Regular Buy Signals
- Red asterics (*) are Major Shift Sell Signals
Green asterics (*) are Major Shift Buy Signals
- Red hashtags (#) are Reversal Sell Signals Following a Major Shift Signal, the first opposite Regular Signal is ignored.
Green hashtags (#) are Reversal Buy Signals
- Red dots (.) are 200 Sell Rules (2nd consecutive Expectation above 200)
Green dots (.) are 0 Buy Rules (2nd consecutive Expectation less than 0)
Alphier Conviction: This is a classic divergence indicator, implemented as only Jim might have; it works by providing a comparison of the counts of plus and minus days versus the actual gains recorded. Classic divergence analysis is at its best here.
For Chandelier Stops indicators, refer to the Stops & Systems
Ice Breaker Trading System
For Parabolic Stops indicators, refer to the Stops & Systems
Ice Breaker Trading System:
For Ice Breaker signals, refer to the Stops & Systems