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Technical Analysis

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How to Calculate Security Price Momentum with the Rate-of-Change Method

In practice, security price momentum is really what math nit-pickers call rate of change. It compares the price today with the price x periods ago. A higher number means a faster speed — and momentum is [more…]

How to Determine a Security Price’s Percentage Rate of Change

One problem with the security price momentum indicator is that you miss a frame of reference — you don’t know whether the move is a huge change over a short period or a minor event hardly worth considering [more…]

How to Apply Momentum to Trading Decisions

In investing and stock trading, the momentum rule is simple: Buy when the trading momentum indicator crosses above the zero line and sell when it crosses below the zero line. The [more…]

How to Determine a Security Price’s Relative Strength Index

The Relative Strength Index (RSI) was devised to determine the best time to make a trading decision. You want to make that decision at the change of direction only by ensuring that the average up move [more…]

How to Use the Stochastic Oscillator to Interpret Trading Price

When looking at trading price momentum indicators, two relationships are particularly important: The high-low range over x number of days, and the relationship of the close to the high or the low over [more…]

How to Measure Trading Price Volatility

Volatility is the degree of variation of a trading price series over time. You can measure volatility in plain or fancy ways. In financial analysis, volatility usually means one thing — the standard deviation [more…]

How to Apply Bollinger Bands to Trading Price

The most popular trading price volatility measure is the Bollinger band, invented by John Bollinger. He charted a simple 20-day moving average of the closing price with a band on either side consisting [more…]

How to Set Trading Price Stops with Average True Range Bands

Instead of using the standard deviation to form the upper and lower bands for a stop, you can use a version of the average true range (ATR). To use a band for a stop, you want the band to be asymmetrical [more…]

How to Apply Patterns to Point-and-Figure Charts of Trading Prices

Patterns pop out on trading price point-and-figure charts. Some of the most common patterns include support and resistance, but also simple patterns such as double and triple tops and bottoms appear.You [more…]

How to Use Point-and-Figure Charts to Project Trading Prices after a Breakout

Point-and-figure chartists forecast trading prices after a breakout by using the box count, either vertically or horizontally. However, vertical projections work more often than horizontal projections. [more…]

Combining Trading Price Point-and-Figure Techniques with Other Indicators

The innate simplicity of trading price point-and-figure (P&F) charting is appealing, but you can add value to decision making by speeding up the buy/sell signal or seeking confirmation or lack of confirmation [more…]

How to Calculate the Positive Expectancy of a Security Technically

The first question to ask yourself is whether a security offers an opportunity to make a profit. As statisticians say, you want to have a positive expectancy [more…]

How to Use Setup Trading

Setup trading is a form of swing trading that’s very popular today. A setup is a particular configuration of trading price bars, usually with one or two other confirming conditions like a pattern or an [more…]

Using a Security Trading System

The term trading system has different meanings to different people in the realm of securities trading. Systematic trading can be as simple as a single indicator and a stop-loss rule. In fact, most folks [more…]

Why Mechanical Trading Systems Fail

Training yourself to be a fully systematic trader is hard. The virtue of a well-designed trading system is that real-time results come in as the backtest leads you to expect. The challenge of a mechanical [more…]

Find a Trading System That Works for You

You may see ads for security trading systems that promise huge returns, practically no risk, and 80-percent accuracy on trade recommendations. Never forget that if it sounds too good to be true, it’s not [more…]

How to Successfully Become a Technical Trader

You can trade technically in any number of equally valid ways. In fact, technical traders come in all stripes (and some are plaid). Whatever their styles, successful technical traders all have one thing [more…]

How to Identify the End of a Trading Chart Trend with the Moving Average Level Rule

When looking at a trading price chart, you can call the end of a trend by using the moving average level rule: an uptrend when the moving average today is less than the moving average yesterday, and a [more…]

How to Interpret the Simple Moving Average on a Trading Chart

You can calculate a moving average that you can apply to your trading chart. The average is “moving” because you’re averaging the trade information across a period. The process of calculating a moving [more…]

How to Use Multiple Moving Averages on a Trading Chart

You like a short moving average when examining a trading chart because that average responds quickly to new conditions, and you like a long moving average because it reduces errors. So why not use both [more…]

How to Create a Point-and-Figure Chart of Trading Prices

Displaying the price only when it makes a significant move is the essence of point-and-figure charting. If nothing noteworthy happened on a particular day, you put nothing on the chart. Consider the point-and-figure [more…]

How to Use a Linear Regression to Identify Market Trends

On a trading chart, you can draw a line (called the linear regression line) that goes through the center of the price series, which you can analyze to identify trends in price. Although you can’t technically [more…]

How to Draw Trading Chart Channels by Hand

A channel in a trading chart is a pair of straight-line trendlines encasing a price series. This channel consists of one line drawn along the top of a price series and another line, parallel to the first [more…]

Why Chart Securities Price Trends?

Most trading charts show that, in some time frame, securities prices tend to move in trends, and trends often persist for long periods of time. A trend [more…]

Behavioral Economics vs. Conventional Economics

Behavioral economics enriches the conventional economics toolbox by incorporating insights from psychology, neuroscience, sociology, politics, and the law. The result: more vibrant and revealing economic [more…]

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