Trading volume is often the silent companion to price trend movements, understanding it can unlock deeper insights into volume analysis, and one tool that helps traders do just that is the volume rate of change trading indicator. Think of trading volume as the engine behind the average price. When the engine revs up (high volume), the price trend moves faster and becomes stronger. The volume...
Donchian Channels, developed by Richard Donchian, are a trading indicator designed to help traders determine market volatility and identify potential entry and exit points. For systematic traders, this clarity is essential for developing consistent, rules-based strategies that reduce the emotional roller coaster often experienced in discretionary trading.Donchian Channels are made up of three...
The McClellan Oscillator is a market breadth tool that is used as a key trading indicator to analyze the overall stock market rather than individual stocks. Developed by Sherman and Marian McClellan in the 1960s, it measures market trends by evaluating the number of advancing and declining stocks. This helps traders gauge whether the market is bullish or bearish. Think of the McClellan...
The VIX (Volatility Index), often referred to as the fear index, measures the market’s expectations for volatility over the next 30 days and may be used as a powerful trading indicator. Launched by the Chicago Board Options Exchange (Cboe) in 1993, it reflects market expectations by capturing the price movement of index options on the S&P 500. To make it relatable, think of the VIX...
The Schaff Trend Cycle trading indicator (STC) is a technical analysis tool that can help stock traders identify trend changes and potential reversals. In simple terms, it’s a momentum indicator that combines moving average convergence divergence (MACD) with a cycle component to forecast when trends are likely to exhaust themselves or reverse. Imagine you're driving on a road trip, and you have...
The Darvas Box is a technical analysis trading indicator designed to help traders identify stocks that are breaking out of established price ranges. In simple terms, it’s like a "box" that forms when a stock price moves between a new high and a low price. Once it breaks above this new box, it’s time to take action. Imagine a stock trading within a trading range, bouncing between the top of the...
Williams %R, or the Williams Percent Range, is a momentum oscillator trading indicator that helps traders identify overbought and oversold conditions. It moves between 0 and -100, showing where the current price sits relative to its recent high-low range. Think of the Williams %R indicator as a fuel gauge in a car, when the indicator is near -20, the market is "full" and potentially overbought....
The Linear Regression indicator is a trading indicator that applies statistical regression analysis to price data to identify the market’s prevailing trend. It plots a straight line that best fits recent price action over a specified period, minimizing the distance between prices and the line. This provides a “fair value” or equilibrium level for the asset. Traders often use it to spot trend...
Here is what we cover in this week's stock market update: 7 Steps to Allocating Capital in a Hot Market Like Nasdaq Stock Market Update - Global Performance Roundup Wisdom from Jesse Livermore Special announcement from Enlightened Stock trading How do you allocate capital between markets / sectors / strategies when one part of the market is so strong (i.e. Tech stocks)? Should you move more...
The Percentage Price Oscillator (PPO) is a momentum trading indicator that measures the relative difference between two exponential moving averages (EMAs). Unlike traditional moving averages, which provide absolute price data, PPO expresses this difference as a percentage of the longer moving average. This makes it an effective tool for comparing momentum across different stocks, regardless of...
The Fisher Transform is a technical analysis trading indicator developed by John F. Ehlers, a renowned figure in technical analysis, designed to convert price data into a Gaussian normal distribution. In simple terms, this transformation makes it easier for traders to identify potential market reversals by transforming price movements into a more statistically meaningful distribution. By...
A volatility stop, while not a trading indicator, is an essential stop-loss strategy that helps traders manage risk by dynamically adjusting stop levels based on market conditions. Unlike a fixed stop order, a volatility stop adapts to market volatility, ensuring that trades have enough room to develop while still protecting profits. Think of a volatility stop like using windshield wipers in a...