The book list and summary help you establish a comprehensive technical analysis system (6)-turnover and market indicators

In this issue, we mainly talk about trading volume and market indicators. The most basic performance of market behavior is transaction price and trading volume. Trading volume is a more real response to the subject matter trading market. Trading volume shows the degree of recognition of the transaction price at a certain moment by both sides. Volume indicators can be used to reflect the relationship between market supply and demand and judge market trends. Market indicators are real-time records of the existing market and analysis, which is a real and effective feedback to the market.

01

Energy tide index (OBV)

Important Indicators:

A. "Trading for a living"

If the closing price of the day is higher than the closing price of the previous day, the trading volume of the day is added to the OBV. If the closing price of the stock on the day is lower than the closing price of the previous day, the trading volume of the day is subtracted from the OBV.

Trading Rules:

When OBV reaches a new high, it indicates that the price is likely to continue to rise, giving a buy signal. When OBV falls below a bottom value, the price may hit a new low, giving a sell signal.

When OBV deviates from the price, it is a strong buy or sell signal. If the price rise trend shows a correction and then rebounds to a new high, but OBV does not reach a new high, it is a sell signal. The buying signal is opposite.

When the price is in the oscillation range, but OBV breaks through the new high, there is a buy signal. On the contrary, when OBV innovation is low, there will be a sell signal.

McDonald's (MCD) daily chart, 22-day index moving average

Image Source: "Trading for a Living"

The inventor of this index, Glanville, used OBV to calculate the OBV of the constituent stocks of Dow Jones Industrial Average, and divided these indexes into three categories: rising, falling and flat, with values of 1,-1 and 0 respectively, which are called net trend indexes. The net trend index is added to obtain the peak index.When the stock market rebounds and the peak index reaches a new high, it is a strong buying signal.

You can decide the buying and selling of individual stocks according to the index, and you can also trade investment targets that follow the overall trend of the market, such as S&P 500 stock index futures.

02

Distributed index (A/D)

Important Indicators:

A. "Trading for a living"

Formula:

The trading signal appears when the A/D value deviates from the price trend. If the price rises to a new high but the A/D value does not reach a new high, the selling signal appears. When the price innovation is low but the A/D value is not low, it indicates that investors are constantly buying and gradually building positions in the process of decline, and a rebound is coming soon.

03

Strength index

Important Indicators:

A. "Trading for a living"

Formula:

This indicator brings together the direction and degree of price change and the corresponding turnover in the process of change.

ADBE Daily Chart, 26-day Index Moving Average

Image Source: "Trading for a Living"

Trading Rules:

2-day EMA is a highly sensitive index for short-term tracking. When the trend follows the index to confirm the upward trend, the EMA value falls below 0 on the 2nd is the buying point. If the trend is downward, EMA rises above 0 on the 2nd, which is the selling point. EMA tracking on the 13th is a change in long-term air force.

2 EMAIt can also help us decide when to clear the warehouse. Short-term traders who buy when EMA is negative on the 2nd can sell when the value is positive. Short-term traders who sell when the index is positive can buy when the value is negative.

When EMA deviates from the price trend on the 2nd (the effective deviation must cross the 0 value line). Whenever EMA falls more than 5 times deeper than normal on the 2nd and rebounds from the region, it can be expected that the price will rise in the near future.

In the strength index interface, adding an envelope can detect extreme deviation values, which may be a signal of price trend reversal. This method is very useful in weekly charts, which is not easy to use in daily charts and time charts, is a real long-term indicator tool.

04

New high-new low index

Important Indicators:

A. "Trading for a living"

Track the market by measuring the number of stocks whose share price hit a new high in the year minus the number of stocks whose share price hit a new low in the year on any day. Elder, author of Trading for a Living, thinks the index is the best market leading indicator in the stock market.

Trading Rules:

The deviation between the position and trend of the middle line and the price trend.

Location:

The upper part of the center line indicates that many parties are strong, while the lower part of the center line indicates that the air side is strong. If the index is negative and lasts for a period of time, when it rises above the middle line, it is the signal that the rally starts, and the oscillation index can be used to find buying opportunities.

Trends:

If the market is rising but the index is falling, you can consider cashing in profits from long positions. When the market is flat but the index rises, it shows the omen of a bull market and is a sign of buying. If the market is flat but the index falls, it is a sign of selling.

Index Deviation:

If the market hits a new high but the index only reaches a second high, there is a deviation. Deviation indicates the end of the upward trend, but attention should be paid to the height of the second highest point. If the recent peak of the index is only higher than 0, there may be a major correction later. On the other hand, if the recent peak is higher than 100, it indicates that the upward force is still strong enough to prevent the market from falling.

You can decide the buying and selling of individual stocks according to the index, and you can also trade investment targets that follow the overall trend of the market, such as S&P 500 stock index futures.

Standard & Poor's 500 Daily Chart, 26th and 13th Index Moving Average

Image Source: "Trading for a Living"

In addition to the above-mentioned daily new high and new low index, there are two new indexes, namely, the 20th and 65th new high and new low indexes, which respectively indicate the high and low data of the past month and quarter, which are more acute than the standard annual index.

05

Proportion of shares on the 50-day moving average

Important Indicators:

A. "Trading for a living"

Calculate the ratio of the number of shares with trading prices above the moving average to the total number of shares, and draw a graph with a range of 0-100%. The author of Trading for a Living likes to analyze this indicator on weekly charts, so as to capture the medium-term reversal point. The 25% and 75% levels are generally used as boundary lines.

This indicator does not send out trading signals by reaching a certain level, but by reversing after approaching a certain level. This indicator indicates that the top is about to be completed by rising above the upper guide line and then falling below the guide line.

Standard & Poor's 500-week chart (26-week moving average) 50-day moving average shares account for 75% and 25% reference line

Image Source: "Trading for a Living"

06

Advance/Decline (A/D)

Important Indicators:

A. "Trading for a living"

This value is the value of subtracting the number of shares whose closing price rises every day from the number of shares whose closing price falls.

Traders should pay attention to new highs and new lows, not the absolute value, because the absolute value mainly depends on the starting and ending dates. If the price hits a new high and the A/D line also hits a new high, indicating that the rise has a broad basis and the upward trend is expected to continue. If the A/D line only reaches a sub-high point lower than the previous high point, it indicates that the upward trend may be drawing to a close.

Standard & Poor's 500 Daily Chart and Tension Index Line

Image Source: Technical Analysis of Financial Markets

08

Conclusion

Important Indicators:

Different indicators have their applicable scope, which is repeatedly emphasized in the article. This scope determines the effectiveness of the indicators. It is mentioned that adding an envelope to the strength index interface can detect the extreme deviation value, which may be a signal of price trend reversal. This method is very useful in weekly charts, but not in daily charts and time charts. It is a real long-term indicator tool.


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