If you ask any professional trader what is the most important rule when trading; nine times out of 10 the response will be money management. Any two traders can enter the market at the same time and same price but the...
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Another use of the trendline. Sometimes after the violation of an up trendline, price will decline a bit before rallying back to the old up trendline (now resistance). Fan lines are drawn are either drawn along...
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Double Trendline
When two relatively close Parallel Trendlines are needed to define the true trend pattern.
Source: Edwards, Robert and Magee, John.Technical Analysis of Stock Trends 9th Edition; (c)...
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Validity of Trendline Penetration
The application of the following three tests when a trendline is broken to determine whether the break is valid, or whether the trendline is still basically intact: (1) the extent of the...
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Red Trendline
A straight line connecting two or more Bottoms together. To avoid confusion, Edwards and Magee use a red line for Bottom Trendlines and a blue line for Top Trendlines.
Source: Edwards, Robert and...
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Blue Trendline
A straight line connecting two or more Tops together. To avoid confusion, Edwards and Magee use a blue line for Top Trendlines and a red line for Bottom Trendlines.
Source: Edwards, Robert and Magee,...
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Descending (Down) Trendline
The declining wave in a stock or commodity is composed of a series of ripples. When the tops of these ripples form on, or very close to, a downward slanting straight line, a basic Descending or...
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Ascending (Up) Trendline
The advancing wave in a stock or commodity is composed of a series of ripples. When the bottoms of these ripples form on, or very close to, an upward slanting straight line, a basic Ascending or...
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Trendline
If we actually apply a ruler to a number of charted price trends, we quickly discover the line that most often is really straight in an uptrend is a line connecting the lower extremes of the Minor Recessions...
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Types of Divergences
Divergences, whether bullish or bearish in nature, have been classified according to their levels of strength. The strongest divergences are Class A divergences; exhibiting less strength are Class B...
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Divergence
Divergence refers to momentum that moves in the direction opposite to the direction of the price trend. Divergence also refers to momentum higher or lower, but less high or low than a previous peak or trough,...
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Bollinger Bands are used widely in the trading community and are a key component of many trading strategies. By their nature, Bollinger bands offer a particular perspective of the market. But that perspective is not without...
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Keltner Channel
A volatility based 'envelope' indicator that measures the movement of stocks in relation to an upper and lower moving-average band. This indicator, named after Chester W. Keltner, is used by sophisticated...
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Bollinger Bands
This popular indicator is similar to the older moving average envelope. It was developed by John A. Bollinger, CFA, CMT. In contrast to the moving average envelope, instead of plotting a "resistance" line...
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Envelopes
Envelopes are lines placed at fixed percentages above and below a moving average line. Envelopes help determine when a market has traveled too far from its moving average and is overextended.
Source: Murphy,...
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Channel Line
Straight Lines drawn parallel to the basic trendline. In an uptrend, the channel line slants up to the right and is drawn above rally peaks; in a downtrend, the channel line is drawn below price troughs and...
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Tracing an indicator’s origin is an exciting hunt. Gregory Morris and Robert Colby have written about the “Schultz AT” measure of market breadth.
Morris asked who Schultz was but did not get a complete answer, while...
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Bulls vs. Bears: The Market Breadth Score
By Alexandra Guevara
Summary
Volatile and oscillating markets can often make it difficult to discern broader investor sentiment and market direction.
For active traders,...
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$TICK - Tock - Testing the NYSE TICK Index
By Erik Skyba, CMT
Senior Market Technician, TradeStation Labs
Summary
If you search for the words "NYSE Tick Index" on the Internet, you will find links to many articles...
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Directional Movement Indicator (DMI) and Average Directional Index (ADX)
Bloomberg Function: Ticker <Equity> <DMI> GO
Created by Welles Wilder (also creator of RSI); DMI measures the "directional movement",...
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ARMS Index (TRIN)
Purpose of the ARMS index is to gauge whether there's volume in rising or falling stocks.
A short-term techncial analysis breadth indicator calculated as the following:
TRIN stands for...
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Unchanged Issues Index
The unchanged issues index uses a ratio of the number of unchanged stocks to the total traded. The theory behind it is that during periods of high directional activity, the number of unchanged...
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Hughes Breadth Oscillator
The Hughes breadth oscillator is a ratio of the difference between the declines divided by the total issues traded. This ratio is traditionally smoothed with a moving average. When the ratio...
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Absolute Breadth Index
The Absolute Breadth Index is a modestly effective measure of stock price movement, regardless of direction, up or down. The Absolute Breadth Index uses daily New York Stock Exchange data. Weekly...
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Advance/Decline Ratio
The Advance/Decline Ratio is a breadth-momentum oscillator calculated by first dividing the number of advancing issues by the number of declining issues each day; and then by smoothing the previously...
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Advance-Decline Line (A-D Line)
The Cumulative Daily Advance-Decline Line, perhaps the most widely known market breadth indicator, traditionally has been used to spot divergences relative to a general market price index,...
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Market Breadth
On any given day, a stock price can do one of three things-close higher, lower, or unchanged from the previous day's close. If a closing price is above its previous close, it is considered to be advancing,...
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By Frederic Palmliden | CMT, Senior Quantitative Analyst, TradeStation Labs
Summary
An implied volatility surface is a three-dimensional plot that reveals implied volatility data for a number of different options...
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Summary
Very much like people, foreign exchange (forex or FX) pairs have unique behaviors and traits that can be observed and studied over time. This may help us to better understand the nature of their price movements. For...
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2 Rivers Strategy
By Frederic Palmliden, CMT
Senior Market Technician, TradeStation Labs
Summary
Accounting for volatility helps filter unwanted signals from a trend-following system, since highly volatile markets are...
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