Zig Zag indicator

Posted in Indicators of technical analysis

Zig Zag (also zigzag indicator) is popular especially among technical traders whose aim is to identify current trend on the market. This indicator is used to remove the market noise from the price chart, so the trend can become much clearer. Unlike other indicators of technical analysis it does not compute exact numbers that would signalize the right time to sell or buy. It is more like chart patters – it is being drawn in a chart and makes the trend (also price swings) more visible. Zig Zag calculation can be based on more types of prices. It is usually calculated on Close prices, but can also be based at the High and Low average prices or OHLC prices.

HMA - Hull Moving Average

Posted in Indicators of technical analysis

HMA indicator is a common abbreviation of Hull Moving Average. The average was developed by Allan Hull and is used mainly to identify the current market trend. Unlike SMA (simple moving average) the curve of Hull moving average is considerably smoother. Moreover, because its aim is to minimize the lag between HMA and price it does follow the price activity much closer. It is used especially for middle-term and long-term trading.

KAMA indicator - Kaufman Adaptive Moving Average

Posted in Indicators of technical analysis

KAMA is an abbreviation of Kaufman Adaptive Moving Average. This indicator of technical analysis was created by an American trader Perry Kaufman (he is also an expert in creating algorithmic trading programs).
KAMA indicator belongs to into the group of adaptive moving averages. Moving averages, generally, follow the price and its development for a certain period of time. E.g. if a trader decides to calculate 10-day Simple moving average, the actual moving average value is calculated always from the last 10 days. Sometimes a greater weight can be put on the most actual days, like Weighted moving average does, but the important thing is that the 11th day does not have any effect on the calculation as it falls beyond the selected time range.

Aroon indicator

Posted in Indicators of technical analysis

Aroon Indicator was developed by Tushar Chande in 1995. It belongs to trend indicators of technical analysis so its main task is to identify the prevailing trend on the market and the likelihood of change in trend. Alike another popular trend indicator - ADX, it consists of two smaller sub-indicators - Aroon Up and Aroon Down. Aroon Up measures the strength of an uptrend while Aroon Down measures the strength of a downtrend.

Heikin Ashi candles

Posted in Indicators of technical analysis

Heikin Ashi is a variation of classic candlestick charting. The words come from Japaneese. Heikin means “average” and Ashi means “step, pace”, so Heikin ashi could be best translated as an average pace (quite common mistake you can find on many websites is they call it Heiken Ashi, but Heiken means “military authority”).
Unlike common candlestick charts Heikin ashi candles try to filter out some noise of the market and display the prices in a form that is much easier to comprehend. Heikin ashi simplifies the trend identification and the process of chart trading.

Bollinger Bands

Posted in Indicators of technical analysis

Bollinger bands indicator was created by a financial analyst John Bollinger in 1980s. Bollinger bands are a complex technical analysis indicator which calculation is based on the volatility of the market (similar to Keltner channel indicator or Donchian channel indicator). The main idea behind the indicator is that it highlights the overbought and oversold conditions on the market but yet some other traders use it to identify strong trends (so as a matter of fact they use it as a trend-following indicator).

ADX - Average Directional Index

Posted in Indicators of technical analysis

ADX is an abbreviation of Average Directional Index. This indicator was created by a famous technical trader – J. Welles Wilder. First it was mentioned in his book “New concepts in technical trading systems” (year 1978). ADX is an indicator which main purpose is to identify the strength of the overall trend – doesn’t matter whether it is positive or negative. It means that high ADX values can mean raising market as well as falling market. You can imagine that as bulls and bears war. High ADX values mean that one of the groups wins most of the battles but you don’t know which of the animals it is.

ATR - Average True Range

Posted in Indicators of technical analysis

ATR is a common abbreviation of Average True Range indicator. ATR has been developed by a famous trader J. Welles Wilder in 1978 and described in his book New concepts in technical trading systems. It was used especially for commodity trading because commodities are much more unstable and volatile than stocks are. Nowadays it is still commonly used on dynamically changing markets like Futures or Forex market. Stock traders usually use other volatility indicators – e. g. Standard deviation. 

IMI - Intraday Momentum Index

Posted in Indicators of technical analysis

Intraday Momentum Index (also known as IMI indicator) is a technical analysis indicator that was developed by Tushar Chande. He described it in his "New Technical Trader" book (1994). IMI combines the advantages of RSI (Relative Strength Index) and Japanese candlestick chart analysis techniques. It helps traders to find proper buy and sell days and signals. That is also the reason why it is used mostly by short-term traders instead of long-term investors.

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