Momentum and Oscillators

The study of momentum and oscillators is an analysis of price changes rather than price levels. Among technicians, momentum establishes the speed of price movement and the rate of ascent or descent. Analysts use momentum interchangeably with slope, a straight-line angle of inclination of price movement as measured from a horizontal line representing time. Momentum is also thought of as force or impact it is often considered, as in Newton's Law, that once started prices tend to remain in motion...

Spreadsheet Approach

A practical way of evaluating a portfolio without requiring special mathematical knowledge or expensive software is to use a spreadsheet program. Using a classic stock and bond mix, Table 23-2 shows the monthly returns of the S& P 500 (S& P) and the Lehman Brothers Treasury Index (LBTI) combined into a portfolio of 60 stocks and 40 bonds. Columns B and C show the monthly percentage returns of these two inputs and columns E and F have the corresponding cumulative returns. At the bottom of...

Financial Astrology

Astrology seeks a common bond in human behavior, similar to the work in biological rhythms and cycles. The impact of astrology on civilization has been great observations of the periodicity of the moon is traced back 32,000 years. Star charts were known to have been in Egypt about 4200 b.c., and the earliest written ephemerides were in the seventh century b.c.36 The pyramids at Giza are said to have sloping corridors leading from the faces to the interior that were used as sighting tubes for...

Bands And Channels

Thus far, modifications have been based on a simple moving average or trendline. The plot can be adjusted forward or backward, the position can be reversed, or the entry or exit delayed in an attempt to begin the new trade at the time when the trend has decidedly taken a new direction. Even if prices have begun what will become a major downtrend, an entry into a short position too soon may be subjected to sharp reversals caused by conflicting fundamental and technical elements at these turning...

Dispersion And Skewness

The center or central tendency of a data series is not a sufficient description for price analysis. The manner in which it is scattered about a given point, its dispersion and skewness, are necessary to describe the data. The mean deviation is a basic method for measuring distribution and may be calculated about any measure of central location, for example, the arithmetic mean. It is found by computing MD - or Avg AbsValue price - Avg price,n ,n where MD is the mean deviation, th average of the...

Swing Trading

The foundation for the largest number of chart-based systems is the swing chart. Similar to point-and-figure, a swing is an upward or downward movement of a minimum size, regardless of the time it takes to achieve that move. Unlike point-and-figure, there are no boxes, and the notation does not use Xs and Os. The only difference between one swing chart and another is the swing filter. Once prices have reversed from a high or low point by the minimum amount specified by the swing filter, a new...

Linear Regression Model

A linear regression, or straight-line fit, could be the basis for a simple trading strategy similar to a moving average. For example, an -day linear regression, applied to the closing prices, could be used with the following rules 1. Buy when the closing price moves above the forecasted value of today's close. 2. Sell when the closing price moves below the forecasted value of today's close.11 There is an important difference between a model based on linear regression and one founded on a moving...

Key Reversal Days

A formation that has been endowed with great forecasting power is the key reversal day, sometimes called an outside reversal day. It is a weaker form of an island reversal. A bearish key reversal is formed in one day by first making a new high in an upward trend, reversing to make a low that is lower than the previous low, and then closing below the previous close. It is considered more reliable when the prior trend is well established. This could be identified using EasyLanguage as if close l...