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TechTalk TUTORIAL:
Moving Average: An indicator that tracks “mean reversion”, or the belief that prices, over time, tend to move back towards the average. We use a 21-day simple moving average and indicate the following 3 columns:
- Direction: Is the trend rising, falling, flat or changing?
- Price: Is the current price above, below or at its 21-day moving average?
- Trend: Is the current price diverting or reverting to its 21-day moving average?
Momentum: A measure of the general direction and strength of a market’s trend over a set period of time. We use both weekly and daily indicators as long and short-term views. This indicator will appear with three columns:
- Weekly Price: Is the last five days’ trend positive, negative or changing?
- Daily Price: Is the current price’s trend positive, negative or changing?
- Daily ROC (Rate of Change): Is the strength of the daily trend rising, falling or flat?
Overbot/Oversold: A measure of whether a market’s price is entering an extreme: either higher or lower. This tool is not necessarily one to use all by itself, but is typically helpful when used with other technical indicators. We indicate 2 columns:
- Direction: Is the trend of the indicator currently rising, falling, peaking, troughing or flat?
- Number: Is the market overvalued or undervalued (0-100)? A higher number corresponds
with a market overextended to the upside and vice versa.
Volatility: A measure of a market’s price instability that is especially helpful to options traders. It should also help structure futures trades with an option component. Volatility can be used in conjunction with other trend indicators for more sophisticated analysis. There are two columns. Pay closest attention to markets with Very High or Very Low Volatility:
- 21 Day W/ 125 Day MA Boll Band: When using the 125-day moving average, the 21-Day - Annualized Volatility is one of the following:
- V-HI (very high): More than two standard deviations above. A market with very high
volatility may present attractive option selling opportunities.
- HI (high): Between one and two standard deviations above.
- AVG (average): Within one standard deviation.
- LO (low): Between one and two standard deviations below.
- V-LO (very low): More than two standard deviations below. A market with very low
volatility may present attractive option purchase opportunities.
- Direction: Is volatility rising, falling, flat or changing?
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