Moving Averages
A moving average smooths the price series by averaging closing prices over a sliding window.
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Technical Analysis and Technical Indicators
Technical analysis evaluates a stock by studying its historical price and volume. This guide explains the most popular technical indicators – how each is calculated, how to read it and which buy and sell signals it gives.
Browse indicators Chart them in Stock PredictorWhat is technical analysis?
Technical analysis interprets market activity to anticipate the future behavior of a stock’s price. It rests on the idea that price and volume already reflect everything that affects a stock – market trends, investor sentiment and the company’s fundamentals – and that prices move in trends and patterns that tend to repeat.
Technical traders use chart patterns, trend lines, support and resistance levels, moving averages, oscillators and volume to identify trends, find buy and sell signals, and set price targets and stop-loss levels. Most combine several indicators so that one confirms another.
What are technical indicators?
A technical indicator is a calculation based on a security’s open, high, low and closing prices, its trading volume and one or more input parameters, such as the number of days. Plotted under or over the price chart, indicators make trends, momentum and buying or selling pressure easier to see than the price alone.
Trend indicators and moving averages
Follow the direction of the trend and signal when it changes.
Bollinger Bands
Bollinger Bands place an upper and a lower band around a moving average at a distance set by the standard deviation of price.
Envelopes
Envelopes are two moving averages shifted a fixed percentage above and below the price average.
Moving Average Oscillator (Price Oscillator)
The Moving Average Oscillator, also known as the Price Oscillator, shows the difference between a shorter and a longer moving average of the price.
MACD (Moving Average Convergence Divergence)
MACD measures the difference between a fast and a slow moving average and compares it with its own average, the signal line.
Momentum oscillators
Measure the speed of price moves and flag overbought and oversold conditions.
Relative Strength Index (RSI)
The Relative Strength Index (RSI) measures the internal strength of a security by comparing the size of recent gains with recent losses.
Fast Stochastic Oscillator
The Fast Stochastic Oscillator is a momentum indicator that shows where the closing price lies within the high–low range of the last n periods.
Slow Stochastic Oscillator
The Slow Stochastic Oscillator is a smoothed version of the Fast Stochastic Oscillator.
Williams %R
Williams %R, developed by Larry Williams, shows where the close lies relative to the highest high of the last n periods.
Volume indicators
Use trading volume to confirm price moves and measure buying and selling pressure.
Volume
Volume is the number of shares traded in a given period, for example one day.
On Balance Volume (OBV)
On Balance Volume (OBV), introduced by Joseph Granville, is a running total of volume that shows whether money is flowing into or out of a security.
Accumulation/Distribution
Accumulation/Distribution (A/D) is a volume-based momentum indicator built on supply and demand.
Quick reference
| Indicator | Type | Typical parameters | Main signal |
|---|---|---|---|
| Moving Averages | Trend-following | n = 10, 20, 50 or 200 days | Price or a shorter MA crosses above (buy) or below (sell) the moving average |
| Bollinger Bands | Volatility / trend | n = 20 days, D = 2 standard deviations | Touches of the bands, band squeezes and breakouts |
| Envelopes | Trend / trading range | n = 20 days, P = 2.5–10% | Price reaching or crossing the upper (sell) or lower (buy) band |
| Moving Average Oscillator | Trend / momentum | short n₁ = 10, long n₂ = 20 days | Oscillator crosses above zero (buy) or below zero (sell) |
| MACD | Trend / momentum | 12, 26, 9 | MACD crosses above (buy) or below (sell) its signal line |
| Relative Strength Index | Momentum oscillator (0–100) | n = 14 days (9 for faster signals) | Turns up from below 30 (buy) or down from above 70 (sell) |
| Fast Stochastic Oscillator | Momentum oscillator (0–100) | %K n₁ = 5 or 14, %D n₂ = 3 or 5 | %K crosses %D, or leaves the 20/80 zones |
| Slow Stochastic Oscillator | Momentum oscillator (0–100) | n₁ = 5 or 14, n₂ = 3 or 5 | %K crosses %D, or leaves the 20/80 zones |
| Williams %R | Momentum oscillator (0 to −100) | n = 14 days | Turns up from below −80 (buy) or down from above −20 (sell) |
| Volume | Volume | none | Confirms price moves; spikes mark trend starts and capitulation |
| On Balance Volume | Volume / money flow | none | Confirmed change of the OBV trend direction |
| Accumulation/Distribution | Volume / money flow | none | Confirmed change of the A/D trend; divergence from price |
Plot these and other technical indicators with Stock Predictor. Chart any stock, adjust indicator parameters, run trading strategies on historical data and see buy and sell signals directly on the chart. Get historical quotes for it with Historical Quotes Downloader.
Technical indicators describe past prices and do not guarantee future results. See our disclaimer.