Indicators are displayed in a window below the Chart Window, referred to as the Indicator Window. Here in the manual the indicator titles are as listed in the right click menu, "Quick Link - name".
Displaying Indicators
To display an Indicator, right-click in the Chart Window or Indicator Window then choose the indicator from the menu. Mouse over Add Indicator Window and a list of indicators will appear. Select the indicator you want opened. You can open ten Indicator Windows at once on one chart, and you can have up to four indicators in each window. When you open a fifth indicator the last indicator opened will automatically be closed.
To open an additional indicator within the indicator window, right-click and choose the indicator from the menu. The indicators that are currently open will have a check mark by them. To remove an indicator from your chart, simply right click in the indicator window again.
On Screen Text
When you open an indicator, an overlay indicator or an indicator in the indicator window, you will see text appear on your chart in the upper left hand corner. You can choose whether to show this text, and choose where it appears by right-clicking on your chart. Mouse over On Screen Text to view your options. This will also change the on screen text of your overlays too.
Right-click the indicator quick link to toggle between other indicators, change indicator preferences, or to remove the indicator window from your chart. The indicator quick links may be used to determine which indicator appears in front of the window. You may change the order by selecting the lower indicator quick link line followed by a quick drag and drop of the link above other listed quick links.
In this example, moving the MACD quick link above the KST quick link will display the MACD indicator window in front of the KST indicator:
The main thing to look for is a difference between the AD and the market trend. If a market were to make a matching or lower low, or a matching or higher high and the AD fails to follow the market trend, this is divergence. Divergence implies that a reversal in the dominant trend may be near.
A series of lower lows would read as a decreasing AD. The pattern created by the AD and the differences in the chart are what the trader looks for. Divergence, or a difference from the pattern, is what you want to see. For example, if the market continues to march to higher territory and the AD follows by doing the same, then there is no divergence. However, if the market makes several new highs but the AD fails to make new highs, it is a warning signal of a market about to reverse direction.
The AD index is computed several different ways. Some computations normalize the index, while others add extra smoothing factors through the use of moving averages.
The first comparison checks for accumulation. (Is the current close higher than the previous close?) If the market is accumulating, subtract the difference between current close and low. Add the difference to the Accumulation/Distribution Index. Traders perceive an undervalued market and they buy.
If Closet > Closet-1 then ADt = ADt-1 + (Closet - Lowt)
The second comparison checks for no change in price. If correct, the AD index does not change.
If Closet = Closet-1 then ADt = ADt-1
The last and final comparison checks for a down market. It looks for the current close below previous close. If it’s correct, the market is distributing. The software first computes the difference between current high and close. Then it subtracts that difference from the AD index. This measures market distribution. Traders perceive an overvalued market and are selling.
If Closet < Closet-1 then ADt = ADt-1 - (Hight - Closet)
ADt: The accumulation/distribution index for the current period.
ADt-1: The accumulation/distribution index for the previous period.
Closet: The closing price for the current interval.
Closet-1: The closing price for the previous interval.
Hight: The true high price for the current interval (current high or previous close).
Lowt: The true low price for the current interval (current low or previous close).
Open the Preferences Tab in your Control Panel. Select the AD quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. AD: Change the color, line style, and line thickness of the Accumulation and Distribution line in the Indicator Window.
3. ADMA: Change the color, line style, and line thickness of the Accumulation/Distribution Moving Average line in the Indicator Window.
4. Show ADMA: Uncheck this box to hide the ADMA line. When the box is checked, specify the number of days used in calculating the ADMA Indicator. The default number is 28 days.
5. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
6. Buy/Sell Arrows: You have the option to display buy/sell arrows on your chart according to the indicator. Click the arrow to view Displayed or Not Displayed. You also have the option to change the color of the buy/sell arrows.
The Average True Range Indicator was developed by Welles Wilder to work with the commodity industry. The purpose of the ATR is to recognize the level of volatility in a market.
Volatility is a measurement of the change in price over a given period. It is often expressed as a percentage and computed as the annualized standard deviation of the percentage change in daily price.
When a market is going sideways, it typically exhibits low volatility and is difficult to trade. A market with higher volatility is typically trending better which would produce more opportunities to get into a trade. If a market’s volatility is too high, traders find that the market is too erratic, and it becomes difficult to trade. In using the ATR, traders hope to measure the level of volatility to help them interpret the different markets they are watching. It is important to remember to consult other indicators or analysis so that you are not relying on only one indicator to determine market entry or exit.
The ATR’s value is a measurement of the market volatility. When a market is increasing in volatility the ATR will have a higher value, and when the market is decreasing in volatility the ATR will have a lower value.
The ATR is a moving average of the True Ranges defined below. The default period interval in Track ‘n Trade Live is 5 days. The ATR is calculated based on the largest of the three distances from the following:
Today’s HIGH to today’s LOW
Yesterday’s CLOSE to today’s HIGH
Yesterday’s CLOSE to today’s LOW
Open the Preferences Tab in your Control Panel. Select the ATR quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Period: Specify the number of days to be used in calculating the ATR.
3. Line: Choose the color, line style, and line thickness of your line.
4. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
You can also use the indicator by looking for divergence between the indicator and the charts. Sharp price advances and declines usually accompany market tops and bottoms, and as a market climbs or falls toward a bottom, the indicator will tend to initially follow the price trend and then fall off, leading to bullish or bearish divergences with the chart.
A buy signal occurs when %B value crosses from below the 0 line to above the 0 line. A sell signal occurs when %B value crosses from above the 0 line to below the 0 line.
Example of Percent Bollinger Bands
Open the Preferences Tab in your Control Panel. Select the %B quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Period: Specify the number of days to be used in calculating the %B.
3. % Deviation: Define the displacement between the bands.
4. Type: Choose from Simple, Linear Weight, or Exponential.
5. Data: Choose from Open, High, Low, or Close.
6. Display as: Choose to view as a Histogram or Line.
7. B+/B-: Choose the color, line style, and line thickness of your line.
8. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
9. Buy/Sell Arrows: Turns the display for buy/sell arrows on and off. You also have the option to change the color of the buy/sell arrows.
During a period of rising price volatility, the distance between the two bands will widen (BB Width will increase). Conversely, during a period of low market volatility, the distance between the two bands will contract (BW will decrease).
The tendency is for the bands to alternate between expansion and contraction. When the bands are unusually far apart, it is often a sign that the current trend may be ending. When the distance between the two bands has narrowed, it is often a sign that a market may be about to begin a new trend.
The BW gives an indication of how wide the Bollinger Bands are as a function of the middle band. It is used to identify the squeeze at low values and the end of trends at high values.
The calculation of the BW is here:
Bollinger Bandwidth = [Top Bollinger Band (x periods)] - [Bottom Bollinger Band (x periods)] / Simple Moving Average Close (x periods)
Open the Preferences Tab in your Control Panel. Select the BW quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Period: Specify the number of days to be used in calculating the BW.
3. % Deviation: Define the displacement between the bands.
4. Type: Choose from Simple, Linear Weight, or Exponential.
5. Data: Choose from either Open, High, Low, or Close.
6. Line: Choose the color, line style, and line thickness of your line.
7. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
Donald Lambert, the creator of this indicator, says that 70% to 80% of all price fluctuations fall within +100 and -100 as measured by the index. The calculation for CCI measures the average daily price’s distance from a moving average of average daily prices.
There are basic trading rules for the CCI: buy when the CCI exceeds -100 and sell when the CCI drops below +100. In other words, a buy signal is generated when the indicator enters the channel, or exceeds -100, coming up from the bottom. A sell signal is generated when the indicator enters the channel from the top, or drops below +100.
Followers of the CCI generally look to establish long positions when the CCI exceeds the -100 level, indicating that prices are in a strong up trend. Most users of this indicator also try to look for patterns within the indicator, such as higher highs, and look for CCI movements to be confirmed by general price readings as well.
The purpose of the CCI index is to keep you out of the market during consolidation, or weak trending periods. By measuring the difference between average prices and mean average prices, this indicator attempts to isolate only strongly trending markets, similar to momentum and MACD.
When CCI is viewed in the Indicator window of Track ‘n Trade Live, -100 is 33% of the window and +100 is 66% of the window. Guides could be set at these two points for ease in tracking CCI. You could also say that -85 would be roughly 36% and +85 would be roughly 64% of the window.
The proper calculation of the CCI requires several steps in the proper sequence. You must first compute the typical price using the high, low, and close for the interval. Simply, take the average of the three values.
TP = (Hight + Lowt + Closet) / 3
TPt: Represents the typical price.
Hight: The highest price for this interval.
Lowt: The lowest price for this interval.
Closet: The closing price for this interval.
Next, calculate a simple moving average of the typical price for the number of periods specified.
TPAVGt = (TP1 + TP2 +... + TPn) / n
TPAVGt: The moving average of the typical price.
TPn: The typical price for the nth interval.
N: Number of intervals for the average.
Compute the mean deviation.
MDt = (|TPAVG1 - TP1| + ... + |TPAVG1 - TPn |) / n
MDT: The mean deviation for this interval.
TPn: The typical price for the nth interval.
N: Number of intervals.
Note: The symbol | | designates absolute value. Negative differences as well as positive differences are treated as positive values.
Final Computation:
CCIt = (TPt - TPAVGt) / (.015 x MDT)
CCIt: The Commodity Channel Index for the current period.
TPt: The typical price for the current period.
TPAVGt: The moving average of the typical price.
.015: A constant.
MDT: The mean deviation for this period.
For a line drawing, a buy signal occurs when the CCI line crosses from below the lower threshold to above the lower threshold. A sell signal occurs when the CCI line crosses from above the upper threshold to below the upper threshold.
For a histogram drawing, a buy signal occurs when the CCI value crosses from below the 0 line to above the 0 line. A sell signal occurs when the CCI value crosses from above the 0 line to below the 0 line.
Example of Commodity Channel Index
Open the Preferences Tab in your Control Panel. Select the CCI quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. CCI Period: To specify the number of days used in calculating CCI, simply click in the box, highlight the current number, and type in a new value.
3. CCI: Change the color, line style, and line thickness of the CCI.
4. Display as: The CCI can be displayed as a line or a histogram.
5. WCCI Option: When you select the WCCI (Woodies CCI) option in the CCI preferences tab this will apply a histogram divided in the middle. See the WCCI example below.
6. WCCI Colors: These two color options allow you to select the color of the histogram above and below (up or down colors) the zero line.
7. Thresholds: The Upper Threshold and Lower Threshold are automatically displayed in the Indicator Window. The crossing of the CCI line below the Upper threshold is a sell signal. The crossing of the CCI above the Lower threshold is a buy signal. You also have the option to view the threshold as a percent or a value, and change the color of the threshold lines.
8. Buy/Sell Arrows: You have the option to display buy/sell arrows on your chart according to the indicator. Click the arrow to view Displayed or Not Displayed. You also have the option to change the color of the buy/sell arrows.
By comparing the close to the high and low, the CMF is determining if the market has pressure to sell or buy. In doing this, the CMF is giving an indication of overbought and oversold by using these comparisons. If the market is consistently closing in the top region of the price bar and there is an increase in volume (showing an increase in the number of trades) then CMF exhibits a positive value. If the market is consistently closing in the bottom region of the price bar and there’s an increase in volume, CMF exhibits a negative value.
When the CMF indicator crosses the zero line either up or down, this is an indication of a change in trend. Traders use this indicator to help confirm breakout signals from either support or resistance trend lines.
The calculation of the CMF is here:
CMF = SUM(MFM, n) / SUM(VOL, n)
where n = Period
MFM = VOL x [(close - low) - (high - close)] / (high - low)
MFM stands for Money Flow Multipliplier
A buy signal occurs when the CMF value crosses from below the 0 line to above the 0 line. A sell signal occurs when the CMF value crosses from above the 0 line to below the 0 line.
Example of Chaikin Money Flow
Right-click on the CMF button in your Indicator toolbar and select CMF Settings. The Preferences Tab will open in the Control Panel and the CMF preferences will be displayed. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. CMF Period: Specify the number of days to be used in calculating the CMF.
3. CMF+: Change the color, style, and thickness of your line.
4. CMF-: Change the color, style, and thickness of your line.
5. Display as: Choose between displaying CMF as a histogram or a line.
6. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
7. Buy/Sell Arrows: Turns the display for buy/sell arrows on and off. You also have the option to change the color of the buy/sell arrows.
Directional Moving Index is plotted as three lines on a scale of 0 to 100. This scale is a measure of market trend. The two lines of DMI show the amount of positive and negative movement. The positive line is called D+ and the negative D-. The direction of these lines and the use of crossovers can show the changes in the current market. The key to this indicator is the ADX, or average of the difference of these two lines. The ADX is the main factor in using this indicator. During periods of extreme price variation the two lines can become very volatile, and the ADX is used to compensate for this.
The best application of DMI is present when used with another indicator. DMI should either confirm or contradict the indicator being used. It is also best to use DMI in long-term trade situations. Because the study is not as sensitive as other indicators it is appropriate to use it as a confirmation tool. When the DMI is advancing, the average is higher on the 0 to 100 scale, trend following systems are best employed. Likewise, with a decreasing DMI average, the line is lower on the scale, closer to 0, so a counter trend system might be best. These traits represent the fact that as the average line goes higher in the scale the strength of the trend is gaining, and as the ADX goes lower the trend is losing strength. It is also important to look at the individual lines for changes in price movement.
The other application for DMI is to look at the D+ and D- lines themselves. When the D+ line crosses above the D- line a buy signal is initiated. This indicates that the positive price direction is greater than the negative. Conversely, once the D+ line crosses below the D- line, a sell trigger is present. The negative price movement is overtaking the positive.
Welles Wilder himself said that he was not comfortable using these two lines by themselves. When looking at reversals, the ADX should be above both lines, and once it turns lower we should see a change in market direction. You should also look to ADX for confirmation.
This application is much the same as momentum, showing a change in the market sentiment. Wilder also says that a trend following system should not be used when the ADX line is below both D lines, as this means that the market has no discernible direction.
When using the D+ and D- crossover method, Wilder stresses the use of an extreme point. On the day the crossover occurs, the extreme point is the high or low of the day (high for a buy, and low for a sell). The market should be able to take out that price and stay beyond it for several days before the trade is initiated or exited. This use of extreme points should keep the trader from getting into whipsaws or false breakouts.
The computations needed to generate the final figures for the DMI are not complex but are numerous and lengthy. The following discussion attempts to unravel the computational mysteries of the DMI. If you need further explanation, please refer to the author’s original work. The book titled New Concepts in Technical Trading Systems by J. Welles Wilder, Jr., explains this indicator and several others.
You must first compute the directional movement, DM, for the current trading interval. Directional movement can be up, down, or zero. If directional movement is up, it is labeled as +DM, and -DM refers to downward directional movement. Wilder defines directional movement as the largest part of the current trading range that is outside the previous trading range. From a mathematical view, it is the largest value between two equations:
Hight - Hight-1 or Lowt - Lowt-1
This is only true when the current low is less than the previous low, or the current high exceeds the previous high. Both of these conditions do not have to be met, only one. It is the largest portion of the trading range outside of the previous trading range.
It is possible for the directional movement to be zero. This occurs when the current trading range is inside the previous trading range, or when the trading ranges, current versus previous, are equal.
Directional movement is up, or positive, when the difference between the highs is the greatest. It is down, or negative, when the difference between the lows is the largest value. The up directional movement is +DM and down directional movement is -DM. Do not let the plus and minus sign designation mislead you. They only indicate upward or downward movement, not values. The directional movement value is always a positive number, or absolute value, regardless of upward or downward movement. This concept is crucial to understanding the computations for the indicator. If you are confused, draw some illustrations or work with actual price data to determine the directional movement values.
The next step in determining the DMI is to compute the true range. The true range (TR) is always a positive number. According to the Wilder, the true range is the largest value of three equations:
Hight - Lowt
Hight - Closet-1
Lowt - Closet-1
Continue this process for the specified trading interval. In this example, use a value of 14. This is the same value Wilder used on daily data. His logic for using this value is that it represents an average half-cycle period. When this task is accomplished for the specified interval, you compute the average value of the +DM, -DM, and TR. Wilder prefers to use an accumulation technique rather than computing a pure moving average. It is a short cut designed to save computational time and effort:
Averaget = (Averaget-1 - (Averaget-1 / n)) + Valuet
When you substitute the above symbols, you these equations:
+DMt = (+DMt-1 - (+DMt-1 / n)) + (+DMt)
-DMt = (-DMt-1 - (-DMt-1 / n)) + (-DMt)
TRt = (TRt-1 - (TRt-1 / n)) + (TRt)
It is a timesaving convention. This indicator was developed before microcomputers were invented. The only tool available was the desktop calculator or adding machine. You could spend a great deal of time and effort calculating averages.
You now have the average values. The next step is to compute the directional indicator. It can be either up or down, depending upon the directional movement. On up intervals use this calculation:
+DI = (+DM / TR) x 100
On a down interval use this formula:
-DI = (-DM / TR) x 100
The plus and minus directional indicator values are computed as percentage figures. You are expressing the percentage of the average true range for both up and down trading intervals.
If you have followed this process so far, the last few steps are relatively simple. You compute the difference between the +DI and the -DI. Remember to use the absolute value of this difference (Convert any negative value into a positive number).
DIdiff = | ((+DI) - (-DI)) |
Compute the sum of the directional indicator values using this formula:
DIsum = ((+DI) + (-DI))
Once you compute the DIdiff and the DIsum, you can calculate the DX or directional movement index. This value is always a percentage:
DX = (DIdiff / DIsum) x 100
The DX is always a value between 0 and 100. If your calculations exceed this range, you have made an error. Wilder was not comfortable using just the directional movement index. It could become very volatile during periods of extreme price movement, especially markets that rise and fall quickly. He implements his accumulated moving average technique to smooth the DX. The result is the ADX or average directional movement index. This is the computational procedure:
ADXt = ( (ADXt-1 x (n - 1) ) + DXt) / n
A buy signal occurs when the DMI+ line crosses from below the DMI- line to above the DMI- line. A sell signal occurs when the DMI+ line crosses from above the DMI- line to below the DMI- line.
Example of Directional Movement Index
Extreme Point Validation: This filter delays the buy/sell arrows at least a day by requiring that the market move higher or lower than the high or low on the day the DM+,DM- crossover happened. If a new high or low is not obtained before the next DM+,- crossover, the buy/sell arrow is suppressed completely for that previous period. The filter does not require the use of DX/ADX, although it does stack with the other filers if they are used.
Trend Strength: The DX or ADX line must be above the target number before a DM+,- cross will give a buy/sell arrow. The theory is the DX/ADX lines indicate trend strength (not direction) and if it is below 20 there is practically no trend. Values above 40 indicate a strong trend. Different articles would use values between 20 and 40 as targets to look for. This box must be selected for this rule to be available.
Turning Point Validation: The directional index line (DX or ADX) must be above the point where DM+,- crossed. This is like a variable trend strength filter. The directional index can indicate any trend strengths as long as the trend strength is greater than the value of the DM+,- crossing point. This indicator also requires that the directional index line be on.
Open the Preferences Tab in your Control Panel. Select the DMI quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. DMI Period: To specify the number of days used in calculating DMI, click in the box, highlight the current number, and type in a new value.
3. Directional Indicator: The two methods available in displaying the DMI indicator are Averaged Directional Index (ADX) and the Directional Index (DX). Click on the button in front of the method to select.
4. DMI/DM+/DM: Change the color, line style, and line thickness of the DMI.
5. Use Relative Scaling: When selected, the 100% location is changed to the highest point value in the DMI indicator.
6. Thresholds: Gives you the option of displaying four threshold lines, which are displayed as a percentage of the Indicator Window. You also have the option to change the color of the threshold line.
7. Buy/Sell Arrows: You have the option to display buy/sell arrows on your chart according to the indicator. Click the arrow to view Displayed or Not Displayed. You also have the option to change the color of the buy/sell arrows.
8. Use Trend Strength: The DX or ADX line must be above the target number before a DM+/- cross will give a buy/sell arrow. The theory is the DX/ADX lines indicate trend strength (not direction) and if it is below 20 there is practically no trend. Values above 40 indicate a strong trend. Different articles would use values between 20 and 40 as targets to look for. This box must be selected for this rule to be available.
9. Use Extreme Point Validation: This filter delays the buy/sell arrows at least a day by requiring that the market move higher or lower than the high or low on the day the DM+/DM- crossover happened. If a new high or lower low is not obtained before the next DM+/- crossover, the buy/sell arrow is suppressed completely for that previous period. The filter does not require the use of DX/ADX, although it does stack with the other filters if they are used.
10. Use Turning Point Validation: The directional index line (DX or ADX) must be above the point where DM+/- crossed. This is like a variable trend strength filter. The directional index can indicate any trend strengths as long as the trend strength is greater than the value of the DM+/- crossing point. This indicator also requires that the directional index line be on.
This indicator is designed to show conditions of overbought and oversold markets. Stochastics are divided into two types: Regular Stochastics, often referred to as Fast Stochastics, and Slow Stochastics. Fast Stochastics are more sensitive to price changes and can give a lot in the short-term, hence the need for Slow Stochastics.
Stochastics display two lines that move in a vertical scale between 0 and 100, representing percentiles from 0% to 100%. Think of the level of Stochastics as where the most current close is within a specific range. If Stochastics are reading 50%, the current close is in the middle of the price range for a specified period of time. If Stochastics are reading 100%, the close is at the high of the range, and 0% represents the current close price being at the low of the range. This will help you to understand why Stochastics are a counter trend indicator, in that the underlying principle behind Stochastics is that prices will move back to the center of the trading range, or the opposite extreme.
When both lines move to an area below 20 on this scale they are said to be in an oversold zone. Conversely, when both %K and %D move to above 80 on this same scale they are indicating an overbought zone. It is this indication of market sentiment that makes this counter trend indicator useful.
George Lane emphasized that the most important signal generated by this method was the difference or divergence between %D and the underlying market price. He said that the divergence is where %D line makes a group of lower highs while the market makes a series of higher highs. This would indicate an overbought condition. The reverse would be true of an oversold market, with %D making higher lows and prices making lower lows.
As with a dual moving average system, when the faster reacting indicator crosses the slower moving indicator, a buy or sell is signaled. Because Stochastics give an indication of either overbought or oversold, you would first want to see both lines in the above 80 or below 20 range, and sloping out of that range back to the middle before looking for these trade triggers.
The first step in computing the stochastic indicator is to determine the n period high and low. Suppose you specified twenty periods for the stochastic. Determine the highest high and lowest low during the last twenty trading intervals. It determines the trading range for that time period. The trading range changes on a continuous basis. The calculations for the %K is here:
%Kt = ( (Closet - Lown) / (Highn - Lown) ) x 100
%Kt: The value for the first %K for the current time period.
Closet: The closing price for the current period.
Lown: The lowest low during the n periods.
Highn: The highest high during the n time periods.
n: The value you specify.
Once you obtain the %K value, you start computing the %D value which is an accumulative moving average. Since the %D is a moving average of a moving average, it requires several trading intervals before the values are calculated properly. If you specify a 20 period stochastic, the software system requires 26 trading intervals before it can calculate valid %K and %D values. The formula for the %D is here:
%DT = ( (%DT-1 x 2) + %Kt) / 3
%DT: The value for %D in the current period.
%DT-1: The value for %D in the previous period.
%Kt: The value for %K in the current period.
The values 2 and 3 are constants. You specify the constants and the length of the time period to examine for the trading range.
A buy signal occurs when both lines are below the lower threshold and the %K line crosses from below the %D line to above the %D line. A sell signal occurs when both lines are above the upper threshold and the %K line crosses from above the %D line to below the %D line.
Example of Fast Stochastics
Open the Preferences Tab in your Control Panel. Select the FSTO quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. FSTO Period: To specify the number of days used in calculating the Fast Stochastics indicator, click in the box, highlight the number, and type in a new value.
3. FSTO Smoothing: To specify the number of days used in calculating smoothing, click in the box, highlight the number, then type in a new value.
4. %K/%D: Change the color, line style and line thickness of the %K and %D lines.
5. Calculation: Choose from Exponential, Simple, and Wilder’s Smoothing for the type of formula used to calculate the indicator.
6. Thresholds: You are given the option to view four threshold lines in the Indicator Window. The crossing of the %D line above the %K line is a sell signal and only confirmed if this crossing occurred above the Upper Threshold line. The crossing of the %D line below the %K line is a buy signal and only confirmed if this crossing occurred below the Lower Threshold line. You can also change the color of the threshold lines.
7. Buy/Sell Arrows: Select to display the buy/sell arrows. Click the arrow to view Displayed or Not Displayed. You also have the option to change the color of the buy/sell arrows.
The Gator was created on a relative scale; what seems to be a large move in the market today may well be just a small move on the historical scale, since the Gator graphically represents itself only against its own historical price line. As the market trends, the Gator will also trend, causing historical representations of market momentum and movement to pale in comparison.
Example of Gator Oscillator
Open the Preferences Tab in your Control Panel. Select the GTR quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Jaws, Teeth, Lips: Specify your periods and shift specifications.
3. Type: Select Simple, Linear Weight, or Exponential.
4. Data: Choose the data you would like to be calculated.
5. Value Up: Select the color of the histogram when the value is up.
6. Value Down: Select the color of the histogram when the value is down.
7. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
Changing the period of time the study observes allows the trader to fine tune options prices. If a market has been extremely volatile for the past 3 months, for example, near term options should be more expensive. If the market has been calm for an extended period of time, longer term options should be reasonable. In futures, we use it for observation. It tells us if prices are calming down or becoming more erratic.
The key to using historic volatility is determining the correct period of time for each market. The market you are looking at may show a history of volatility years ago, but has been relatively calm the last few months. Getting an idea of the markets behavior recently may be of no use to the trader that is looking at distant options.
For the futures trader, this tool is useful as a guide for order placement. Changing market volatility may indicate that it is time to move stops closer or farther away. If the trader is profitable with the trend and volatility is changing, it might be a time to move stops closer to protect profits. If a trader is trading against the trend, he might want to move stops further away to avoid getting bumped out prematurely.
Options traders could use this study to help them purchase profitable options. The basic idea is to buy options when volatility is decreasing to take advantage of a change in that volatility. Any rise in volatility will translate to an increase in option values. Look at options strategies that take advantage of low volatility, such as straddles or ratio spreads. When volatility is high, selling options would be better because any decrease in volatility will translate to a loss of option value. Option strategies that take advantage of a decrease in volatility are strangles and regular short option positions.
Obviously, historic volatility is only one component of option pricing. Any changes in the underlying futures market could negate the changes in option prices due to volatility. For example, if you were to buy a low volatility Put option and prices go higher, that option will lose value but not as quickly as a higher volatility option.
For the futures trader, the basic concept is to expect market changes during periods of increased volatility. George Soros, the trading legend, said “Short term volatility is greatest at a turn around and diminishes as a trend becomes established.”
This indicator is commonly viewed as very mean regressive. What this term means is that the historic volatility indicator tends to return to the opposite end of the spectrum and therefore return to an average. If volatility is great it will eventually cool off and return to that place. If volatility is low it will not stay quiet forever. What this means to traders is that a market that is erratic will sooner or later calm down and a market that is quiet will eventually get loud again.
The calculation for the historical volatility is rather involved. The number of periods per year vary depending on the type of price chart used for the study. The following table lists the number of periods for each type of chart:
Chart Type |
Trading Periods Per Year |
Perpetual | 252 |
Daily | 252 |
Weekly | 52 |
Monthly | 12 |
Variable | Based on chart period (see below) |
Tick | Not available for this study |
When using variable charts, you must first calculate the number of trading periods per year. To do this, you must determine the trading time of the selected commodity. The formula is as follows:
TP = (Tt / Pn) x 252
TP: The total number of trading periods per year.
Tt: The total trading time in a day.
Pn: The length of the period.
252: The number of weekdays per year.
Example: The S&P 500 trades from 8:30 a.m. to 3:15 p.m. That is a total trading time of 6 hours and 45 minutes. On a variable chart using 5 minute bars, the number of periods for the day is 81:
6 hours x 60 minutes = 360 minutes + 45 minutes
Total minutes of trading = 405 minutes
405 / 5 minute bars = 81 trading periods per day
Now that you have calculated the trading periods per day, you now must calculate the number of periods for the year. Since historical volatility considers every weekday of the year when calculating total periods for the year, the multiplier is 252:
TP = (405/5) x 252
TP = 81 x 252
TP = 20,412
Note: This formula applies only to historical volatility on a variable chart. It does not apply to other chart types.
Now that you have the total number of periods per year, continue with the calculation of the historical volatility, by calculating the natural logarithm of the price change for each price in the specified time span of n periods:
LOGSi = LOG(Pi / Pi-1)
LOG: The natural logarithm function.
Pi: The current price.
Pi-1: The previous price.
Now that you have the natural logarithms of the price changes, calculate the total natural logarithms for the time span you are reviewing:
Tlogs: The total of the natural logarithm price ratio for the time span.
S: Indicates to sum all n natural logarithms.
LOGSi: The natural logarithm of the price change for period i.
N: The number of periods for the specified time span.
The next step is to calculate the average of the logs by dividing the total natural logarithm by the number of periods:
ALOGS = Tlogs / n
ALOGS: The average of the natural logarithms.
Tlogs: The total of the natural logarithm for the time span.
N: The number of periods for the specified time span.
The last calculation is to sum the squares of the difference between the individual natural logarithms for each period and the average natural logarithm:
SSD: The sum of the squared differences.
S: Indicates to total the squares of all n differences.
LOGSi: The natural logarithm of the price change for period i.
ALOGS: The average of the natural logarithms.
Now that the elements of the final formula are complete, the following formula calculates the historical volatility for a given period over a specified time span:
SSD: The sum of the squared differences.
n: The number of periods for the specified time span.
TP: The total number of trading periods for the year.
Due to the complexity of the formula, it is preferable to use a scientific calculator when attempting to manually calculate the historical volatility of a futures instrument.
Open the Preferences Tab in your Control Panel. Select the HVOL quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. HVOL Period: To specify the number of days used in calculating Historic Volatility, simply click on the box, highlight the current number, and type in a new value.
3. HVOL: Change the color, line style, and line thickness of the HVOL.
4. Use Relative Scale: When choosing this option, the 100% location is changed to the highest point value in the HVOL indicator.
5. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
Watch for bullish and bearish momentum signals in the KST indicator. When the KST turns upward, this is a bullish signal, and when the KST turns down, this is a bearish signal. More confirmation is given when the trigger line crosses the KST line as a result of the change in direction.
There are two lines: the trigger line and the KST line. The KST line is a result of the four moving averages smoothed as well as the Rate of Change or ROC. The trigger line is a moving average of the KST.
A buy signal occurs when the KST line is below the 0 line and crosses from below the trigger line to above the trigger line. A sell signal occurs when the KST line above the 0 line and crosses from above the trigger line to below the trigger line.
Example of Know Sure Thing
Open the Preferences Tab in your Control Panel. Select the KST quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. MA: Specify the number of days used in calculating the period and ROC period of the 1, 2, 3, and 4 moving average lines.
3. Trigger Period: Specify the number of days used in calculating the trigger period. Choose between a histogram or line.
4. Type: Choose if you would like to see KST as a histogram or line.
5. Calculation: Choose between Simple, Linear Weight, and Exponential.
6. KST/Trigger: Choose the color, line style, and line thickness of your KST and trigger lines.
7. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
8. Buy/Sell Arrows: Turns the display for buy/sell arrows on and off. You also have the option to change the color of the buy/sell arrows.
MACD was created in an attempt to determine the strength of a trend along with the direction of that trend. Gerald Appel created a system that looked at two exponential moving averages and the difference between those two averages. Looking at these moving averages of the market we are able to see clear buy and sell signals. We are also able to get a more accurate signal by averaging the difference in the two moving averages.
Computing this indicator requires the use of exponential moving averages. Exponential moving averages are different than simple moving averages; instead of looking at only the last few days and averaging them, the exponential averages look at all the prices and puts more weight on the most recent data. This type of weighted average gives a smoother average price that reacts quickly to market moves. The two averages of MACD move above and below a base line, which gives indication of the strength of the current move. This placement of the two averages in relationship to the base line is calculated by looking at the exponential moving average of the difference between the two averages. Even though the two averages may cross, the divergence, or true indication of the signal, is not shown until both averages cross the base line.
Keeping this in mind, an ideal buy signal is seen on a move where the shorter-term average moves above the other average and both averages cross above the base line of zero. A sell signal would be the opposite of this.
The histogram method of MACD is read as a straight line above or below the zero base line. This line represents the difference between the Moving Averages. When the moving averages move above the base line they are indicating a buy, and as the difference between the averages increases the lines will get taller.
The opposite is true of a sell signal. Track ‘n Trade Live's ability to display MACD in this fashion is vital because it allows you to read the strength of the current trend along with the signal to buy or sell.
When MACD is plotted as a histogram, the values used to plot the histogram are the differences between the two moving averages on each day. The “trigger” line that appears on this chart is an average of the histogram data, or a smoothed view of the histogram.
Using the MACD as a histogram will allow the trader to spot divergences between the indicator and the market price. A divergence is present when the market makes a higher high than the previous high, but the MACD histogram fails to make a corresponding higher high. This is considered to be a sign of weakness and a sell signal when the MACD breaks below the lowest point in between the divergent highs.
Bullish divergence is seen in an exact opposite fashion. Assume a market has been trending downward. The market has been consistently making lower lows, as has been the MACD histogram indicator. However, eventually the MACD fails to make a lower low, corresponding to the lower low in price. If the MACD histogram line crosses above the highest high in between the divergent lows, then technical lore says higher prices should follow. You also have the choice to view the MACD indicator in a simple line style, instead of the histogram. In this view there is no trigger line. The line style MACD gives buy and sell signals based off of the crossing of the two moving averages.
In this study, the oscillator is the simple difference between the first two exponential moving averages:
OSCt = (EMA1 - EMA2)
OSCt: The oscillator for the current period.
EMA1: The first exponential moving average.
EMA2: The second exponential moving average.
The second part of the study computes an exponential moving average of the oscillator:
EMAosct = EMAosct-1+ (k x (OSCt - EMAosct-1))
EMAosct: The exponential moving average of the oscillator.
OSCt: The oscillator for the current interval.
EMAosct-1: The exponential moving average of the oscillator for the previous interval.
k: The exponential smoothing constant.
Since the second value, EMAosct, is an exponential moving average, it rises and falls slower than the oscillator, and the two lines generate crossover points. These crossover points are the buy/sell signals.
If the study is displayed as a histogram, each value for the lines is calculated:
DIFFt = OSCt - EMAosct
DIFFt: The difference between the oscillator for the current interval and the exponential moving average of the oscillator.
OSCt: The oscillator for the current interval.
EMAosct: The exponential moving average of the oscillator.
For a line drawing, a buy signal occurs when the MACD crosses from below the trigger line to above the trigger line, and the trigger line is less than 0. A sell signal occurs when the MACD line crosses from above the trigger line to below the trigger line, and the trigger line is greater than 0. We recommend you turn on the 0 Value threshold line to make sure your trigger line is above/below 0 in meeting the buy/sell signal conditions. A histogram drawing with the trigger line works similarly.
For a histogram drawing, a buy signal occurs when the MACD value crosses from below the 0 line to above the 0 line. A sell signal occurs when the MACD value crosses from above the 0 line to below the 0 line.
Example of Moving Average Convergence/Divergence
Open the Preferences Tab in your Control Panel. Select the MACD quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
EMA Periods: The MACD is calculated using two exponential moving averages. To change the periods used in the formula, highlight the number and type in the new value desired.
Bull/Bear: Change the color, line style, and line thickness of the Bullish and Bearish lines.
Trigger Period: To change the number of days, click in the box, highlight the number, then type in the desired period.
Trigger: Check this box to hide the Trigger line. You can also change the color and line style of the Trigger.
6. Display as: The MACD indicator can be displayed differently. From the drop down menu, choose either to view it as a line or as a histogram.
Calculation: Choose how you would like your chart calculated. You can choose Standard Calculation or Extra Smoothing. Extra Smoothing is a proprietary formula developed by Lan H. Turner, president and CEO of Gecko Software, Inc. This method increases the movement in the MACD indicator and has shown to be more accurate (in Gecko Software’s market testing) than the standard calculation. Click the Extra Smoothing option to test its accuracy for yourself. Its relationship to the MACD is similar to the relationship between the Fast and Slow Stochastics - think of this indicator as the “Fast MACD.”
Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
Buy/Sell Arrows: You have the option to display buy/sell arrows on your chart according to the indicator. Click the arrow to view Displayed or Not Displayed. You also have the option to change the color of the buy/sell arrows.
The theory says that as money flows into the equity, or volume increases, the MFI will increase its rate of climb. As money flows out of the equity, volume decreases, and the MFI will decrease its rate of climb. The MFI is a classic overbought/oversold indicator based on a 0-100 scale. When the MFI reaches up above the top threshold, which is traditionally set at 75-80%, the equity is considered overbought and a retracement is anticipated. When the MFI line reaches below the 20-25% threshold, the underlying equity is considered oversold and a reversal is anticipated once again.
The "flow" of money is the product of price and vlume and shows the demand for a security and a certain price. The money flow is not the same as the Money Flow Index but rather is a component of calculating it. So when calculating the money flow, we first need to find the average price for a period. Since we are often looking at a 14-day period, we will calculate the typical price for a day and use that to create a 14-day average.
The calculation of MFI is here:
Money Flow = (Typical Price) x (Volume)
The MFI compares the ratio of "positive" money flow and "negative" money flow. If typical price today is greater than yesterday, it is considered positive money. For a 14-day average, the sum of all positive money for those 14 days is the positive money flow. The MFI is based on the ratio of positive/negative money flow (Money Ratio).
Finally, the MFI can be calculated using this ratio:
A buy signal occurs when the MFI line crosses from below the lower threshold to above the lower threshold. A sell signal occurs when the MFI line crosses from above the upper threshold to below the upper threshold.
Example of Money Flow Index
Open the Preferences Tab in your Control Panel. Select the MFI quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Update All MFI's will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. MFI Period: To specify the number of days used in calculating the MFI, click in the box, highlight the current number, and type in a new value.
3. MFI: Change the color, style, and thickness of the line.
4. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
5. Buy/Sell Arrows: Turns the display for buy/sell arrows on and off. You also have the option to change the color of the buy/sell arrows.
Momentum measures the rate of change in prices rather than actual price levels themselves. By measuring this rate of incline or decline, momentum tells whether the current trend is strengthening or weakening. If prices are rising and the momentum indicator is above the zero line, then the trend is gaining strength. If prices were rising but the indicator was sagging or went below the zero line, then we would interpret this as a sign of a coming change in trend. This is true because, although prices were still increasing, they are doing so at a decreasing rate.
The reverse would be true during a declining market. For example, think of a race car gaining 20 miles an hour each lap, until it starts to only gain 15 miles an hour, then 10 mph, then 5 mph until eventually it reaches its top speed. Like a race car, a market can not sustain growing momentum forever, and in many occurrences momentum slows before prices change direction.
Typically, the trade signals are to buy when the momentum indicator crosses from below the zero line to above it. This indicates that a new upward trend has begun, as the market is able to violate resistance levels and continue higher with increasing speed.
The sell signal would be to sell when the line crosses from above the zero line to below it. This indicates that the market is picking up speed to the downside and should be able to violate support areas. It is in this way that this unique indicator is a trend following tool.
Another way to use momentum is to establish regions of overbought or oversold. For example, in a declining market, the prices continue downward and the momentum indicator moves toward more negative but begins to level out. We would be looking for a buy signal when the indicator turned upward and out of that oversold region. It is in this way that momentum can sometimes shift ahead of the price movement. This use of the momentum indicator is a counter trend usage.
In either implementation of this indicator, the key is divergence. Seeing momentum make lower highs while prices are making higher highs, or momentum making higher lows while prices are making lower lows. Being aware of a difference in price movement and the momentum level can help the trader make informed trading decisions.
The general formula to calculate momentum is here:
MOMt = Pi - Pi-n
MOMt: The momentum indicator for the current period.
Pi: The price of the i interval.
Pin: The price n intervals ago.
n: The number of intervals or length specified.
Example: Assume the current price is 7470. This example examines a momentum study using a length of ten trading intervals. The price ten intervals ago is 7400:
MOM = 7470 - 7400 = +70
The momentum value can have a very broad range. It is a function of the length you select for the momentum and the volatility of the underlying futures contract. Thus, it could swing very wide and wildly about the zero line.
If we draw MOM with the MOMMA line, a sell signal occurs when the MOM value crosses from above the MOMMA line to below the MOMMA line, and the MOMMA line is greater than 0. A buy signal occurs when the MOM value crosses from below the MOMMA line to above the MOMMA line, and the MOMMA line is less than 0.
If we draw MOM without the MOMMA line, a buy signal occurs when the MOM value crosses from below the 0 line to above the 0 line. A sell signal occurs when the MOM value crosses from above the 0 line to below the 0 line.
Example of Momentum
Open the Preferences Tab in your Control Panel. Select the MOM quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Update All MOMs will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. MOM Period: To specify the number of days used in calculating the Momentum (MOM) indicator, click in the box, highlight the current number, and type in a new value.
3. MOM/MA: Change the color, line style, and line thickness of the Moving Average and Momentum lines.
4. Show MOMMA with Period: Uncheck this box if you would like to hide the Momentum Moving Average (MOMMA) line. You can also specify the number of days used in calculating the MOMMA line.
5. Display as: The Momentum Indicator can be displayed differently. From the drop-down menu, choose either to view it as a line or as a histogram.
6. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
7. Buy/Sell Arrows: You have the option to display buy/sell arrows on your chart according to the indicator. Click the arrow to view Displayed or Not Displayed. You also have the option to change the color of the buy/sell arrows.
The concept behind the OBV is that changes will be reflected in the OBV prior to the markets change. A rise in volume is meant to indicate a rise in money inflows to the security. Once the public continues to add money, the price of the equity should continue to rise.
Directional movement in the indicator gives foresight into the market direction. A rise in the OBV indicator gives the trader the indication that markets are on the rise; a dropping OBV is an indication of a weakening market and lower prices are soon to follow.
When market divergence is seen within the OBV indicator, one must take heed that the market is either weakening in a bullish trend, or strengthening in a bearish trend, and a market reversal is about to occur. The actual calculated value of the line itself is of little use, but the visual movement of the line is what’s important to the trader. An inclining line is the indication of a strengthening market, and a declining line is representative of declining market strength.
Open the Preferences Tab in your Control Panel. Select the OBV quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Update All OBVs will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Line: Choose the color, line style, and line thickness of your line.
3. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
The PPO indicator shows the relationship between two moving averages. The PPO indicator is a modification of the highly regarded and effective MACD indicator. This enhancement provides us the ability to receive the differences between the two moving averages as a percentage. This allows the trader to easily compare stocks with different prices. For example, a PPO result of 20 means that the short term average is 20% above the long term average.
Calculation
To calculate the PPO, subtract the 26-day exponential moving average (EMA) from the nine-day EMA and divide this difference by the 26-day EMA. The end result is a percentage that tells the trader where the short-term average is relative to the longer-term average.
PPO = (Fast_EMA - Slow_EMA) / Fast_EMA
Additionally, the PPO histogram can be calculated by using the MA of a PPO itself:
PPO_Histogram = PPO - EMA_PPO
A buy signal occurs when the PPO line crosses from below the trigger line to above the trigger line. A sell signal occurs when the PPO line crosses from above the trigger line to below the trigger line.
Example of Percent Price Oscillator
Open the Preferences Tab in your Control Panel. Select the PPO quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. PPO Periods: Specify the number of days to be used in calculating the PPO.
3. PPO: Choose the color, line style, and line thickness of your PPO line.
4. Trigger: Specify the number of days used in calculating the Trigger.
5. Line: Choose the color, line style, and line thickness of your Trigger line.
6. Build With: Choose either Close, Open, High, or Low to build with.
7. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
8. Buy/Sell Arrows: Turns the display for buy/sell arrows on and off. You also have the option to change the color of the buy/sell arrows.
Centerline Crossovers: The PVO oscillates above and below the zero line. A PVO above zero indicates that volume levels are generally above average and relatively heavy. When the PVO is below zero, volume levels are generally below average and light. When PVO is positive, the shorter EMA of volume is greater than the longer EMA of volume. When PVO is negative, the shorter EMA of volume is less than the longer EMA of volume.
Directional Movement: The general overall direction of the PVO gives the trader a visual of market momentum and direction. A rising PVO signals volume levels are increasing, and a falling PVO signals volume levels are decreasing.
Moving Average Crossovers: The last variable in the PVO forms the signal line. For example, PVO (12,26,9) would include a 9-day EMA of PVO as well as a histogram representing the difference between the PVO and its 9-day EMA. When PVO moves above its signal line, volume levels are generally increasing. When PVO moves below its signal line, volume levels are generally decreasing.
Movements in the PVO are completely separate from price movements. Movements in PVO can correlate with price movements to assess the degree of buying or selling pressure.
Calculation
The calculation of PVO is here:
Volume Oscillator (%) - PVO = [(Vol 12-day EMA - Vol 26-day EMA)/Vol 12-day EMA] x 100
Increasing and decreasing the exponential moving average variables changes the PVO to reflect a longer or shorter trading time period. The absolute values of the PVO indicator are not as important as the crossovers of the moving averages as well as a crossover above or below the zero line.
There are three additional methods on the next page of acquiring market strength and weakness information from the PVO.
When the PVO crosses above the zero line, volume is increasing and an increase in price is anticipated.
When the PVO crosses below the zero line, volume is decreasing and a decrease in price and a weakening market are anticipated.
Simple directional movement can be one of the greatest strengths of the PVO indicator. When the line is ascending, volume is increasing, so therefore markets should increase. When the line is descending, volume is decreasing, therefore the market should weaken and decrease.
Buy/Sell Signals
A buy signal occurs when the PVO line crosses from below the trigger line to above the trigger line. A sell signal occurs when the PVO line crosses from above the trigger line to below the trigger line.
Example of Percent Volume Oscillator
Preferences
Open the Preferences Tab in your Control Panel. Select the PVO quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Update All PVOs will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. PVO Periods: Specify the number of days to be used in calculating the PVO.
3. PVO: Choose the color, line style, and line thickness of your line.
4. Trigger: Specify the number of days used in calculating the trigger period.
5. Line: Choose the color, line style, and line thickness of your trigger line.
6. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
7. Buy/Sell Arrows: Turns the display for buy/sell arrows on and off. You also have the option to change the color of the buy/sell arrows.
Williams’s basic rule is simple: when the %R is lower than 20% and becomes greater than 20%, it is interpreted as a buy signal. Conversely, when the %R is higher than 80% and becomes lower than 80%, a sell signal is activated.
Changing the sensitivity of the indicator to work for you is essential to making the study a better tool. The longer the period for the %R, the less sensitive it will be. The indicator will move less but will be more smoothed. A number of technical traders use a value that is less volatile, or in other words, a larger value. Many traders find it better to use a strategy where the market leaves the areas of overbought/ oversold before entering a trade position. In either case, using solid exit strategies is important with this indicator.
Calculation
You must first determine the highest high and lowest low for the length of the interval. This is the trading range for the specified interval:
%Rt = ( (Highn - Closet) / (Highn - Lown) ) x -100
%Rt: The percent of the range for the current period.
Highn: The highest price during the past n trading periods.
Closet: The closing price for the current period.
Lown: The lowest price during the past n trading periods.
n: The length of the interval.
Example: Assume the market is Treasury Bills. The high for the past ten trading intervals is 9275, and the low is 9125. The closing price in the current period is 9267.
This is what you get if you substitute those values in the equation:
%R = ( (9275 - 9267) / (9275 - 9125) ) x 100 br /> = (8 / 150) x 100
= 5.33
%Rt = ( (Closet - Lown) / (Highn - Lown) ) x -100
Buy/Sell Signal
A buy signal occurs when the %R line crosses from below the lower threshold to above the lower threshold. A sell signal occurs when the %R line crosses from below the upper threshold to below the upper threshold.
Example of Williams %R
Preferences
Open the Preferences Tab in your Control Panel. Select the %R quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Update All %Rs will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. %R Period: To specify the number of days used in calculating %R simply click in the box, highlight the current number, and type in a new value.
3. %R: Change the color, style, and thickness of the line.
4. Calculation: Choose between common or updated calculations.
5. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
6. Buy/Sell Arrows: Turns the display for buy/sell arrows on and off. You also have the option to change the color of the buy/sell arrows.
The ROC indicator is used to help a trader determine the rate at which a market is either increasing or decreasing in strength or weakness. A rising rate of change indicates an advancing market, while a decreasing rate of change indicates a declining market. As the rate of change line approaches the centerline, the rate of change is considered to be in equilibrium. This is somewhat of a misnomer, since the ROC is on a relative scale and scales against historical rates. What is equilibrium today will not be the equilibrium line down the road, and what is not equilibrium today will appear to be so from a historical point of view.
Comparing the ROC’s of different time-spans improves the accuracy of the analysis. A 12 month period is usually the most reliable for long-term trends, and a 3 or 6 month period works well for intermediate trends. A 10 or 12-day ROC is a good short-term indicator, oscillating in a fairly regular cycle.
The lower the ROC, the more undersold the market and the more likely a recovery. Although the opposite may hold true in that the higher the ROC, the more overbought the market, both extremes can indicate the formation of a sideways channel.
Calculations
The calculation for the ROC is here:
ROC = 100 x (Today’s close - Close 10 periods ago) / (Close 10 periods ago)
Example of Rate of Change
Preferences
Open the Preferences Tab in your Control Panel. Select the ROC quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Update All ROCs will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Period: Specify the number of days to be used in calculating the SRSI.
3. Line: Choose the color, line style, and line thickness of your line.
4. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
RSI computes the difference in recent prices as a solid line and plots this line on a scale similar to the scale used by Stochastics. The area above 70 is generally considered to be the overbought region, and the region below 30 is referred to as the oversold region. Simply selling in the overbought region and buying when the RSI is in the oversold region is not a consistent method of trade. Trade signals are not generated until the RSI leaves these regions. A sell signal would not be present until the RSI has begun sloping down and leaves the 70 region.
A buy signal, in the simple methodology associated with this pattern, is derived when RSI leaves the oversold region, crosses from below 30 to above it. Just like sell signals, RSI buy signals are present when the market begins to turn and the indicator leaves the oversold region.
Another use of the RSI is to look for a divergence in prices, in the case of a market making higher highs or lower lows and the RSI failing to follow suit. This difference in the indicator and the market could be a signal that the market lacks the momentum to continue its current price direction. So, you may be able to take a position sooner using this strategy, than you would with the previous way. Wilder says that this divergence is “the single most indicative characteristic of the RSI.”
In its calculation the RSI indicator uses a moving average of price changes over the period. You can select which type of moving average is used to produce the desired amount of smoothing on the RSI indicator.
Calculation
The RSI computations are not difficult, but they are tedious. You first calculate the difference between the current closing price and the previous closing price:
DIFt = Closet - Closet-1
If that difference is a positive value, then it is an up period, which means the current close is higher than the previous close. If the difference is negative, then it is a down period, which means the current close is below the previous close. The DOWN value is always a positive number for all computations. It is the absolute value of a negative DIF. The worksheet on the next page shows the calculations needed to create a 9 period RSI.
Day | Current Close | Previous Close | Dif | Up | Down |
1 | 7450 | 7430 | +20 | 20 | 0 |
2 | 7460 | 7450 | +10 | 10 | 0 |
3 | 7470 | 7460 | +10 | 10 | 0 |
4 | 7480 | 7470 | +10 | 10 | 0 |
5 | 7485 | 7480 | +5 | 5 | 0 |
6 | 7490 | 7485 | +5 | 5 | 0 |
7 | 7480 | 7490 | -10 | 0 | 10 |
8 | 7470 | 7480 | -10 | 0 | 10 |
9 | 7455 | 7470 | -15 | 0 | 15 |
Totals | 60 | 35 |
You now compute the up and down averages:
Ut = (UP1 +... + UPn) / n
Dt = (DOWN1 +... + DOWNn) / n
UT: The up average for the current period.
DT: The down average for the current period.
UPn: The UP value for the nth period.
DOWNn: The DOWN value for the nth period.
n: The number of periods for the RSI.
Use the values from the worksheet to find the up average:
U = 60 / 9
= 6.67
Use the same values to find the down average:
D = 35 / 9
= 3.89
The general formula for the RSI:
RSIt = ( UT / (UT + DT) ) x 100
Use the general formula with the above values:
RSI = ( 6.67 / ( 6.67 + 3.89 )) x 100
= 63.16
Assume the market continues the downward trend. The next DIF value is -15, which sets the UP value to 0 and the DOWN value to 15. Calculate the next up and down average by using Wilder’s accumulative moving average technique:
UT = ( (UT-1 x (n-1) ) + UPt) / n
= ( (6.67 x (9 -1) ) + 0) / 9
= 5.93
DT = ( ( DT-1 x (n-1) ) + DOWNt) / n
= ( ( 3.89 * (9 - 1) ) + 15) / 9
= 5.12
The value for the new RSI equals 53.67:
RSI = ( (5.93) / (5.93 + 5.12)) x 100
= 53.67
Buy/Sell Signals
A buy signal occurs when the RSI line crosses from below the lower threshold to above the lower threshold. A sell signal occurs when the RSI line crosses from above the upper threshold to below the upper threshold.
Example of Relative Strength Index
Open the Preferences Tab in your Control Panel. Select the RSI quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Update All RSIs will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. RSI Period: To specify the number of days used in calculating the RSI click in the box, highlight the current number, and type in a new value.
3. RSI: Change the color, line style, and line thickness of the RSI.
4. Calculation: Choose between Exponential, Simple, and Wilder’s Smoothing calculations.
5. Thresholds: You are given the option to view four threshold lines in the Indicator Window. The crossing of the RSI line below the Upper Threshold is a buy signal. The crossing of the RSI line above the Lower Threshold is a sell signal. You can also change the color of the threshold lines.
6. Buy/Sell Arrows: You have the option to display buy/sell arrows on your chart according to the indicator. Click the arrow to view Displayed or Not Displayed. You also have the option to change the color of the buy/sell arrows.
The Stochastics RSI is a combination of these two indicators, where the %K within the Stochastics formula is replaced by the RSI. The formula is then set on a 0 to 100 scale for both the Stochastics indicator as well as the RSI is read in much the same manner as the traditional RSI. When the SRSI reaches up into the upper region above the upper threshold line, the market is considered overbought and anticipate a reversal of the trend. When the SRSI reaches down into the lower region below the lower threshold, the market is considered oversold and a reversal is anticipated. Traditionally, the upper threshold marker is set at 70% and the lower marker is set at 30%.
Calculation
The calculation for the SRSI is here:
StochRSI = (RSI - LowRSIn) / (HighRSIn - LowRSIn)
RSI: The current level of the RSI indicator.
LowRSIn: The lowest level the RSI reached over the last n periods.
HighRSIn: The highest level the RSI reached over the last n periods.
Buy/Sell Signals
A buy signal occurs when the SRSI line crosses from below the lower threshold to above the lower threshold into the channel. A sell signal occurs when the SRSI line crosses from above the upper threshold to below the upper threshold into the channel.
Example of Stochastic Relative Strength Index
Preferences
Open the Preferences Tab in your Control Panel. Select the SRSI quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Update All SRSIs will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. SRSI Period: Specify the number of days to be used in calculating the SRSI.
3. Underlying RSI Period: Specify the number of days used in calculating the Underlying RSI.
4. Calculation: Choose from Exponential, Simple, or Wilder’s Smoothing.
5. Line: Choose the color, line style, and line thickness of your line.
6. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
7. Buy/Sell Arrows: Turns the display for buy/sell arrows on and off. You also have the option to change the color of the buy/sell arrows.
Slow Stochastics are interpreted the same as Fast Stochastics. Quite often the faster of the two indicators moves in and out of the overbought/oversold regions quickly.
Calculation
The calculations for the slow stochastic are similar to the normal stochastic. The first step in computing the stochastic indicator is to determine the n period high and low. Suppose you specified twenty periods for the stochastic. Determine the highest high and lowest low during the last twenty trading intervals. It determines the trading range for that time period. The trading range changes on a continuous basis.
The calculations for the %K is here:
%Kt = ( (CloseT - LowN) / (HighN - LowN) ) x 100
%Kt: The value for the first %K for the current time period.
CloseT: The closing price for the current Time period.
LowN: The lowest low during the N periods.
HighN: The highest high during the N time periods.
N: The value you specify.
Once you obtain the %K value, you start computing the %D value, which is an accumulative moving average. Since the %D is a moving average of a moving average, it requires several trading intervals before the values are calculated properly. If you specify a 20 period stochastic, the software system requires 26 trading intervals before it can calculate valid %K and %D values. The formula for the %D is here:
%DT = ( (%DT-1 x 2) + %Kt) / 3
%DT: The value for %D in the current period.
%DT-1: The value for %D in the previous time period.
%Kt: The value for %K in the current period.
The values 2 and 3 are constants. You specify the constants and the length of the time period to examine for the trading range.
Once the %K and %D values for the normal stochastic are derived, the slow stochastic can be computed. The formula for the slow stochastic is here:
%KSLOW = %DNORMAL
%DSLOWt = ( ( %D SLOWt-1 x 2 ) + %K SLOWt-1 ) ) / 3
%KSLOW: The %D for the normal stochastic.
%DSLOWt: Slow %D value for the current period.
%DSLOWt-1: The slow %D for the previous period.
%KSLOWt-1: The slow %K for the previous period.
The values 2 and 3 are the smoothing constants. You may select different values.
Buy/Sell Signals
A buy signal occurs when the %K line crosses from below %D to above %D and both lines are less than the lower threshold. A sell signal occurs when the %K line crosses from above the %D line to below the %D line and both lines are greater than the upper threshold.
Example of Slow Stochastics
Preferences
Open the Preferences Tab in your Control Panel. Select the SSTO quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Update All SSTOs will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. SSTO Period: To specify the number of days used in calculating the Slow Stochastics indicator, click in the box, highlight the number, and type in a new value.
3. Smoothing: To specify the number of days used in calculating smoothing, click in the box, highlight the number, then type in a new value.
4. %K/%D: Change the color, line style and line thickness of the %K and %D lines.
5. Calculation: Choose from Exponential, Simple, and Wilder’s Smoothing for the type of formula used to calculate the indicator.
6. Thresholds: You are given the option to view four threshold lines in the Indicator Window. The crossing of the %D line above the %K line is a sell signal and only confirmed if this crossing occurred above the Upper Threshold line. The crossing of the %D line below the %K line is a buy signal and only confirmed if this crossing occurred below the Lower Threshold line. You can also change the color of the threshold lines.
7. Buy/Sell Arrows: You have the option to display buy/sell arrows on your chart according to the indicator. Click the arrow to view Displayed or Not Displayed. You also have the option to change the color of the buy/sell arrows.
TRIX was designed to filter out the minor, less significant moves within a market trend. This is done, just as other traditional indicators have done in the past, by utilizing multiple moving averages.
Convergence and Divergence are common uses of the TRIX indicator. Adding the trigger line crossover provides the trader with a Buy/Sell Signal generated from the crossing of the two moving averages.
Calculation
To calculate TRIX, first pick a period with which to create an exponential moving average of the closing prices. For a 15-day period the calculations would look like this:
Calculate the 15-day exponential moving average of the closing price.
Calculate the 15-day exponential moving average of the moving average calculated in step #1.
Calculate the 15-day exponential moving average of the moving average calculated in step #2.
The result is triple exponentially smoothing the moving average of closing prices, greatly reducing volatility.
Finally, calculate the 1-day percent change of the moving average calculated in step #3.
Buy/Sell Signals
A buy signal occurs when the TRIX value crosses from below the trigger line to above the trigger line. A sell signal occurs when the TRIX value crosses from above the trigger line to below the trigger line.
Example of Triple Exponential Average
Preferences
Open the Preferences Tab in your Control Panel. Select the TRIX quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Update All TRIXs will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. Period: Specify the number of days to be used in calculating the SRSI.
3. Line: Choose the color, line style, and line thickness of your line.
4. Trigger Period: Specify the number of days used in calculating the Underlying RSI.
5. Line: Choose the color, line style, and line thickness of your trigger line.
6. Display as: Choose if you want to see a histogram or line.
7. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
8. Buy/Sell Arrows: Turns the display for buy/sell arrows on and off. You also have the option to change the color of the buy/sell arrows.
This indicator, as with the RSI indicator, works on an overbought and oversold region. Mr. Williams states that the upper threshold should start at 70% and the lower threshold at 30%, but depending on the market, the volatility, and the settings, you may need to adjust the thresholds to either higher or lower settings to obtain signals.
Once the ULT line crosses above the upper threshold into the overbought region, it is time to anticipate a reversal in price and lower prices to ensue. When the ULT line crosses below the lower threshold, it is time to anticipate a reversal in price and anticipate prices to rise once again. Many traders like to use a 50% line to reconfirm price action. Crossing the 50% line is a confirmation of the overall trend.
The True Low (TL) is the lower of today’s low or yesterday’s close. Calculate today’s Buying Pressure (BP) like this:
BP = Today’s close - Today’s TL
Calculate today’s True Range (TR) by finding the largest outcome of one of the following equations:
TR = Today’s High - Today’s Low
Today’s High - Yesterday’s Close
Today’s Close - Today’s Low
Calculate BPSum1, BPSum2, and BPSum3 by adding up all of the BPs for each of the three specified time frames. Calculate TRSum1, TRSum2, and TRSum3 the same way with the TR’s.
The Raw Ultimate Oscillator (RawUO) is calculated here:
RawUO = 4 x (BPSum1 / TRSum1) + 2 x (BPSum2 / TRSum2) + (BPSum3 / TRSum3)
The Final Ultimate Oscillator is calculated here:
FUO = [ RawUO / (4 + 2 + 1) ] x 100
A buy signal occurs when the ULT line crosses from below the lower threshold to above the lower threshold. A sell signal occurs when the ULT line crosses from above the upper threshold to below the upper threshold.
Open the Preferences Tab in your Control Panel. Select the ULT quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Update All ULTs will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
2. ULT Periods: Specify the number of days to be used in calculating the SRSI.
3. Line: Choose the color, line style, and line thickness of your line.
4. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.
5. Buy/Sell Arrows: Turns the display for buy/sell arrows on and off. You also have the option to change the color of the buy/sell arrows.
Volume is a measurement of the number of contracts traded in a day. It is a sign of market activity. In liquid markets, these numbers will be consistently higher than in a thin or illiquid market. These numbers are always a day behind, because it takes the exchange that long to tabulate these figures. When displayed, Track 'n Trade High Finance offsets these values to put them beneath their respective data in the chart, consequently there is not a value for volume for the most recent day of any contract. Volume indicates participation and urgency. This tells the trader which market is the correct one to be in based on its participation.
Volume measures the number of contracts that changed hands during that trading session. This indicator of market activity can show whether trade was heavy or light. That will give you an idea of the possible volatility present in that market. VOL does not give straight buy or sell signals or have set trading rules. Rather it shows the cyclical tendencies of the market. The flow of the underlying market can be represented. Looking at VOL shows whether new buyers or sellers are entering the market or if they are liquidating positions.
There are basic common sense rules for this indicator. If the prices are up and VOL is increasing, the market is strong. If the prices are up and VOL is declining, the market is getting weaker. If the prices are down and VOL is rising, the market is getting stronger. If the prices are down and VOL is declining, the market is getting weaker.
In bull markets, volume tends to increase during rallies, and tends to decrease on reactions. In bear markets, volume tends to increase on declines and decrease during rallies. Trading volume usually increases dramatically at tops and bottoms. Looking at the volume can help you determine the liquidity of the market.
This study has no computations. The values for volume are transmitted from the exchanges. However, the actual volume figures are always one day behind price information. You will not know Monday's volume until Tuesday at approximately noon (for U.S. markets - central time). That is due to the exchanges and their reporting requirements.
Open the Preferences Tab in your Control Panel. Select the VOL quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)
Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.
Volume: Choose the color, line style, and line thickness of your Volume line.
Alternate: Select to view the Volume indicator in two colors. Choose the color, line style, and line thickness of your Alternate line.
Compare with: When the Alternate option is selected, you can compare the price day to day based on Previous Period Open (high, low, and close) or the Current Period Open (high or low).
Display as: The VOL indicator can be displayed differently. From the dropdown menu, choose either to view it as a line or as a histogram.
View up to four Thresholds at values and colors of your choice. When calculating buy/sell signals, Threshold 1 is used as the upper threshold and Threshold 2 is used as the lower threshold (default values set at 80 and 20).