Reading Assignments: Indicators

TA & Algo Trading Course
#181

  1. Moving Average Convergence Divergence - is used for traders to look at trends get insight on short term moves.

  2. MACD vs RSI - RSI tracks overbought or oversold price markers while MACD is a trend gauge.

  3. On Balance Volume - measuring volume to confirm up and down trends. Ideally a rising volume should be accompanied by a rising price and vice versa.

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#182

  1. Moving Average Convergence Divergence (MACD) is an oscillating indicator (both trend-following & momentum indicator) that help traders quickly spot increasing short-term momentum. Made up of 2 moving averages (2 lines on a chart) that have different time periods, MACD helps identify points in the price chart where the trend might be accelerating. When a crossover by 2 lines (aka 2 indicators on a chart) occur, traders use this cross point as an entry signal: as price crosses above a moving average, it can be used as a buy signal, and when the price crosses below a moving average, it can be used as a sell signal.
    One basic MACD strategy is to look at which side of zero the MACD lines are on in the histogram below the chart. If the MACD lines are above zero for a sustained period of time, the stock is likely trending upwards. Conversely, if the MACD lines are below zero for a sustained period of time, the trend is likely down.

  2. Another oscillating indicator is the relative strength index (RSI) but, unlike the MACD, its movement is contained between zero and 100, which provides a different information: a price that is overbought is due for a correction OR it is due for a bounce if oversold. Also, MACD is generally used to gauge the trend and overall strength of the market while RSI is generally used to gauge overbought/oversold conditions. One way to interpret the RSI is by viewing the price as “overbought”—and due for a correction—when the indicator in the histogram is above 70, and viewing the price as oversold—and due for a bounce—when the indicator is below 30. In a strong uptrend, the price will often reach 70 and beyond for sustained periods of time. For downtrends, the price can stay at 30 or below for a long time. While general overbought and oversold levels can be accurate occasionally, they may not provide the most timely signals for trend traders. An alternative is to buy close to oversold conditions when the trend is up and place a short trade near an overbought condition in a downtrend. For example, suppose the long-term trend of a stock is up. A buy signal occurs when the RSI moves below 50 and then back above it. Essentially, this means a pullback in price has occurred. So, the trader buys once the pullback appears to have ended (according to the RSI) and the trend is resuming. The 50-levels are used because the RSI doesn’t typically reach 30 in an uptrend unless a potential reversal is underway. A short-trade signal occurs when the trend is down and the RSI moves above 50 and then back below it.

  3. Volume itself is a valuable indicator, and On-Balance Volume (OBV) measures volume flow (positive/negative) and is generally used as a momentum indicator and identify divergence in price action. The indicator measures cumulative buying and selling pressure by adding the volume on “up” days and subtracting volume on “down” days. Ideally, the volume should confirm trends. A rising price should be accompanied by a rising OBV; a falling price should be accompanied by a falling OBV. If OBV is rising and the price isn’t, it’s likely that the price will follow the OBV in the future and start rising. If the price is rising and OBV is flat-lining or falling, the price may be near a top. If the price is falling and OBV is flat-lining or rising, the price could be nearing a bottom.

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#183

  1. Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of a security’s price. The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA.

  2. MACD measures the relationship between two EMAs, while the RSI measures price change in relation to recent price highs and lows.

  3. OBV takes a significant amount of volume information and compiles it into a single one-line indicator. The indicator measures cumulative buying and selling pressure by adding the volume on “up” days and subtracting volume on “down” days. It is used to confirm trends. If a price rises and the OBV rises too, it shows it is on an upward trend and vice versa.

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#184

  1. The moving average convergence divergence (MACD) is a kind of oscillating indicator that can help traders quickly spot increasing short-term momentum. It is used to provide either a buy or a sell signal to the trader by looking at the fast and the slow lines, where they meet and on which side of the 0 they are.

  2. The relative strength index RSI is another oscillating indicator but its movement is contained between zero and 100 so it provides different information than the MACD. Unlike MACD the RSI is always above 0 and it provides information about stock being overbought or oversold.

  3. OBV (On-balance volume) takes a significant amount of volume information and compiles it into a single one-line indicator. It confirm trends, a rising price should be accompanied by a rising OBV; a falling price should be accompanied by a falling OBV.

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#185

Loved your answers. It’s easy to understand. Great work. :clap:

Carlos Z.

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#186

  1. What is MACD and how is it used?
    Moving Average Convergence Divergence - MACD has a slow and a fast line. The MACD can be used for entry/exist signals and the fast line crosses the slow line. The MACD can also be used as the lines move above and below the zero line.

  2. What is the difference between MACD and RSI?
    Both indicators measure the momentum of an asset. The MACD measures the relationship between two EMAs, while the RSI measures price change in relation to recent price highs and lows.

  3. What is OBV and how is it used?
    On-balance volume (OBV) is a technical indicator of momentum, using volume changes to make price predictions.

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#187

  1. What is MACD and how is it used?
    MACD is a kind of oscillating indicator, based on the difference between the Esponential Movement Average on 12 periods and the same EMA 26. It moves between 2 and -2.
    A buy signal occurs when the fast line crosses through and above the slow line. A sell signal occurs when the fast line crosses through and below the slow line.

  2. What is the difference between MACD and RSI?
    Relative Strength Index wants to represent the strength of the asset. It is based on the price movements. It ranges from 0 to 100 and usually 14 periods are used to calculate RSI values. A buy signal occurs when the RSI moves below 50 and then back above it. A short-trade signal occurs when the trend is down and the RSI moves above 50 and then back below it.

  3. What is OBV and how is it used?
    On Balance Volume is an indicator that consider mainly the exchanged volume of the assets. OBV = previous OBV + exchanged volumes. It is important to consider the fork between OBV movement and price movement.

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#188
  1. MACD is an oscillating indicator used to signal trends and momentum. It is represented by two lines over a period of time, a fast line and a slow line. Distance between these two lines and whether they are above or below zero can serve as indicators as to whether probability might favor upward or downward momentum

(I don’t really understand what the fast line and the slow line represent? Are they price over time? Do they represent different time periods? This isn’t really made clear)

  1. The RSI indicates the strength of a price movement’s momentum relative to the (is it a percentage? is that why it’s 0-100?). It is contained from zero to 100 and is only a single line used to try and spot corrections, while the MACD is two lines indicated by actual price that are used to spot convergence.

  2. OBV is an indicator used to indicate buying and selling pressure based on trade volume. Rising trade volume might indicate an incoming rise in price.

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#189

What is MACD and how is it used?

A average move from 2 indicators, example: EMA for 50 days and EMA for 200days, this will tell you the average price over a period of 50 days and 200days, each EMA .

MACD takes two EMA (Exponential Moving Average), calculate the convergence between them, what you could see on the chart as crossovers (when this 2 lines cross each others), so basically when the short(50days, what you understan has “fast line” i guess) and long (200 days, “slow line”) is one below or above one another, will mean that the trend could change the direction for a period of time.

Here is a better resource link to go deep into MACD: MACD (Moving Average Convergence/Divergence Oscillator)

If you have any more questions, please let us know so we can help you! :slight_smile:

Carlos Z.

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#190
  1. What is MACD and how is it used?
    The MACD is a kind of oscillating indicator that helps traders spot increasing short-term momentum. It is used to identify when bullish or bearish momentum is high in order to identify entry and exit points for trades.
  2. What is the difference between MACD and RSI?
    The MACD measures between two moving averages. RSI, on the other hand, measures price change in relation to recent price highs and lows.
  3. What is OBV and how is it used?
    OBV is a technical indicator of momentum, using volume changes to make price predictions. It shows crowd sentiment that can predict bullish or bearish outcome
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#191

Response:

  1. MACD is the moving avg. convergence/divergence. It’s made up of 2 lines that are fast/slow and is measured within a band range.

  2. The differences between MACD and RSI is that a timeframe is used to calculate MACD whereas RSI measures the strength of buy and sell orders.

  3. OBV (on-balance volume) is used to show the difference between buying and selling pressure, then displaying it as a single-line indicator. The volume being measured should confirm price action on the chart. If there are discrepancies between them, then there will most likely be a reversal of action.

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#192
  1. The moving average convergence divergence (MACD) is a kind of oscillating indicator that can help traders quickly spot increasing short-term momentum.
    2.The relative strength index (RSI) is a momentum indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock.
    MACD measures the relationship between two EMAs(exponential moving averages), while the RSI measures price change in relation to recent price highs and lows.
  2. On-balance volume ( OBV) is a technical trading momentum indicator that uses volume flow to predict changes in stock price.
    OBV capitalizes on this idea by keeping a running tally of volume when price moves up or down. On up days, volume is added to the indicator. On down days, volume is subtracted from the indicator.
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#193

1.What is MACD and how is it used?
An oscillating indicator. Varies over time within a band and is both a trend-following and momentum indicator.

One MACD strategy is to keep an eye on where the MACD lines are relative to zero in the histogram below the chart. Above zero for prolonged time, means a case is likely trending upwards. Below zero, the trend is likely down. Potential buy signals happen when MACD moves over zero, and potential sell signals when it crosses below.

Additionally, signal line crossovers (one fast, one slow) can give buying and sell signals when the fast line crosses the slow line though and above or below respectively.

2.What is the difference between MACD and RSI?
The relative strength index (RSI) is also an oscillating indicator but it moves between 0-100.

The RSI can be considered as “overbought” and due for a correction above 70, and oversold and due for a bounce below 30. During extended periods of time, the RSI can stay around or above 70 (strong uptrend) and around or below 30 (oversold).

3.What is OBV and how is it used?
The on-balance volume (OBV) indicator measures cumulative buying and selling pressure by adding and compiling a significant amount of volume on “up” days and subtracting it on “down” days. Ideally, the volume confirms the trend so that a rising price is accompanied by a rising OBV and vice versa.

  • If the on-balance volume is rising and the price isn’t, the price will likely rise in a near future.

  • If the price is rising and OBV is moving horizontally or falling, it could be the signal of a top.

  • If the price is falling and OBV is moving horizontally or rising, it could be the indication of a bottom.

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#194

Loved your answers. It’s easy to understand. Great work. :clap:

Carlos Z.

#195

Thanks Carlos, I appreciate it!

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#196

  • What is MACD and how is it used?
    The moving average convergence divergence (MACD) is a kind of oscillating indicator; moving average smooths out price data by creating a constantly updated average price - this happens over a selected period of time; MACD works with two moving averages and checks the crossing between them (potential buying or selling signal)

  • What is the difference between MACD and RSI?
    The moving average convergence divergence (MACD) can help traders quickly spot increasing short-term momentum
    The relative strength index (RSI) is a momentum indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock; when the indicator in the histogram is above 70 - this could mean overbought market, when the indicator is below 30 - it could mean oversold market

  • What is OBV and how is it used?
    The on-balance volume (OBV) indicator measures cumulative buying and selling pressure by adding the volume on “up” days and subtracting volume on “down” days; by a rising price - the OBV should rise and by a falling price - the OBV should be falling; the OBV can indicate also prices on the top and at the bottom

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#197

  1. What is MACD and how is it used?
    A: The MACD is the “Moving Average Convergence Divergence” indicator. It is both a trend-following and momentum indicator. If the MACD lines are above zero for a sustained period of time, the stock is likely trending upwards. Conversely, if the MACD lines are below zero for a sustained period of time, the trend is likely down. When the signal lines crossover, this could be a good buy/sell signal.

  2. What is the difference between MACD and RSI?
    A: RSI is similar to MACD, but its movement is contained between 0 and 100. When its value is above 70 then it can be considered to be “overbought”; when it is below 30 it can be considered to be “oversold”.

  3. What is OBV and how is it used?
    A: OBV stands for: “On Balance Volume”. It takes a large amount of trading volume information and compiles it into a single one-line indicator. It measures cumulative buying and selling pressure by adding the volume on “up” days and subtracting volume on “down” days.
    Ideally, the volume should confirm trends. A rising price should be accompanied by a rising OBV; a falling price should be accompanied by a falling OBV.

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#198

1. What is MACD and how is it used?

The moving average convergence divergence (MACD) is a kind of oscillating indicator. An oscillating indicator is a technical analysis indicator that varies over time within a band (above and below a centerline; the MACD fluctuates above and below zero. It is both a trend-following and momentum indicator.

One basic MACD strategy is to look at which side of zero the MACD lines are on in the histogram below the chart. If the MACD lines are above zero for a sustained period of time, the stock is likely trending upwards. Conversely, if the MACD lines are below zero for a sustained period of time, the trend is likely down.2ï»ż Using this strategy, potential buy signals occur when the MACD moves above zero, and potential sell signals when it crosses below zero.

2. What is the difference between MACD and RSI?

RSI has values between 0 and 100 and indicates phases of overbought or oversold territories in the market. MACD gives more information on general trend on the market.

3. What is OBV and how is it used?

OBV shows market sentiment. It shows volume changes in regards to price predictions and therefore gives more info then the simple volume bars.

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#199

  1. MACD is an oscillating indicator used to determine trend based on the EMa and momentum based on the volume histogram. it helps to identify when the market is about to go long and short based on the Macd EMA crossover in confluence with the volume that identify the momentum

  2. Rsi is used to show over bought and over sold territory which is above 70% and below 30% this helps to identify potential retracement or price reversal while macd is based on moving average being above or below zero . which is mostly used to identify trends

  3. obv stands for on balance volume which help to identify the volume traded in a particular period of time, gives a clear picture if buyers or sellers are in control of the market

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#200

  1. MACD is Moving Average Convergence Divergence. This indicator is composed of two moving averages of price, with one averaging more recent time periods and the other more periods extending back further in time. This creates moving averages that are fast and slow to react to price changes, respectively. These lines travel in a fixed range of values, which creates what is known as an oscillator or oscillating indicator. MACD can thus serve as an indicator of momentum, by observing crossover events of the fast and slow moving average lines, as well as a trend indicator, with upward trending price identified by the MACD lines both maintaining a level above the center, or 0 line, for extended periods.

  2. RSI, or Relative Strength Index, is also an oscillating indicator, but rather than measure differences in price changes between moving averages of varying lengths of time, it is a measure of price changes relative to its own high and low price within a defined time period. This also serves as a momentum indicator, however, it is most often used to indicate overbought or oversold conditions, which can be potential points of price trend reversal.

  3. OBV, or On-Balance Volume, is a indicator calculated from volume data. Specifically, the OBV is a cumulative total of trade volume for an asset, and is calculated as the difference between the sum of volume on days where volume is up relative to the previous day and the sum of days where relative volume is down. This provides a measure of trade flow and momentum and is best applied as evidence to confirm validity of trends in price action identified by other indicators.

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