Indicators

Moving Average (MA)

The Moving Average is the average of a security’s price over a specified number of periods. The formula is:

$${\text{MA}}_n=\frac{P_1+P_2+\cdots +P_n}{n}$$

• $P_1,P_2,\dots ,P_n$ are the prices at each period.
• $n$ is the number of periods.

Exponential Moving Average (EMA)

The Exponential Moving Average gives more weight to recent prices. The formula is:

$${\text{EMA}}_t=\left(P_t\times \alpha +{\text{EMA}}_{t-1}\times (1-\alpha )\right)$$

Where:

$$\alpha =\frac{2}{n+1}$$

• $P_t$ is the current price.
• ${\text{EMA}}_{t-1}$ is the EMA value of the previous period.
• $n$ is the number of periods.

Bollinger Bands (BOLL)

Bollinger Bands consist of a middle band (which is usually a 20-period MA) and two outer bands. The formula is:

• Middle Band (MB): $\text{MB}={\text{MA}}_n$

• Upper Band (UB): $\text{UB}=\text{MB}+(k\times \sigma )$

• Lower Band (LB): $\text{LB}=\text{MB}-(k\times \sigma )$

Where:

• $\sigma$ is the standard deviation of the prices over the past $n$ periods.
• $k$ is the number of standard deviations away from the middle band, typically set to 2.

Parabolic SAR (SAR)

The Parabolic SAR (Stop and Reverse) is calculated using the following formula:

• SAR Current = SAR Previous + [AF * (EP - SAR Previous)]

Where:

• SAR Previous: The SAR value of the previous period.
• AF (Acceleration Factor): Starts at 0.02 and increases by 0.02 each time a new extreme point (EP) is reached, up to a maximum of 0.20.
• EP (Extreme Point): The highest high or lowest low in the current trend.

SAR Calculation Process:

• In an uptrend, the SAR value is calculated by increasing the SAR of the previous period.
• In a downtrend, the SAR value is calculated by decreasing the SAR of the previous period.

Moving Average Convergence Divergence (MACD)

The MACD is calculated as follows:

• MACD Line = 12-day EMA - 26-day EMA
• Signal Line = 9-day EMA of the MACD Line
• MACD Histogram = MACD Line - Signal Line

Where:

• EMA: Exponential Moving Average.
• The most common settings are 12, 26, and 9 days for the EMA.

KDJ Indicator

The KDJ indicator is an extension of the Stochastic Oscillator. It includes three lines: K, D, and J.

• %K = (Current Close - Lowest Low) / (Highest High - Lowest Low) * 100
• %D = 3-day SMA of %K
• %J = 3 * %K - 2 * %D

Where:

• Lowest Low: The lowest low over a specific period (usually 14 days).
• Highest High: The highest high over a specific period (usually 14 days).
• SMA: Simple Moving Average.

Relative Strength Index (RSI)

The RSI is calculated using the following formula:

• RSI = 100 - [100 / (1 + RS)]

Where:

• RS (Relative Strength) = Average Gain / Average Loss
• Average Gain: The average of all positive price changes over a specific period (typically 14 days).
• Average Loss: The average of all negative price changes over the same period.

RSI Calculation Process:

1. Calculate the Average Gain and Average Loss over the initial 14 periods.
2. Continue to smooth the averages as new data comes in.
3. Compute the RS and then use the RSI formula.

These formulas are widely used in technical analysis for identifying trends, reversals, and potential entry/exit points in trading.