Glossary of Technical Analysis Terms (Technifilter Plus)
Absolute Breadth Index
The absolute difference between the number of NYSE advances and declines. Generally, high ABI values suggest market bottoms, and low ABI values suggest market highs.
The value of a number regardless of its sign (also known as the magnitude of the number). For example, the absolute value of negative 10 is 10; the absolute value of 10 is 10.
A weighted volume indicator based on the one-day change in price divided by the current dayâ€™s range. Generally, the ADI moves in the direction of price. For example, if the price drops on a given day, the volume is deemed negative.
The ratio of NYSE advances to declines and one of the standard market indicators that can be used to analyze general market trends. Generally, ADR values above 1.25 indicate oversold conditions; values below .75 indicate overbought conditions.
The most commonly understood method of writing a mathematical formula. A very simple example is 1 + 1 = 2 . TechniFilter Plus lets you enter formulas using this familiar method, but performs the calculation using the faster, more efficient post-fixed notation method.
Formula-writing tools that perform arithmetic operations (like multiplication and addition) on two time series to obtain a result series. A simple formula using an arithmetic combiner is C + L, which produces a result series in which each entry is the sum (+) of the close (C) and low (L) for a particular day in the two original time series. Arithmetic combiners include: + (addition), – (subtraction), / (division) and * (multiplication). There are nine arithmetic combiners and nine logical combiners.
Bands placed a user-specified percentage above and below a moving average on a bar or line chart.
Average Directional Movement
The 14-day exponential average of the Directional Movement Indicator (DX).
Average Directional Movement Rating
The average of Average Directional Movement (ADX) today and ADX 14 days ago.
Average True Range
The true range of an issueâ€™s price determined by taking an exponential average of the difference between the higher of todayâ€™s high and yesterdayâ€™s close, and the lower of todayâ€™s low and yesterdayâ€™s close.
Average True Range bands
Support/resistance lines that mark off an issueâ€™s average true price range, which is determined by taking an exponential average of the difference between the higher of todayâ€™s high and yesterdayâ€™s close, and the lower of todayâ€™s low and yesterdayâ€™s close.
Testing a strategy on a large historical database to evaluate its profitability before risking any money.
One of chart types produced by TechniFilter Plus. A bar chart is a graphic representation of an issueâ€™s high, low, close and open prices. Prices appear on the vertical axis. Time is on the horizontal axis. For each day, a line is drawn to connect the high and the low. Closes are represented by ticks to the right of the high-low bar; opens are represented by ticks to the left of the bar. When just one time series is charted, a line chart is produced.
An open account test that has two main uses: (1) it lets you buy the top “n” issues from your chosen collection of issues based on some ranked statistic; and (2) it lets you test a strategy on a collection of issues. TechniFilter Plus tracks the basis required to trade the system and uses this number to compute return. Entry and exit fees are tracked (either fixed or percentage). On the General tab (Strategy dialog) enter the basket issues in the Issues to Test box.
A negative interpretation of the behavior of an equity or the market as a whole based on a prolonged period of falling prices.
A standard point & figure pattern. This Double Bottom variation has an added relationship between the previous two X columns. Namely, the most recent X column must top at a lower price than the previous X column. The Bearish Pattern, which occurs less frequently than the Double Bottom, is considered a stronger bearish signal.
Curves plotted above and below a moving average of prices using a standard deviation offset. You specify where the bands should be placed in relation to the average.
The dollar amount used to decide where to plot a new X or O on a point & figure chart. One of the two parameters required to draw a point & figure chart. The other is reversal.
These formula-writing tools are letters that represent a particular time series in formulas. There are 12 building blocks. Six represent price time series (e.g., H represents the high time series in formulas). The rest of the building blocks represent popular volume indicators (e.g., K represents On-Balance Volume in formulas.
A positive interpretation of the behavior of an equity or the market as a whole based on an extended rise in prices.
A standard point & figure pattern. This Double Top variation has an added relationship between the previous two O columns. Namely, the most recent O column must bottom at a higher price than the previous O column. The Bull Pattern, which occurs less frequently than the Double Top, is considered a stronger bullish signal.
One of two preliminary indicators used to compute the Demand Index. Buying power tries to measure that part of the trading volume that comes from buying the issue. This indicator uses price-movement measurements to weight the volume as either up-volume or down-volume. Its companion indicator is selling pressure.
One of the chart types produced by TechniFilter Plus. A candlestick (or candle) chart clearly displays the relationship between an issueâ€™s current-day opening and closing prices. A line is drawn to connect each dayâ€™s high price with each dayâ€™s low price and a rectangle (called the candle body) is drawn over the bar. The height and location of the candle body is determined by the opening and closing prices. The top of the body is always at the higher of the open and the close. The bottom of the body is always at the lower of the open and the close. A solid black body indicates that the close is lower than the open. A solid white body indicates that the close is higher than the open. This simple construction makes it very easy to see up-days (solid white bodies) and down-days (solid black bodies).
A method of point & figure charting that dates back to 1947. It has a default boxsize of 0 and a reversal of 3. The boxsize of 0 sets a box value range from $.25 to $2, depending on the price of the issue. The reversal of 3 means that an X column will change to an O column when the price drops at least three boxes below the highest X in the current column. To reverse from Os to Xs, the price must rise three boxes above the lowest O in the current column.
An issueâ€™s last price of the trading day. When recorded over a length of time, the closing prices form a time series, represented in formulas by the building block C.
These formula-writing tools perform mathematical operations on two time series to compute a third time series (also called the result series). There are two types of combiners: arithmetic and logical.
Commodity Channel Index
An indicator that measures how much the current typical price varies from an average typical price. Typical price is just the sum of the high, low and close divided by 3. CCI, which oscillates around zero, can be as large as 250 or as small as -250. Most of the time it ranges between 100 and -100. When the indicator is outside of this range, an overbought or oversold condition exists and you can expect a price correction.
In addition to the 12 building blocks, you can use constants within formulas. Basically, constants perform the same function as building blocks, representing a time series in which each entry is a fixed number. A simple formula using a constant is C > 50, or “Is the close (C) greater than (>) 50?”
The running sum of the difference between NYSE advances and declines. As with any indicator computed as a running sum, the actual values depend on when the sum begins. CADL signals are triggered by curve direction and relationships between points on the curve. Look for divergence between CADL and a market average (like the Dow Jones Industrials). For example, if CADL is making new highs but the average is not, the situation is considered bullish. The opposite divergence is bearish.
A daily sum of the difference between NYSE up-volume and down-volume. This indicator is usually compared to a market index, such as the S&P 500, for divergence.
Daily Volume Indicator
One of the weighted volume indicators. To calculate DVI, TechniFilter Plus picks an arbitrary value and, on each successive day, adjusts the indicator up or down depending on where that dayâ€™s close is located relative to the dayâ€™s trading range. For example, if the price closes nearer to the high price of the day than to the low price of the day, the volume is deemed positive. Look for breakouts and divergence between DVI and price.
A leading indicator to changes in price trends (designed by James Sibbet). The DI calculation uses volume and price movement to quantify two ideas: buying power and selling pressure. When the DI crosses zero, buying power and selling pressure cross. An up-cross is a buy signal; a down-cross is a sell signal.
Directional Movement Indicator
Directional movement is family of indicators developed by J. Welles Wilder to study and quantify the strength of trends and trending issues. Specifically, the Directional Movement Indicator (DX) combines the values from a Percentage of Uptrend (+DI) formula and a Percentage of Downtrend (-DI) formula to measure the strength of a trend. Regardless of direction, the higher the number, the stronger the trend. Welles Wilderâ€™s suggested time period is 14 days.
Two curves are said to diverge when one curve makes a significant new peak (or valley) but the other curve does not. Divergence is an important part of many technical indicators. The following three classic examples all look for divergence between the price of an issue and an indicator based on the issue. In each case, divergence usually signals a change in price trend. They are: price and OBV, price and RSI, price and a stochastic. Divergence also helps you study market indexes, like the S&P 500, and market indicators, like the Advance/Decline Line. You can identify divergence simply by looking at a chart because your eyes automatically can pick out significant peaks, often ignoring many smaller peaks in the process. However, it is difficult to create a computer algorithm that ignores insignificant peaks. TechniFilter Plusâ€™s solution is the divergence combiner formula-writing tools.
Formula-writing tool used to mathematically join two time series. The divergence combiner looks for four types of divergence between the two original series, entering either 1, -1, 2, -2 or 0 in the result series, depending on the type of divergence found (i.e., positive divergence on the high side, positive divergence on the low side, negative divergence on the high side and negative divergence on the low side). 0 indicates no divergence.
A standard point & figure pattern. The last column is an O column that goes below the previous O column. It is the first indication of a bearish situation. On the day this pattern is formed, strategies include exiting long positions and entering short positions. However, you may want to wait for a stronger bearish pattern before entering short positions.
A standard point & figure pattern. The last column is an X column that exceeds the previous X column. It is the first indication of a bullish situation. On the day this pattern is formed, strategies include taking long positions and exiting short positions. However, you may want to wait for a stronger bullish pattern before entering long positions.
A type of “fixed” test that lets you invest an equal dollar amount at each position, which makes it easier to compare test results among issues that trade in different ranges. The equal test is similar to the percentage test with the following difference: In a percentage test, the amount invested in each position is the initial amount plus or minus prior gains or losses. In an equal test, the amount invested in each position is the same.
exponential moving average
A moving average that gives more weight to recent price values and less weight to earlier price values within its time span. Unlike the other moving averages, exponential averages use all available closing price data. The other two moving averages are simple and weighted.
A spreadsheet-like technical report that will search through your database and pick out issues that meet conditions you specify. Each column in the report can define a condition for which you want to filter.
One of the formula-writing tools used to join two time series to form a result series. The flag combiner locates distinct, nonoverlapping signals, entering 0s (no flag), -1 (flag) or 1 (flag).
floating point values
Numbers that may contain a decimal point.
A graphic representation of the results of a selected formula.
A collection of formulas grouped together for a strategy or a filter report.
Mathematical constructions that identify specific trading patterns. TechniFilter Plus comes with a library of more than 200 formulas. Some of these formulas are integral parts of trading systems; others are not tied to any particular system and interpretation depends on what is being analyzed. You also can build your own formulas using the three basic formula-writing tools: combiners, building blocks and modifiers.
A type of test that mimics how you would normally trade futures contracts, buying and selling on margin. It considers leverage, initial margin requirements and maintenance margin requirements. You enter margin requirements and TechniFilter Plus tracks the basis required to trade the system and uses this number to compute return. When a position is opened, the rule specifies the number of contracts involved. You can make partial liquidations (specifying a percentage or a specific number of contracts) or close the entire position. Entry and exit fees are tracked (either fixed or percentage).
geometric volume indicator
A type of volume indicator derived from an iterative multiplicative calculation. Geometric volume indicators attempt to track “smart money” in the market. The Negative Volume Indicator and the Positive Volume Indicator are geometric volume indicators.
hierarchy of operations
Rules that govern the order in which mathematical calculations are done. In TechniFilter Plus formulas, integer division and modulus operations are performed first; followed by multiplication and division, then addition and subtraction; greater and lesser; equal and not equal; less than or equal to and greater than or equal to; greater than and less than; and and or; flag and divergence.
An issueâ€™s highest price of the day. When recorded over a length of time, the high prices form a time series, represented in formulas by the building block H.
A support/resistance line that you can plot at your specified price level. For example, draw support lines at a recent low price and resistance lines at a recent high.
In the standard filter report, all the issues use the same column formulas. In an individualized report, each issue could use a different number as the parameter. To create an individualized report, you first go through the steps to create a standard report, then you individualize the formulas by changing parameters.
One of the formula-writing tools used to mathematically join two time series to form a result series. For each day in the two original time series, the integer division combiner enters a nonfractional value in the result series.
Day counts. For example, if today has Julian date 25001, then tomorrow has Julian date 25002.
Unique straight lines that best approximate the values (highs, lows, etc.) under study. Lines with an upward slope bullish, while lines with a downward slope are bearish. LSF lines are also called linear regression lines. (Technically, LSF are not support/resistance lines, although they are often grouped with those analytic tools.)
linear price scale
On a chart, this scale type shows distances between moves based on actual dollar changes.
Formula-writing tools that answer some true or false question (such as “Did the price rise?”) for a time series. The result is another time series made up of 0s and 1s, which are called truth values (1 for true and 0 for false). Often, weâ€™ll use logical results in an arithmetic manner, such as adding up the 1s and 0s to find out how many times an event is true or false. There are nine logical combiners, including: > (greater than), < (less than), = (equal to) and < > (not equal to). A simple formula that uses a logical combiner is C > Y1, or “Did the price (C) rise (>) from yesterday (Y1)?” There are also nine arithmetic combiners.
An issueâ€™s lowest price of the day. When recorded over a length of time, the low prices form a time series, represented in formulas by the building block L.
A formula-writing tool that produces a time series in which each typical entry is the number of days since the largest value of the original series over the most recent n days. In other words, the number of days since the maximum occurred.
A formula-writing tool that picks the largest value over the given number of days. It produces a time series in which each typical entry is the largest value of the original series over the entire range of loaded data or over the most recent n days (including the current day).
An overbought or oversold technical indicator. MO values below 20 are oversold, and values above 70 are overbought. When the oscillator breaks up across zero, it is bullish for stocks; the opposite break is bearish.
McClellan Summation Index
A running sum of the McClellan Oscillator. MSI breaking above zero is bullish. MSI breaking below zero is bearish.
A formula-writing tool that produces a time series in which each typical entry is the number of days since the smallest value of the original series over the most recent n days. In other words, the number of days since the minimum occurred.
A formula-writing tool that picks the smallest value over the given number of days. It produces a time series in which each entry is the smallest value of the original series over the entire range of loaded data or over the most recent n days (including the current day).
A type of time series resulting from the action of one of the modifier tools. The modified series gets its values from the original series through some calculation or algorithm as defined by the modifier used. There are more than 40 modifiers, including time offset, relative strength, standard deviation, extreme values and summation.
Formula-writing tools that use a calculation or algorithm to change the values in an original time series to create a new, modified time series. There are more than 40 modifiers, including time offset, relative strength, standard deviation, extreme values and summation. For example, CY2 produces a modified series in which each entry is the value of the close series two days ago. That is, todayâ€™s value of CY2 is the value of C two days ago. Y is the time-offset modifier. C is the building block that represents the close time series.
This integer division companion combiner yields the integer amount that remains following an integer division operation. It is often called the remainder operator.
Money Flow Index
A volume indicator that combines the ideas of positive and negative volume with the RSI calculation. Money flow is defined as the typical daily price times todayâ€™s volume. This quantity is tracked from day to day, and averages of up-money flow days and down-money flow days over some specified period of time are computed. MFI is defined as the percentage of the total money flow that is up.
A succession of individual averages for an issueâ€™s price over a given time period. Averaging techniques take into account several entries in the original time series; which means that the influence of a single entry from the original series on a single entry in the modified series is reduced. The modified series, therefore, produces a smoother graph than the original series. For this reason, averaging is sometimes referred to as smoothing. TechniFilter Plus charts five basic moving averages: simple, weighted, exponential, centered and geometric.
A series of referenced formulas treated as one formula, with the last formula in the series defining the value of the multiline formula. Prior formula reference usually plays a part in the final computation. In effect, multiline formulas let you break complex calculations into a series of more simple calculations, which can help you translate your more intricate analytic ideas into a form that TechniFilter Plus can use. You also can create recursive multiline formulas.
named formula reference
You can refer to a standard formula by name within a formula body using the format: name(param). For example, in the Formula box on the Custom Formula dialog, you would enter a reference to the One-Day Acceleration formula as: Accel(CA30). When referenced in this way, the named formula serves the same function as a building block, and you can use other formula-writing tools to compute, for example, moving averages of named formulas. You must include the parameter parentheses even for formulas that do not have parameters. Simply use a pair of parentheses with nothing inside. You cannot use point & figure, recursive or multiline formulas in this way.
When Curve 1 is making new lows or new highs but Curve 2 is not.
Negative volume implies that current market activity will make the price of the issue decrease, which is a bearish sign. Negative volume exists when money is moving out of the stock. Technicians also use the term distribution for negative movement.
Negative Volume Indicator
A geometric volume indicator that measures price movement on days that the volume has declined, beginning at an arbitrary value of 100. The value of NVI only changes if the volume declines. If the volume declines, the new value of the indicator is 1 times the old value of the indicator plus the percentage change in price. It is bullish for NVI to be above its long-term average because that situation indicates that, in the long run, smart money is entering the issue.
On-Balance Volume Indicator
A weighted sum of volume where the weights are 1 (bullish volume) or -1 (bearish volume). The simplest method of determining bullish volume and bearish volume is to check the price. If todayâ€™s close is higher than yesterdayâ€™s close, consider todayâ€™s volume positive. If todayâ€™s close is lower than yesterdayâ€™s close, consider todayâ€™s volume negative. If you keep a running tally of positive volume minus negative volume, you get the volume indicator known as On-Balance Volume, or OBV. In formulas, you can use the building block K to represent OBV.
The price at which an issue begins trading. When recorded over a length of time, the open prices form a time series, represented in formulas by the building block O.
Open 10 Trading Index
A modification of the Short-term Trading Index (TRIN). 10TRIN uses 10-day sums of the components, instead of just the components (which are used in the TRIN calculation). Values above 1 are bearish; values below 1 are bullish.
The number of outstanding futures contracts. When recorded over a length of time, the open interest values form a time series, represented in formulas by the building block I.
Varying parameters in a test to see which variation would have been the most profitable. You are, in effect, asking “What if…?” “What if I changed the time period of this average?” “What if I used a simple average instead of a weighted average?” “What if I calculated over a different length of time?” The goal is to see if one variation might be more profitable than another-which variation is optimal. You can optimize signals and formulas that use parameters.
An unstable pricing situation for a security or a market. There has been an unexpectedly sharp price rise and a price drop (or correction) is expected.
An unstable pricing situation for a security or a market. There has been an unexpectedly sharp price decline and a price rise is expected.
Support/resistance lines that define an area of trading activity, known as a linear trading band. The lines can be drawn parallel to trendlines, horizontal lines and least-squares-fit lines.
The most commonly used parameters are parts of formulas or signals that you may need to change, like time periods, time series or some other fixed values. When used in this way, they simplify formula and signal variation, letting you quickly and easily change elements without editing the formula or signal body. (For example, parameters are required for optimizing strategies and for individualized reports.) You can have up to nine parameters in formulas. Parameter locations are marked with placeholders (&1, &2, &3,â€¦, &9). There also are two special instances where parameters do not follow the rules described above. One type is used in point & figure formulas; the other in basket tests. Point & figure formulas require two parameters: a boxsize and reversal, which do not use corresponding placeholders in the formula body. For basket tests, a special stop item (RankScore) requires that you specify a formula number as a parameter. This formula parameter does not require a matching placeholder in the signal body.
A peak is defined as a point on the curve that is higher than the point to its immediate right, and at least as high as the point to its immediate left. Making a succession of higher price peaks is a bullish signal. One way to identify higher peaks is to look at the slope of the trendline determined by the peaks. If the slope is up, the peaks are rising. If it is down, then they are falling.
A type of test that mimics how mutual funds are traded, letting you trade a closed system that starts with a fixed amount of money. The test then tracks the profit from this investment. When a position is open, the entire balance in the account is encumbered and no new position can be taken. Entry and exit fees are tracked (either fixed or percentage). You can specify an interest rate to be paid on the account while it is not invested. Because percentage tests start with a fixed dollar amount and do not allow money to be added, the ending balance can be used to quantify performance.
Characters used to hold up to nine parameter locations within formulas and signals. The placeholders are &1, &2, &3, &4, &5, &6, &7, &8, &9. (Point & figure formula parameters do not require matching placeholders in the formula body.)
point & figure chart
One of the chart types produced by TechniFilter Plus. A point & figure (P&F) chart consists of alternating columns of Xs (increasing prices) and Os (decreasing prices). When demand overwhelms supply, you see a price rise revealed by a breakout to the upside, graphically shown as a long column of Xs. When supply exceeds demand, you see a price drop revealed by a breakout to the downside, graphically shown as a long column of Os. Unlike other charts, time is not a factor.
point & figure formulas
Logical formulas designed to search for point & figure patterns. They require two parameters: a boxsize and a reversal. P&F formulas return a 1 for any day the formula is true and a 0 for any day the formula is false. By default, TechniFilter Plus uses both the high and low time series to perform calculations for a P&F chart. To override this default and use another time series, you must insert a special line as the first line in your P&F formula.
When Curve 1 is making new highs or lows but Curve 2 is not.
Positive volume implies that current market activity will make the price of the issue increase, which is a bullish sign. Positive volume exists when money is moving into the stock. Technicians also use the term accumulation for positive movement.
Positive Volume Indicator
A geometric volume indicator that measures price movement on days that the volume has increased, beginning at an arbitrary value of 100. The value of PVI only changes if the volume increases. If the volume increases, the new value of the indicator is 1 times the old value of the indicator plus the percentage change in price. It is bullish for PVI to be above its long-term average because that situation indicates that, in the long run, smart money is entering the issue.
A method of writing a mathematical formula that offers straightforward calculations of very complex formulas. TechniFilter Plus lets you enter formulas using the familiar algebraic method, but performs the calculation using the faster, more efficient post-fixed notation method.
A weighted sum of volume where the weights are the percentage change in price. PVT is a variation of the cumulative volume theme. In this case, PVT is adjusted by a percentage of the volume and is interpreted in much the same way as OBV. OBV makes the assumption that the dayâ€™s volume is either all positive or all negative. PVT adds or subtracts a percentage of the dayâ€™s volume. In formulas, you can use the building block P to represent PVT.
prior formula reference
When working with a collection of formulas (like in a strategy or report), later formulas sometimes will depend on earlier formulas. When this happens, it is more efficient to refer to the prior formula rather than rewrite it. When you want to use a prior formula, place its formula number inside square brackets, [ ]. When a formula number is enclosed within square brackets, it serves the same function as a building block.
Formulas that derive their current value from the previous value of the formula. As a result, recursive formulas must be computed every day because you need to know yesterdayâ€™s value to get todayâ€™s value. For example, exponential averages are recursively defined formulas. Todayâ€™s value of a 10% exponential average is 10% of todayâ€™s price plus 90% of yesterdayâ€™s exponential average value. Recursive formulas begin with an initial value (perhaps the close) and hold the recursion values each day thereafter.
Relative Strength Index
An indicator created by J. Welles Wilder that measures the internal strength of a price curve by determining how much of the recent price movement is up-movement (“recent” depends on the parameter n). The calculation returns a number between 0 and 100.
A type of time series. When two time series are combined through a mathematical operation, a result series is formed.
An integer used to decide when to change columns in a point & figure pattern. The reversal is one of the two parameters required to draw a P&F chart. The other is boxsize.
One of two preliminary indicators used to compute the Demand Index. Selling pressure tries to measure that part of the trading volume that comes from selling the issue. This indicator uses price-movement measurements to weight the volume as either up-volume or down-volume. Its companion indicator is buying power.
semilog price scale
On a chart, this scale type shows distances between moves based on percentage changes. Semilog scales show price moves of the same percentage the same physical distance on the chart, regardless of the actual price.
Short-term Trading Index
The quotient of the ratio of NYSE advances to declines divided by the ratio of up-volume to down-volume. TRIN values above 1 are bearish, and values below 1 are bullish.
simple moving average
A moving average that gives equal weight to each price value in its time span. For example, if the closing prices of a particular stock have been recorded for the last 12 trading days, then the average closing price of the 12-day span is the sum of the 12 prices divided by 12. By calculating this simple average, you can determine if the price is above or below its average value over the last 12 days. The other two moving averages are weighted and exponential.
Smoothed Short-term Trading Index
An overbought or oversold indicator similar to Zwiegâ€™s Breadth Thrust Indicator. STIX high values are bullish; low values are bearish.
Line segments drawn at an angle from the starting point of a trendline. They represent support when an up-trendline is broken and resistance when a down-trendline is broken.
Taking a long position on one issue and a short position on a second issue, buying and selling both at the same time. You take profit based on the difference (i.e., the spread) between the two positions; you donâ€™t really care about actual contract prices. Generally, spread trading (also called straddling) is less risky than trading actual contract prices because you are both long and short at the same time. As a result, it is also less profitable.
A measure of how much the numbers in a modified series vary from the arithmetic mean (simple average) of the numbers. Think of it as a measure of dispersion, or volatility, of the modified series.
A family of overbought/oversold indicators based on position in range. The curves produced reflect where the current price is in relation to the trading range over a period of time. The values vary between 0 and 100. Values above 80 are overbought, and values below 20 are oversold.
A type of test that mimics how common stocks are traded, buying and selling in fixed-share blocks. In each transaction, you buy or sell a number of shares, paying or receiving the total cost of each purchase or sale when it takes place, including any commissions. TechniFilter Plus tracks the basis required to trade the system and uses this number to compute return. When a position is opened, the rule specifies the number of shares involved. You can make partial liquidations based on a percentage or a specific number of shares, or close the entire position. Multiple positions are allowed. Entry and exit fees are tracked (either fixed or percentage).
A plan or system for making trading decisions. Strategies consist of formulas, which are technical indicators; signals, which define logical relationships among the formulas; and rules, which tell TechniFilter Plus how to manage the trading process.
Strong Double Bottom
A standard point & figure pattern. This Double Bottom variation has an extra condition placed on the relationship between the tops of the last two O columns. Namely, the last O column must top at the same level as the previous O column. The Strong Double Bottom, which occurs less frequently than the Double Bottom, is considered a slightly stronger bearish signal.
Strong Double Top
A standard point & figure pattern. This Double Top variation has an extra condition placed on the relationship between the bottoms of the last two X columns. Namely, the last X column must bottom at the same level as the previous X column. The Strong Double Top, which occurs less frequently than the Double Top, is considered a slightly stronger bullish signal.
Straight lines constructed from past trading patterns. A support line designates a price level above which an issueâ€™s price is expected to remain. A resistance line designates a price level below which an issueâ€™s price is expected to remain. After a support or resistance line is breached, it often changes to the opposite designation. For example, in the case of a support line breakout, some buyers at the support level could have been left holding stock that they would rather be without. So, when the price returns to this level, they become willing sellers. In the case of a broken resistance line, buyers who missed the initial breakout remain willing to buy when the price returns to the previous resistance level, thus making it a support line.
Using the high, low, close and open on two consecutive days, this indicator attempts to determine the “real” market price of a security by measuring the price swing.
The structure of a TechniFilter Plus formula. To create a valid TechniFilter Plus formula, you must be familiar with the parts of a formula (e.g., building blocks, modifiers) and how they must be arranged.
To use a fixed issue in a TechniFilter Plus formula, you enclose the issueâ€™s symbol within tilde expressions, ~< and >~. For example, to compute the relative strength of an issue to the S&P 500 index (symbol SPX), you could use the formula (( C/~<SPX>~)/TY00)*100. This formula takes the issueâ€™s close, and divides it by the close of SPX. The result then is divided by the quantity at the beginning of the time series. Finally, the ratio is multiplied by 100.
When recorded over a length of time, each pricing element (high, low, close, open, open interest, volume) determines its own time series. There is also a family of technical indicators that combine price and volume to form new time series known as volume indicators. You study time series using formulas designed to identify specific technical patterns. Each time series is represented by a single letter known as a building block, one of the three formula-writing tools (e.g., the high time series building block is H; the On-Balance Volume building block is K). The other formula-writing tools are combiners and modifiers.
A special building block that represents the most recently computed quantity within the current formula. For example, (H+L+C)/TY10 is the ratio of (H+L+C) to the same value 10 days ago. The T represents the quantity on the other side of the combiner, a division sign. (H+L+C)/TY10 evaluates the same as (H+L+C)/(H+L+C)Y10, but without the T-operator the H+L+C calculation must be done twice. In recursive formulas, T refers to the result time series. So, TY1 is the previous dayâ€™s result.
Diagonal support/resistance lines that indicate upward or downward price movement. Support trendlines are drawn below the issueâ€™s price and trend upward. Resistance trendlines are drawn above the issueâ€™s price and trend down. Breakthrough of either trendline, particularly on large volume, is a signal that the trendline is no longer viable.
A standard point & figure pattern. The most recent column is an O column that is lower than the previous two O columns. Because it takes five columns to form, it is considered a stronger bearish signal than the Double Bottom, the Strong Double Bottom and the Bear Pattern formations.
A standard point & figure pattern. The most recent column is an X column that exceeds the previous two X columns. Because it takes five columns to form, it is considered a stronger bullish signal than the Double Top, Strong Double Top and Bull Pattern formations.
A generic term used to refer to individual blocks of time in your data, since you could be following the issue daily, weekly, monthly or quarterly. Sometimes we use the phrase time units.
A family of modifiers used for a variety of analytic functions such as absolute value, log, exponential, sine, cosine and extreme values. The parameter (0 through 99) determines which function is applied to the original series. Many calculations for the U-modifiers can be done using logical combiners such as > and <. Among other things, U-modifiers make it possible to count and to determine where curves cross.
A point on the curve that is lower than the point to its immediate right and at least as low as the point to its immediate left. Making a succession of lower price valleys is a bearish signal. One way to identify lower valleys is to look at the slope of the trendline determined by the valleys. If the slope is down, the valleys are falling. If it is up, then they are rising.
A line tool that lets you see price values as you move the line across a displayed chart.
The daily total of shares bought and sold. When recorded over a length of time, the volume figures form a time series, represented in formulas by the building block V.
A family of technical indicators that combine price and volume to form time series that can be used in formulas. In theory, volume leads price, so you should be able to predict where price is going by examining volume. Volume indicators try to capitalize on this belief. In formulas, On-Balance Volume is a volume indicator represented by the building block K .
Unusually large volume, graphed on a bar chart as a spike. To locate volume spikes, you compare a single dayâ€™s volume to average volume. If one dayâ€™s volume is two to three times the average volume, it will appear as a spike. Unusually large volume often foreshadows a major change in price trend.
weighted moving average
A moving average that gives more weight to recent price values and less weight to earlier price values within its time span. The time span must be less than (or equal to) the number of units read from disk. The other two moving averages are simple and exponential.
weighted volume indicator
A type of volume indicator formed by looking at a running sum of volume multiplied by some quantity that depends on price. The multiplier (the weight) denotes how bullish volume and bearish volume is defined for the particular indicator. The built-in weighted volume indicators include On-Balance Volume, Price Volume Trend, Accumulation Distribution Indicator and Daily Volume Indicator.
A family of modifiers that look for major moves in a time series and ignore the moves that you have deemed insignificant with the parameter. For example, the time series HZ5 is based on the high price time series and ignores moves of less than 5%. To compute HZ5, TechniFilter Plus looks through the high curve, marking peaks and valleys that are at least 5% apart. Generally, the Z-modifier works with major moves and ignores minor curve fluctuations, making it especially useful in divergence studies.
Zwiegâ€™s Breadth Thrust Indicator
The 10-day average of the ratio of NYSE advancing issues to the sum of advancing issues and declining issues. (Also known as BTI.)