Common Chart Indicators: Part I
Hey, traders! In this series, we’re going to cover some common chart indicators available for general market. To keep it simple and easy to read, there will be several parts to this educational post. We’re really hope you enjoy it, so let’s get started!
Bollinger Bands are a technical indicator created by John Bollinger that is used to determine market volatility and identify "overbought" or "oversold" scenarios. A quick recap would be that there are typically 2 lines in this indicator, that get close together when market is non-directional and if you see them spreading apart that means that there is something volatility building up. There is also a 3rd line representing the middle line which just an SMA (usually a 20). Think of this indicator as a dynamic support and resistance where the price tends to come back to the middle line.
Keltner Channels is a volatility indicator created by Chester Keltner, a grain trader, in his 1960 book How To Make Money in Commodities. Linda Raschke later produced an updated version in the 1980s. Linda's Keltner Channel, which is more often used, is quite similar to Bollinger Bands in that it has three lines as well. In a Keltner Channel, however, the central line is an Exponential Moving Average (EMA), while the two outer lines are based on the Average True Range (ATR) rather than standard deviations (SD). The Keltner Channel contracts and expands with volatility, although not as much as the Bollinger Bands, because it is derived from the ATR, which is a volatility indicator. Keltner Channels are used to set trading entry and exit points.
What exactly is MACD? Moving Average Convergence Divergence (MACD) is an abbreviation for Moving Average Convergence Divergence. This technical indicator is a technique for identifying moving averages that indicate a new trend, whether bullish or negative. After all, finding a trend is a key priority in trading because that is where the greatest money is produced. A MACD chart normally has three numbers that are used to establish the parameters. The first is the number of periods that the faster-moving average is calculated across. The number of periods utilized in the slower moving average is the second factor. The number of bars utilized to construct the moving average of the difference between the faster and slower moving averages is the third factor.
Bollinger Bands are a technical indicator created by John Bollinger that is used to determine market volatility and identify "overbought" or "oversold" scenarios. A quick recap would be that there are typically 2 lines in this indicator, that get close together when market is non-directional and if you see them spreading apart that means that there is something volatility building up. There is also a 3rd line representing the middle line which just an SMA (usually a 20). Think of this indicator as a dynamic support and resistance where the price tends to come back to the middle line.
Keltner Channels is a volatility indicator created by Chester Keltner, a grain trader, in his 1960 book How To Make Money in Commodities. Linda Raschke later produced an updated version in the 1980s. Linda's Keltner Channel, which is more often used, is quite similar to Bollinger Bands in that it has three lines as well. In a Keltner Channel, however, the central line is an Exponential Moving Average (EMA), while the two outer lines are based on the Average True Range (ATR) rather than standard deviations (SD). The Keltner Channel contracts and expands with volatility, although not as much as the Bollinger Bands, because it is derived from the ATR, which is a volatility indicator. Keltner Channels are used to set trading entry and exit points.
What exactly is MACD? Moving Average Convergence Divergence (MACD) is an abbreviation for Moving Average Convergence Divergence. This technical indicator is a technique for identifying moving averages that indicate a new trend, whether bullish or negative. After all, finding a trend is a key priority in trading because that is where the greatest money is produced. A MACD chart normally has three numbers that are used to establish the parameters. The first is the number of periods that the faster-moving average is calculated across. The number of periods utilized in the slower moving average is the second factor. The number of bars utilized to construct the moving average of the difference between the faster and slower moving averages is the third factor.
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