Trading and Technical Analysis Indicators

A trend-following indicator that uses aspects of the Aroon indicator ("Aroon up" and "Aroon down") to gauge the strength of a current trend and the likelihood that it will continue. The Aroon oscillator is calculated by subtracting Aroon down from Aroon up. Readings above zero indicate that an uptrend is present, while readings below zero indicate that a downtrend is present.

Aroon up and Aroon down are the two components that comprise the Aroon indicator. The notion is that an asset is trending up when a stock is trading near the high of its range. Aroon up is used to measure the strength of the uptrend, while Aroon down is used to measure the strength of the downtrend. Many traders will watch for a cross above the zero line to suggest the beginning of a new uptrend. Conversely, a cross below zero would indicate the start of a downtrend. Readings near zero suggest that a security may be trending sideways and that this period of consolidation could continue.

Accumulation/Distribution

Accumulation/Distribution Technical Indicator is determined by the changes in price and volume. The volume acts as a weighting coefficient at the change of price — the higher the coefficient (the volume) is, the greater the contribution of the price change (for this period of time) will be in the value of the indicator.

In fact, this indicator is a variant of the more commonly used indicator On Balance Volume. They are both used to confirm price changes by means of measuring the respective volume of sales.

When the Accumulation/Distribution indicator grows, it means accumulation (buying) of a particular security, as the overwhelming share of the sales volume is related to an upward trend of prices. When the indicator drops, it means distribution (selling) of the security, as most of sales take place during the downward price movement.

Divergences between the Accumulation/Distribution indicator and the price of the security indicate the upcoming change of prices. As a rule, in case of such divergences, the price tendency moves in the direction in which the indicator moves. Thus, if the indicator is growing, and the price of the security is dropping, a turnaround of price should be expected.

Calculation:
A certain share of the daily volume is added to or subtracted from the current accumulated value of the indicator. The nearer the closing price to the maximum price of the day is, the higher the added share will be. The nearer the closing price to the minimum price of the day is, the greater the subtracted share will be. If the closing price is exactly in between the maximum and minimum of the day, the indicator value remains unchanged.

A/D(i) =((CLOSE(i) - LOW(i)) - (HIGH(i) - CLOSE(i)) * VOLUME(i) / (HIGH(i) - LOW(i)) + A/D(i-1)

Where:
A/D(i) importance of the Indicator of the Accumulation/Distribution for the current bar;
CLOSE(i) the price of the closing the bar;
LOW(i) the minimum price of the bar;
HIGH(i) the maximum price of the bar;
VOLUME(i) volume;
A/D(i-1) importance of the Indicator of the Accumulation/Distribution for previous bar.

Trading UseAccumulation Distribution is usually used as a divergence indicator, with long entries signaled by bullish divergence, and short entries signaled by bearish divergence. Accumulation Distribution can also be used as an exit indicator, by showing the end (or the weakening) of the current trend.

Accumulation Swing Index (ASI)

ASI was created by Wales Wilder as an ordinary fluctuations indicator that gets signals from previous maximums and minimums of price. Once, Wilder said: "Somewhere amidst the maze of Open, High, Low and Close prices is a phantom line that is the real market." What helps us reveal this phantom line is the cumulation index.

In his book "New Concepts in Technical Trading Systems", Wilder describes the indicator this way: "When the Index is plotted on the same chart as the daily bar chart, trend lines drawn on the ASI can be compared to trend lines drawn on the bar chart. For those who know how to draw meaningful trend lines, the ASI can be a good tool to confirm trend-line breakouts. Often erroneous breaking of trend lines drawn on bar charts will not be confirmed by the trend lines drawn on the ASI. Since the ASI is heavily weighted in favor of the close price, a quick run up or down during a day's trading does not adversely affect the index."

With the ASI attempting to show the "real market," it closely resembles actual prices. This allows usage of classic support/resistance analysis on the ASI. Standart analysis involves looking for breakouts, new highs and lows, and divergences. Wilder points out the following characteristics of ASI:

It gives quantitation parameters of price changing.
It shows the turning points of short-term changing.
It gives a possibility to understand the real power and trend of the market.

Calculation

SI(i) = 50*(CLOSE(i-1) - CLOSE(i) + 0,5*(CLOSE(i-1) - OPEN(i-1)) + 0,25*(CLOSE(i) - OPEN(i)) / R)*(K / T)ASI(i) = SI(i-1) + SI(i)

Where:
SI (i)- current value of Swing Index technical indicator;
SI (i - 1)- stands for the value of Swing Index on the previous bar;
CLOSE (i)- current close price;
CLOSE (i - 1)- previous close price;
OPEN (i)- current open price;
OPEN (i - 1)- previous open price;
R - the parameter we get from a complicated formula based on the ratio between current close price and previous maximum and minimum;
K - the greatest of two values: (HIGH (i - 1) - CLOSE (i)) and (LOW (i - 1) - CLOSE (i));
T - the maximum price changing during trade session;
ASI (i) - the current value of Accumulation Swing Index.

Sample Chart for Accumulation Swing Index (ASI) for BANK OF INDIA