Elder-Rays Technical Indicator

Elder-Rays Technical Indicator combine the properties of trend following indicators and oscillators. They use Exponential Moving Averageindicator (EMA, the best period is 13) as a tracing indicator. The oscillators reflect the power of bulls and bears.To plot the Elder-Rays three charts should be used: on one side, the price chart and Exponential Moving Averagewill be plotted, on two other sides bulls power oscillator (Bulls Power) and bears power oscillator (Bears Power) will be plotted.

Elder-rays are used both individually and together with other methods. If using them individually, one should take into account that the Exponential Moving Average slope determines the trendmovement, and position should be opened in its direction. Bulls and bears power oscillators are applied for defining the moment of positions opening/closing.
Buy if:

• there is an increasing trend (determined with the Exponential Moving Average movement);
• the Bears Power oscillator is negative, but increasing at the same time;
• the last peak of the Bulls Power oscillator is higher than the previous one;
• the Bears Power oscillator increases after the Bulls divergence.

At the positive values of the Bears Power oscillator, it is better to keep back.
Sell if:

• there is a decreasing trend (determined with the Exponential Moving Average movement);
• the Bulls Power oscillator is positive, but decreases gradually;
• the last trough of the Bulls Power oscillator is lower than the previous one;
• the Bulls Power oscillator decreases leaving the Bears’ divergence.

Do not open short positions when the Bulls Power oscillator is negative.

Divergence between the Bulls and Bears Power and prices is the best time for trading.

Calculation:

BULLS = HIGH - EMA
BEARS = LOW - EMA 

Where:
BULLS — force of bulls;
BEARS — force of bears;
HIGH — maximum price of current bar;
LOW — minimum price of current bar;
EMA — exponential moving average.

Detrended Price Oscillator

Detrended Price Oscillator eliminates the trend effect of price movement. This simplifies the process of finding out cycles and levels of outbidding/resale.
Long-term cycles consist of several shorter cycles. Analyzing such short components helps to define crucial moments of the cycle's development. DPO gives a chance to eliminate the influence on prices of long-term cycles.

To calculate DPO you should take a certain period. Remove cycles that are longer than the chosen period from price dynamics, and leave shorter cycles. Half of the cycle's length is used for smoothing. We recommend using a period of 21 or less.
The bounds (overbought/oversold levels) come from the history of previous behavior of prices. It is recommended to stand in a long position if DPO first falls below the resale level and then gets above it. Crossing of the zero point from above followed by a rise above that level is also a signal for opening a long position. Everything is vice versa for short positions.

Calculations:

DPO = CLOSE - SMA (CLOSE, (N / 2 + 1))

Where:
SMA — a simple moving average;
CLOSE — the closing price;
N — the period of the cycle (if N is equal to 12, DPO resembles the DiNapoli Detrend Oscillator).

Demarker Technical Indicator

Demarker Technical Indicator is based on the comparison of the period maximum with the previous period maximum. If the current period (bar) maximum is higher, the respective difference between the two will be registered. If the current maximum is lower or equaling the maximum of the previous period, the naught value will be registered. The differences received for N periods are then summarized. The received value is used as the numerator of the DeMarker and will be divided by the same value plus the sum of differences between the price minima of the previous and the current periods (bars). If the current price minimum is greater than that of the previous bar, the naught value will be registered.

When the indicator falls below 30, the bullish price reversal should be expected. When the indicator rises above 70, the bearish price reversal should be expected.

If you use periods of longer duration, when calculating the indicator, you’ll be able to catch the long term market tendency. Indicators based on short periods let you enter the market at the point of the least risk and plan the time of transaction so that it falls in with the major trend.

Calculation:

The value of the DeMarker for the "i" interval is calculated as follows:

• The DeMax(i) is calculated:
  

  If high(i) > high(i-1) , then DeMax(i) = high(i)-high(i-1), otherwise DeMax(i) = 0

• The DeMin(i) is calculated:
  

  If low(i) < low(i-1), then DeMin(i) = low(i-1)-low(i), otherwise DeMin(i) = 0

• The value of the DeMarker is calculated as:

  DMark(N) = SMA(DeMax, N)/(SMA(DeMax, N)+SMA(DeMin, N))

Where:
SMA — Simple Moving Average;
N — the number of periods used in the calculation.

Chaikin Volatility

Chaikin's volatility indicator calculates the spread between the maximum and minimum prices. It judges the value of volatility basing on the amplitude between the maximum and the minimum. Unlike Average True Range, Chaikin's indicator doesn't take gaps into account.

According to Chaikin's interpretation, a growth of volume indicator in a relatively short space of time means that the prices approach their minimum (like when the securities are sold in panic), while a decrease of volatility in a longer period of time indicates that the prices are on the peak (for example, in the conditions of a mature bull market).

We recommend using Moving Averages and Envelopes as a confirmation of Chaikin's indicator signals.

• A peak of indicator's reading appears when market prices rollaway from the new summit and the market turns flat.
• A flat market resembles low volatility. An exit from the side movement (from a flat) is not accompanied by a significant increase of volatility.
• Volatility grows along with the increase in price level over the previous maximum.
• A rise of Chaikin's indicator level continues till a new price peak is reached.
• A rapid decrease of volatility means that the movement is slowing down and that a back-roll is possible.

Calculations:

H-L (i) = HIGH (i) - LOW (i)
H-L (i - 10) = HIGH (i - 10) - LOW (i - 10)
CHV = (EMA (H-L (i), 10) - EMA (H-L (i - 10), 10)) / EMA (H-L (i - 10), 10) * 100

Where:
HIGH (i) — maximum price of current bar;
LOW (i) — minimum price of current bar;
HIGH (i - 10) — maximum price of the bar ten positions away from the current one;
LOW (i - 10) — minimum price of the bar ten positions away from the current one;
H-L (i) — difference between the maximum and the minimum price in the current bar;
H-L (i - 10) — difference between the maximum and the minimum price ten bars ago;
EMA — exponential moving average.

Chaikin Oscillator

Chaikin's oscillator is the difference of moving averages of Accumulation/Distribution.
"The concept of this oscillator is based on three main theses. First: if a share or an index is higher when it closes than it was during the day (you can calculate the average value as [max+min]/2), it means that it was a day of accumulation. The closer the closing index of a share or an index gets to the maximum, the more active the accumulation is. Vice versa, if a share's closing price is lower than the average level of the day, it means that distribution took place. The closer to the minimum the share gets, the more active is the distribution.
Second: stable price growth is accompanied by increase in trade volume and strong accumulation of the volume. As the volume is like fuel that feeds market growth, the lag of volume along with the growth of prices shows that there isn't enough fuel to continue the rise.
Vice versa, a slump in prices is usually accompanied by low amount and ends up in panic liquidation of positions by institutional investors. Therefore, first of all we see a growth of volume, then a slump in prices accompanied by reduced volume and finally, when the market is close to foundation, some accumulation takes place.
Third: with a Chaikin's oscillator you can trace back the volume of money resources coming in to the market and leaving it. Comparing the dynamics of volume and prices allows finding out peaks and foundations of the market, both short- and medium-term.
As there are no correct methods of technical analysis, I would recommend you using this oscillator along with other technical indicators. The reliability of short-term and medium-term trade signals will be higher if you use a Chaikin's oscillator together with, for example, Envelopes based on a 21-day moving average and some oscillator of outbidding/resale.
The most important signal arises when the prices reach a maximum or a minimum level (especially on the level of outbidding/resale), but the Chaikin's oscillator can't overcome its previous extremum and so it turns around.

• Signals moving in the direction of the medium-term trend are more reliable than those moving against it.
• The fact that an oscillator confirms a new maximum or minimum doesn't mean that the prices will move on in that direction. I regard this event as unimportant.

Another way of using Chaikin's oscillator implies the following: a change in its direction is a signal for purchase or a sale, but only if it coincides with the price trend direction. For example, if a share is on the rise and its price is higher than a 90-day moving average, then an up-turn of the oscillator curve in the area of negative values can be regarded as a signal for purchase (but the share price must be higher than a 90-day moving average - not less.)
A down-turn of the oscillator curve in the area of positive values (above zero) can be regarded as a signal for sale, but the share price must be lower than the 90-day moving average of closing prices."

Mark Chaikin

Calculations:

To calculate the Chaikin's oscillator, you must subtract a 10-period exponential moving average of Accumulation/Distribution indicator from a 3-period exponential moving average of the same indicator.

CHO = EMA (A/D, 3) — EMA (A/D, 10)

Where:
EMA — exponential moving average;
A/D — Accumulation/Distribution indicator.

Average True Range Technical Indicator (ATR)

Average True Range Technical Indicator (ATR) is an indicator that shows volatility of the market. It was introduced by Welles Wilder in his book "New concepts in technical trading systems". This indicator has been used as a component of numerous other indicators and trading systems ever since.

Average True Range can often reach a high value at the bottom of the market after a sheer fall in prices occasioned by panic selling. Low values of the indicator are typical for the periods of sideways movement of long duration which happen at the top of the market and during consolidation. Average True Range can be interpreted according to the same principles as other volatility indicators. The principle of forecasting based on this indicator can be worded the following way: the higher the value of the indicator, the higher the probability of a trend change; the lower the indicator’s value, the weaker the trend’s movement is.

Calculation:

True Range is the greatest of the following three values:

• difference between the current maximum and minimum (high and low);
• difference between the previous closing price and the current maximum;
• difference between the previous closing price and the current minimum.

The indicator of Average True Range is a moving average of values of the true range.

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