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How a Technical Analyst Uses the Parabolic SAR

The Parabolic SAR (stop-and-reverse) is a technical indicator devised by J. Welles Wilder, which is discussed in his book ‘New Concepts in Technical Trading Systems’ published in 1978. The Parabolic SAR follows price action and is therefore considered to be a trend following indicator. The Parabolic SAR, also know as the ‘stop and reverse system’ is shown on a chart as a series of dots placed either above or below an asset’s price level. The dots are shown below the price level when prices are rising (i.e. in an uptrend) and above the price level when prices are falling (i.e. in a downtrend). A parabola (i.e. a curve) of dots below the price level is considered to be bullish, while a parabola above the price level is considered to be bearish.

How a Technical Analyst Uses the Average Directional Index

The Average Directional Index (ADX) and Directional Movement Index (DMI) were developed by J. Welles Wilder in 1978. The ADX is an indicator of trend strength in the price of a security without regard to the direction of the trend. The DMX is made up of two indicators – Plus Directional Indicator (+DMI) and Minus Directional Indicator (-DMI) – that complement ADX by defining the direction of the securities trend. When used together, technical analysts can ascertain both the direction and strength of the trend. ADX and DMI was initially designed for the commodity markets using daily prices, although these indicators can also be applied to stocks, mutual funds, exchange-traded funds and futures.

How a Technical Analyst Uses Moving Average Convergence Divergence

The Moving Average Convergence Divergence (MACD), developed by Gerald Appel in the 1970s, is a popular momentum indicator used by technical analysts. The MACD indicator provides traders and investors with a measure of short-term momentum compared to longer term momentum, which gives an an indication of the current direction of momentum.

How a Technical Analyst Uses the Coppock Indicator

The Coppock Indicator is a technical analysis indicator developed by Edwin Coppock and first published in 1962. The Coppock Indicator is a popular price momentum indicator that is used by technical analysts to identify major bottoms in the stock market that provided good buying opportunities for long-term stock market investors.

How a Technical Analyst Uses the Stochastic Oscillator

The Stochastic Oscillator was developed by George Lane in 1958. The Stochastic Oscillator is a technical indicator that looks to predict turning points in price through the momentum of a security’s price, by comparing the closing price of the security relative to the high-low range over a given time period, most commonly 14 days. Because of its adaptability and ease of application, the Stochastic Oscillator is a favourite amongst traders and investors worldwide.

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