F.A.Q
KOBIPC Technical Analysis
- Tenkan-Sen (Conversion Line): A short-term trend indicator, calculated as the average of the highest high and lowest low over the past 9 periods.
- Kijun-Sen (Base Line): A medium-term trend indicator, calculated as the average of the highest high and lowest low over the past 26 periods.
- Senkou Span A (Leading Span A): Forms one edge of the cloud, calculated as the average of the Tenkan-Sen and Kijun-Sen, plotted 26 periods ahead.
- Senkou Span B (Leading Span B): Forms the other edge of the cloud, calculated as the average of the highest high and lowest low over the past 52 periods, plotted 26 periods ahead.
- Chikou Span (Lagging Span): The current closing price plotted 26 periods behind, showing potential support/resistance.
- Price Above the Cloud: Indicates an uptrend.
- Price Below the Cloud: Indicates a downtrend.
- Price Inside the Cloud: Suggests consolidation or indecision.
- Cloud Thickness: A thicker cloud indicates stronger support/resistance, while a thinner cloud suggests weaker levels.
- Simple Moving Average (SMA): The SMA is calculated by taking the average of a set of prices over a specific number of periods. Example: A 10-day SMA adds up the closing prices of the last 10 days and divides by 10.
- Exponential Moving Average (EMA): The EMA gives more weight to recent prices, making it more responsive to new information compared to the SMA. Example: A 10-day EMA places more emphasis on the most recent prices than the SMA.
- Weighted Moving Average (WMA): The WMA assigns a heavier weighting to more recent data points, similar to the EMA, but the weighting decreases linearly.
- Price Above the MA: Indicates an uptrend.
- Price Below the MA: Indicates a downtrend.
- Price oscillates around the MA: Suggests consolidation or indecision.
- Moving averages can act as dynamic support (in an uptrend) or resistance (in a downtrend).
Typical Price
The Typical Price is a simplified average of a stock's high, low, and closing prices for a given period.
Formula: Typical Price = (High + Low + Close) / 3
This measure provides a general sense of where the stock traded during the session, smoothing out volatility by incorporating three key price points.
Median Price
The Median Price represents the middle value between a stock's high and low prices for a given period.
Formula: Median Price = (High + Low) / 2
This metric eliminates extreme values and focuses on the central trading range, which can be useful for identifying support and resistance levels.
Weighted Close Price
The Weighted Close Price gives more importance to the closing price while still considering the high and low prices.
Formula: Weighted Close = (High + Low + 2*Close) / 4
This calculation places double weight on the closing price, reflecting many traders' belief that the closing price is the most significant price of the trading day.
Comparison of Price Types
| Price Type | Components | When to Use |
|---|---|---|
| Typical Price | Equal weight to High, Low, Close | General market analysis, smoothing price data |
| Median Price | Equal weight to High and Low only | Focusing on trading range, ignoring closing bias |
| Weighted Close | Double weight to Close, single to High/Low | When closing price is considered most significant |
Doji
Neutral signal
A Doji forms when the opening and closing prices are virtually equal, creating a cross-like shape. This indicates indecision in the market.
Key features: Small or non-existent body with wicks on both sides. The longer the wicks, the more significant the indecision.
Morning Star
Bullish reversal pattern
A three-candle pattern that signals a potential bottom and reversal from a downtrend to an uptrend.
Key features:
- First candle: Long bearish candle
- Second candle: Small-bodied candle (bullish or bearish) that gaps down
- Third candle: Long bullish candle that closes into the first candle's body
Evening Star
Bearish reversal pattern
A three-candle pattern that signals a potential top and reversal from an uptrend to a downtrend (opposite of Morning Star).
Key features:
- First candle: Long bullish candle
- Second candle: Small-bodied candle (bullish or bearish) that gaps up
- Third candle: Long bearish candle that closes into the first candle's body
Hammer
Bullish reversal pattern (when appearing in a downtrend)
A single-candle pattern with a small body at the upper end and a long lower wick, suggesting rejection of lower prices.
Key features:
- Small real body (bullish or bearish) at the top of the trading range
- Long lower shadow (at least twice the length of the body)
- Little or no upper shadow
Inverted Hammer
Bullish reversal pattern (when appearing in a downtrend)
Similar to a hammer but inverted, with a long upper wick and small body at the lower end.
Key features:
- Small real body (bullish or bearish) at the bottom of the trading range
- Long upper shadow (at least twice the length of the body)
- Little or no lower shadow
Bullish Engulfing
Bullish reversal pattern
A two-candle pattern where a large bullish candle completely engulfs the previous bearish candle.
Key features:
- First candle: Bearish candle (any size)
- Second candle: Larger bullish candle that completely engulfs the first candle's body
- More significant after a downtrend
Bearish Engulfing
Bearish reversal pattern
A two-candle pattern where a large bearish candle completely engulfs the previous bullish candle (opposite of Bullish Engulfing).
Key features:
- First candle: Bullish candle (any size)
- Second candle: Larger bearish candle that completely engulfs the first candle's body
- More significant after an uptrend
Shooting Star
Bearish reversal pattern (when appearing in an uptrend)
A single-candle pattern that resembles an inverted hammer but appears after an uptrend, signaling potential reversal.
Key features:
- Small real body (bullish or bearish) at the bottom of the trading range
- Long upper shadow (at least twice the length of the body)
- Little or no lower shadow
- Appears after an uptrend
Hanging Man
Bearish reversal pattern (when appearing in an uptrend)
A single-candle pattern that looks like a hammer but appears after an uptrend, signaling potential reversal.
Key features:
- Small real body (bullish or bearish) at the top of the trading range
- Long lower shadow (at least twice the length of the body)
- Little or no upper shadow
- Appears after an uptrend
Average True Range (ATR)
The Average True Range measures market volatility by decomposing the entire range of an asset price for that period.
- Developed by J. Welles Wilder
- Calculated as a moving average of true ranges
- Higher ATR = higher volatility
- Doesn't indicate price direction, only volatility
Bollinger Bands
Bollinger Bands consist of a middle band (SMA) with two outer bands that adjust based on volatility.
- Created by John Bollinger
- Bands widen during volatile periods and contract during stable periods
- Standard settings: 20-period SMA with bands at ±2 standard deviations
- Used to identify overbought/oversold conditions
Keltner Channel
The Keltner Channel is a volatility-based envelope set above and below an exponential moving average.
- Uses Average True Range to set channel width
- Channel expands and contracts with volatility changes
- Often used to identify trend direction and potential reversals
- Less common than Bollinger Bands but similar in application
Donchian Channel
Donchian Channels plot the highest high and lowest low over a specified period.
- Created by Richard Donchian
- Channel width directly reflects volatility
- Common settings use 20-period highs/lows
- Breakouts above/below channels signal potential trend changes
Standard Deviation
Standard Deviation measures how prices are dispersed from their average price.
- Statistical measure of price volatility
- Higher values indicate greater price fluctuations
- Often used as a component in other indicators
- Typically calculated using closing prices
VIX (Volatility Index)
The VIX measures the market's expectation of 30-day volatility.
- Often called the "fear index"
- Calculated from S&P 500 index options
- High VIX values indicate increased fear/uncertainty
- Low VIX values suggest market complacency
Historical Volatility
Historical Volatility measures how much an asset's price has fluctuated over a given time.
- Calculated as the annualized standard deviation of daily price changes
- Looks backward at actual price movements
- Different from implied volatility which looks forward
- Used to compare current volatility to historical ranges
Chaikin's Volatility
Chaikin's Volatility measures volatility by comparing the spread between high and low prices.
- Created by Marc Chaikin
- Uses an exponential moving average of the difference between highs and lows
- Rising values indicate increasing volatility
- Often used with volume indicators for confirmation
Relative Volatility Index (RVI)
The Relative Volatility Index measures the direction of volatility.
- Similar to RSI but measures volatility instead of price
- Values above 50 suggest increasing volatility
- Values below 50 suggest decreasing volatility
- Can help confirm trend strength
Ulcer Index
The Ulcer Index measures downside volatility and risk.
- Focuses only on drawdowns below recent highs
- Higher values indicate more severe drawdowns
- Used to compare risk between investments
- Popular among long-term investors
Using Volatility Indicators
Volatility indicators are valuable tools for traders and investors to:
- Assess market risk
- Determine position sizing
- Identify potential breakouts
- Set stop-loss levels
- Compare volatility across different assets
They work best when combined with other technical indicators and fundamental analysis.