Confirmation

Question 1

Failure swing (bullish example)

Answer 1

In a bullish uptrend, the indicator reaches its overbought level or its upper extremes and retreats lower only to rebound up towards its extremes again. However, the indicator fails to reach the same level as before and turns down again, making a M pattern

Question 2

Oscillator reversal

Answer 2

Happens when the oscillator is doing a new high or a new low but the price is not

Question 3

Trend ID

Answer 3

• When an oscillator stays in one one-half range for a long period of time due to a trending market
• Overbought/oversold levels can be adjusted to consider the trend ID and reduce false signals

Question 4

• When a price advance halts with high volume
• When a price decline halts with high volume

Answer 4

• it is potentially a top
• it is potentially a bottom

Question 5

On-Balance-Volume (OBV)

Answer 5

• If the closing price is above the prior close price then: Current OBV = Previous OBV + Current Volume
• If the closing price is below the prior close price then: Current OBV = Previous OBV - Current Volume
• If the closing prices equals the prior close price then: Current OBV = Previous OBV (no change)

Question 6

If OBV does not reach a new high and confirms price strength

Answer 6

negative divergence has occurred and the trend might soon reverse

Question 7

When prices are in a trading range and the OBV breaks its own support or resistance

Answer 7

it often indicates the direction in which the price breakout will occur

Question 8

Price-Volume Trend (PVT)

Answer 8

PVT = [((CurrentClose - PreviousClose) / PreviousClose) x Volume] + Previous PVT

Question 9

Williams Variable Accumulation Distribution (WVAD)

Answer 9

• DRF = [(H - O) + (C - L)] / [2 * (H - L)]
• C is the Close
• O is the Open
• H is the High
• L is the Low

Question 10

Chaikin Accumulation Distribution

Answer 10

• Money Flow Multiplier = [(Close - Low) - (High - Close)] /(High - Low)
• Money Flow Volume = Money Flow Multiplier x Volume for the Period
• ADL = Previous ADL + Current Period’s Money Flow Volume

Question 11

Williams Accumulation Distribution (WAD)

Answer 11

• TRH (i) = MAX (HIGH (i) || CLOSE (i - 1))
• TRL (i) = MIN (LOW (i) || CLOSE (i - 1))
• If the current closing price is higher than the previous one, then:
  
  • CurА/D = CLOSE (i) - ТRL (i)
• If the current closing price is lower than the previous one, then:
  
  • CurА/D = CLOSE (i) - ТRH (i)
• If current and previous closing prices coincide then:
  
  • CurА/D = 0
• WА/D (i) = CurА/D + WА/D (i - 1)

Question 12

Volume Oscillator

Answer 12

Ratio of two MA of volume

Question 13

Money Flow Index (Oscillator)

Answer 13

• MF_i = { (High_i + Low_i + Close_i) / 3} x Volume_i
• MFR = ΣPMF / ΣNMF
• MFI = 100 - (100 / (1 + MFR))

Question 14

Ease of Movement (EMV)

Answer 14

• Distance Moved = ((H + L)/2 - (Prior H + Prior L)/2)
• Box Ratio = ((V/100,000,000)/(H - L))
• 1-Period EMV = ((H + L)/2 - (Prior H + Prior L)/2) / ((V/100,000,000)/(H - L))
• 14-Period Ease of Movement = 14-Period simple moving average of 1-period EMV

Question 15

Force Index

Answer 15

• Force Index(1) = {Close (current period) - Close (prior period)} x Volume
• Force Index(13) = 13-period EMA of Force Index(1)

Question 16

Shock Spiral

Answer 16

• ABC movement
• A - Downward gap
• B - DCB
• C - Final decline

Question 17

• First derivative
• Second derivative

Answer 17

• Slope
• Change in the slope

Question 18

Momentum Oscillators

Answer 18

Measure the rate of change in price

Question 19

Williams %R

Answer 19

%R = [(H - C) / (H - L)] * 100

Question 20

Commodity Channel Index (CCI)

Answer 20

• CCI = (Typical Price - 20-period SMA of TP) / ( .015 x Mean Deviation)
• Typical Price (TP) = (High + Low + Close) / 3
• Constant = .015
• Measures the deviation of a security’s price from a moving average

Question 21

ADX in trading systems

Answer 21

Is useful to determine when to switch between trading formulas