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Trading 101

1. The document discusses several technical indicators used to analyze stock price movements, including the Moving Average Convergence Divergence (MACD) indicator, On-Balance Volume (OBV) indicator, and Accumulation/Distribution (A/D) line. 2. MACD measures the relationship between two exponential moving averages to identify bullish and bearish trends and divergences. OBV measures the positive and negative flow of trading volume. A/D line considers trading volume and price range to identify periods of buying and selling pressure. 3. These technical indicators provide information on momentum, buying and selling pressure, and trend confirmation to help traders identify opportunities to buy low and sell high.

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Rica Navarro
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0% found this document useful (0 votes)
207 views27 pages

Trading 101

1. The document discusses several technical indicators used to analyze stock price movements, including the Moving Average Convergence Divergence (MACD) indicator, On-Balance Volume (OBV) indicator, and Accumulation/Distribution (A/D) line. 2. MACD measures the relationship between two exponential moving averages to identify bullish and bearish trends and divergences. OBV measures the positive and negative flow of trading volume. A/D line considers trading volume and price range to identify periods of buying and selling pressure. 3. These technical indicators provide information on momentum, buying and selling pressure, and trend confirmation to help traders identify opportunities to buy low and sell high.

Uploaded by

Rica Navarro
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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1 MIN chart Important Day min

RED = buy
green = pataas ,,, hold ,, pg ngred sell
ngspike yung green na mahaba may papatunayan

Moving Averages
6 smooth line should be above
close
exponential
* the pattern of line should be 6 above middle is 13 and 25 the bottom
13 *pg humiwalay ang 6 13 and 25 saka bumili
close *indication of bull market pg tingin sa MACD , pgconfirm ay pag moving averages look in MAC
exponential

25
close
exponential

MACD
g moving averages look in MACD if two lines ngbreakout or cross OVER"bumili na" or "sell " check on Moving average if the candle stick is
average if the candle stick is red "sell" if the candle stick is green "buy"
What Is Moving Average Convergence Divergence – MACD?

Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator


that shows the relationship between two moving averages of a security’s price. The MACD
is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-
period EMA.

MACD is calculated by subtracting the 26-period EMA from the 12-period EMA.
MACD triggers technical signals when it crosses above (to buy) or below (to sell) its signal
line.
The speed of crossovers is also taken as a signal of a market is overbought or oversold.
MACD helps investors understand whether the bullish or bearish movement in the price is
strengthening or weakening.

Learning From MACD

Learning From MACD


The MACD has a positive value whenever the 12-period EMA (blue) is above the 26-period
EMA (red) and a negative value when the 12-period EMA is below the 26-period EMA. The
more distant the MACD is above or below its baseline indicates that the distance between
the two EMAs is growing. In the following chart, you can see how the two EMAs applied to
the price chart correspond to the MACD (blue) crossing above or below its baseline (red
dashed) in the indicator below the price chart
MACD is often displayed with a histogram (see the chart below) which graphs the di
between the MACD and its signal line. If the MACD is above the signal line, the histog
be above the MACD’s baseline. If the MACD is below its signal line, the histogram will b
the MACD’s baseline. Traders use the MACD’s histogram to identify when bullish or b
momentum is high.
MACD vs. Relative Strength

The relative strength indicator (RSI) aims to signal whether a market is considered to be overbought or oversold in
The RSI is an oscillator that calculates average price gains and losses over a given period of time; the default time p
bounded from 0 to 100.

MACD measures the relationship between two EMAs, while the RSI measures price change in relation to recent pric

These indicators both measure momentum in a market, but, because they measure different factors, they sometime

Limitations of MACD
One of the main problems with divergence is that it can often signal a possible reversal but then
happens – it produces a false positive. The other problem is that divergence doesn't forecast all re
predicts too many reversals that don't occur and not enough real price reve

"False positive" divergence often occurs when the price of an asset moves sideways, such as in a
following a trend. A slowdown in the momentum - sideways movement or slow trending moveme
the MACD to pull away from its prior extremes and gravitate toward the zero lines even in the a

Example of MACD Crossovers

As shown on the following chart, when the MACD falls below the signal line, it is a bearish signal w
be time to sell. Conversely, when the MACD rises above the signal line, the indicator gives a bullish
the price of the asset is likely to experience upward momentum. Some traders wait for a confirmed
before entering a position to reduce the chances of being "faked out" and entering a po
As shown on the following chart, when the MACD falls below the signal line, it is a bearish signal w
be time to sell. Conversely, when the MACD rises above the signal line, the indicator gives a bullish
the price of the asset is likely to experience upward momentum. Some traders wait for a confirmed
before entering a position to reduce the chances of being "faked out" and entering a po

Crossovers are more reliable when they conform to the prevailing trend. If the MACD
line following a brief correction within a longer-term uptrend, it qualifies as bull
Example of Divergence

When the MACD forms highs or lows that diverge from the corresponding highs and lows on
divergence. A bullish divergence appears when the MACD forms two rising lows that correspond
price. This is a valid bullish signal when the long-term trend is still positive. Some traders will look f
when the long-term trend is negative because they can signal a change in the trend, although this
When the MACD forms a series of two falling highs that correspond with two rising
bearish divergence has been formed. A bearish divergence that appears during a long
considered confirmation that the trend is likely to continue. Some traders will watch f
during long-term bullish trends because they can signal weakness in the trend. Howeve
a bearish divergence during a bearish trend.
MACD?

mentum indicator
ice. The MACD
MA) from the 12-

eriod EMA.
to sell) its signal

ht or oversold.
nt in the price is

ve the 26-period
period EMA. The
stance between
EMAs applied to
ts baseline (red
) which graphs the distance
signal line, the histogram will
e, the histogram will be below
ntify when bullish or bearish
e overbought or oversold in relation to recent price levels.
d of time; the default time period is 14 periods with values

ge in relation to recent price highs and lows. These two indicators are often used together to provide  analysts a more complet

rent factors, they sometimes give contrary indications. For example, the RSI may show a reading above 70 for a sustained perio

sible reversal but then no actual reversal actually


ce doesn't forecast all reversals. In other words, it
enough real price reversals.

s sideways, such as in a range or triangle pattern


r slow trending movement - of the price will cause
zero lines even in the absence of a true reversal.

ne, it is a bearish signal which indicates that it may


indicator gives a bullish signal, which suggests that
ers wait for a confirmed cross above the signal line
d out" and entering a position too early.
g trend. If the MACD crosses above its signal
nd, it qualifies as bullish confirmation.
ding highs and lows on the price, it is called a
g lows that correspond with two falling lows on the
Some traders will look for bullish divergences even
the trend, although this technique is less reliable.
pond with two rising highs on the price, a
appears during a long-term bearish trend is
e traders will watch for bearish divergences
in the trend. However, it is not as reliable as
arish trend.
7 Technical Indicators to Build a Trading Toolkit

Technical indicators are used by traders to gain insight into the supply and demand of securities. In
Toolkit

demand of securities. Indicators, such as volume, provide clues as to whether a price move will continue. In t
On-Balance Volume
First up, use the on-balance volume indicator (OBV) to measure the positive and negative flow of v

The indicator is a running total of up volume minus down volume. Up volume is how much volume
when the price rallied. Down volume is the volume on day when the price falls. Each day volu
subtracted from the indicator based on whether the price went higher or lower.

When OBV is rising, it shows that buyers are willing to step in and push the price higher. When O
selling volume is outpacing buying volume, which indicates lower prices. In this way, it acts like a
tool. If price and OBV are rising, that helps indicate a continuation of the trend.

Traders who use OBV also watch for divergence. This occurs when the indicator and p
different directions. If the price is rising but OBV is falling, that could indicate that th
backed by strong buyers and could soon reverse.
e and negative flow of volume in a security over time

me is how much volume there is on a day


ice falls. Each day volume is added or
e went higher or lower.

he price higher. When OBV is falling, the


n this way, it acts like a trend confirmation
ontinuation of the trend.

n the indicator and price are going in


could indicate that the trend is not
n reverse.
Accumulation/Distribution Line
One of the most commonly used indicators to determine the money flow in and out of a s
the accumulation/distribution line (A/D line).

It is similar to the on-balance volume indicator (OBV), but instead of considering only t
of the security for the period, it also takes into account the trading range for the perio
close is in relation to that range. If a stock finishes near its high, the indicator gives
weight than if it closes near the midpoint of its range. The different calculations mean
work better in some cases and A/D will work better in others.

If the indicator line is trending up, it shows buying interest, since the stock is closing ab
point of the range. This helps confirm an uptrend. On the other hand, if A/D is falling,
price is finishing in the lower portion of its daily range, and thus volume is considered
helps confirm a downtrend.
ey flow in and out of a security is
line).

of considering only the closing price


g range for the period and where the
h, the indicator gives volume more
ent calculations means that OBV will
better in others.

he stock is closing above the halfway


and, if A/D is falling, that means the
volume is considered negative. This
Average Directional Index

The average directional index (ADX) is a trend indicator used to measure the strength and
momentum of a trend. When the ADX is above 40, the trend is considered to have a lot of
directional strength, either up or down, depending on the direction the price is moving

When the ADX indicator is below 20, the trend is considered to be weak or non-
trending.
he strength and
d to have a lot of
price is moving

e weak or non-

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