Price Based Analysis

By Viktor Ka

Price studies in the technical analysis have been from the beginning of the technical analysis itself. This is the oldest and most popular indicators among institutional and retail traders. There are a lot of various ways build around analysis of the price movements with the main purpose of getting an ability to predict with certain degree of confidence a possible development of future price trend.

Below I have gathered some of the most popular price based indicators in technical analysis with short description. You have to keep in mind that many technical indicators repeat each other by, basically, representing the same information from different point, in different scale or in different form.

Moving average is the basic and the most important tool in the analysis of the price movements. There are several types of averages: simple, exponential, weighted, etc. The simple one (you may see form the name that is the simplest in building and calculations) is simply and average price over specified period of time or specified number of bars. Many strategies in technical analysis use moving average as a component of analysis. At the same time moving averages are used to smooth, price and other indicators fluctuations. Another use of moving averages is to build signals lines with a purpose of defining reversal points of different indicators. MACD is one of the most popular indicators. MACD is strictly based on the moving averages.

Stochastics is another price based technical indicators. If the main purpose of the moving averages is to smooth price fluctuation and define general stock trend, then the purpose of Stochastics in technical analysis is to show how far the current price is from the most recent highest (resistance) and lowest (support) levels. Even moving averages are not used in Stochastics calculations; a moving average could be plotted on the Stochastics line as a signal line in order to see where the Stochastics line changes its trend.

RSI (Relative Strength Index) is another price based study that the same as Stochastics is not based on the moving averages, but may use plotted moving average as a signal line. The RSI has been developed to define how fast price is moving and respectfully to see how strong an analyzed trend is.

ATR (Average True Range) is another indicator that is used in technical analysis to evaluate volatility of the trends.

There are plenty of other price based indicators, yet, I would say that these four are the main indicators that describe different parameters of price movements: where the price is trending, how fast it moves, how volatile (choppy) this movement is and where it is in relation to the closest resistance and support levels.

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About The Author
Charts, quotes, technical analysis, signals for indexes and exchanges (S&P 500, Nasdaq 100, DJI, etc) are essential in options trading, trading index derivatives (QQQQ, SPY, DIA, etc), index emini futures and index tracking funds.