MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава

OSCILLATORS

Key terms
1. oscillator — осциллятор — индикатор, который колеблется меж верхней инижней границами коридора, обозначает сигналы «купи», «продай», указывая разницу меж показателями среднего движения курса за маленький и длиннющий периоды времени.
2. Momentum — осциллятор, указывающий на скорость конфигурации цены в сопоставлении с уровнем самой цены. Разница меж ценой инструмента сейчас и ценой в MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава предыдущие периоды. Положительное либо отрицательное значение различия отмечается относительно нулевой полосы.
3. Relative Strength Index (RSI) — осциллятор — индекс, обозначающий силу цены истинной относительно цены в прошедшем.
4. Stochastics — индикатор скорости конфигурации цен. На растущем рынке цены при закрытии биржи устремляются ввысь, и напротив, при понижательной рыночной конъюнктуре они падают вниз.
Slow MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава stochastics — дает наименее чувствительные характеристики движения цен и поболее предпочтителен для торговцев. Его показатель % К соответствует % D стремительных стохастических линий.
Fast stochastics — индикатор более чувствительный, чем неспешные стохастические полосы, линия % указывает близость цен закрытия биржи к верхней границе за определенный период. Масштаб измерения — от 0 до 100. Наивысшая стоимость — 100, самая низкая MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава — 0. % D — 2-ая линия, особая линия характеристик среднего движения курса % К по разным периодам. Сигнал покупки образует композиция низкого значения % D и еще больше низкого значения % К (наименее 20). Сигнал реализации — высочайшее значение % D и еще больше высочайшее % К (более 80).
5. Moving Average Convergence Divergence (MACD) — две полосы характеристик среднего движения курса, колеблющиеся выше MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава и ниже нуля. 1-ая линия (Conv.) отмечает разницу меж показателями среднего курса (MACD W), а 2-ая является экспонентным показателем среднего курса первой полосы (MACD), т.е. сигнальной линией. Если MACD W пересечет сигнальную линию сверху, то появляется сигнал покупки. Если скрещение произойдет с обратной стороны — то появляется сигнал реализации MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава. Чем скрещение далее от нуля, тем прогноз надежнее.
6. Moving Average Crossover — скрещение скользящих средних с маленьким и длинноватым периодом образует две полосы характеристик среднего движения курса. Если курс с маленьким периодом падает ниже курса с длинноватым периодом и оба курса понижаются, то появляется сигнал реализации. Если курс MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава недлинного периода пересекает курс длинноватого периода снизу и оба курса подымаются ввысь, то появляется сигнал покупки.
7. Bollinger Bands — полосы, наносимые на график выше и ниже скользящей средней цен закрытия. Верхняя и нижняя полосы сближаются при размеренной конъюнктуре рынка и расползаются с ростом колебания цен.
8. Directional Movement Index —индекс MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава, образуемый 4-мя индексами и указывающий на силу тренда.

Momentum oscillators are technical indicators which measure the change in prices over a given time period. These indicators are very useful in trendless or sidewavs trending markets, as well as in trading band conditions. They can also help in oinoointing the turn in MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава trends, whether they be intra-day, weekly, or very long term in nature. During a trending period though, the trend will tend to dominate any signals given by the momentum oscillator. There are three important indications to look for in all momentum oscillators: direction. extreme values and divergence from prices MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава. Direction Momentum oscillators track prices verv well. and can actually lead price direction bv one to two periods. The direction Vocabulary ae 'value - ценность, стоимость, сумма э: divergence - отклонение i: to'lead - упреждать crossover — скрещение
that momentum oscillators are moving in thus corresponds to the direction in MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава which prices will potentially move. Longer term versus shorter term momentum oscillator analysis provides indication of price direction as well. This is similar to the use of long and short term moving averages for determining nrice direction, in that cross overs are very important. A longer term momentum oscillator is one MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава that uses a larger time period. relative to a medium term momentum oscillator. For example, a 21-day Stochastic would be considered a long term momentum oscillator, compared to a 9-day stochastic, and a 10-bar hourly stochastic would be considered a longer term stochastic in comparison to a 5-bar MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава hourly stochastic. As a rule: "The longer term momentum oscillators have less volatility and thus they will not be subject to the number of false

signals that the shorter term momentum oscillators are, making a case for using them in conjunction with each other. The same effect can MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава be generated bv smoothing a same time period oscillator, in effect slowing it down. In this case, a moving average of a momentum oscillator can be compared to the underlying momentum oscillator, and give similar cross over signals as using the longer term/shorter term indicators. Extreme Values An extreme value MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава in the momentum oscillator occurs, when peaks and troughs are evident in the momentum oscillator chart. When the momentum oscillator reaches an extreme value, the trend in prices will generally flatten, and there is potential for a reversal of the prior trend. However, the prevailing trend of price MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава direction is still the major trading factor, and momentum oscillators reaching extreme values is usually a pause in the trend. Areas of extreme value are called overbought levels at momentum oscillator peaks, and oversold levels at momentum oscillator troughs. Both the Relative Strength Index and the Stochastic MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава indicator have predetermined levels where the underlying instrument is considered to be overbought or oversold, but as peaks tend to occur at higher levels in bull markets, troughs at lower levels in bear markets, the use of predetermined levels for overbought/oversold signals is not encouraged. Other momentum oscillators MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава such as the Net Change Oscillator (NCO) or Rate of Change Indicator (ROC) display peaks and troughs as well, but there are no predetermined valuation levels which give overbought/oversold indi­cations. Divergence As prices and momentum oscillators usually trend in the same direction, and momentum oscillators can be used for the MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава timing of price turns, divergence in direction is an important sianal. Divergence occurs when prices continue to trend higher (or lower) and momentum oscillators turn in the opposite direction. This is most significant at new price highs or lows, but keep in mind that chart patterns such as MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава double tops, head and shoulders, etc. can occur when divergence is seen, and one should wait for penetration of kev suooort. or resistance, in order to confirm this turn in the trend. Divergence can be used to tighten stops, or as a strong warning signal that the prevailing trend could MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава be reversing. These three indications are verv important in using momentum oscillators, as used in conjunction with each other thev can help in determining trends and turning points. Moving Average Spreads (MAS) The formula of the moving average spread is: MAS = shorter moving average - longer moving average Example MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава: (4-day MA) — (18-day MA), or (5-week MA) - (20-week MA). Moving average spreads are derived by taking the difference between two moving averages. Usually one of the moving averages is a short term moving average, while the other can be intermediate, or long term. This difference, or spread, is plotted MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава and used as a momentum oscillator. л
'underlying - основной
of
'trough — нижняя точка (поддержка)
i:
'peak — высшая точка (сопротивления)
QT dl
'prior — предыдущий
e
spread — разница, разрыв
pre-set — заблаговременно установленный
ae
'magnitude — величина, значение
to overlay — наложить

Moving average spreads are plotted as any momentum oscillator. Direction, extreme MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава values and divergence are looked for in the chart. If the spread is uptrending, the shorter term moving average must be greater than (above) the longer term moving average. The reverse is true for a downtrending spread. Trading signals are generated when the zero line is crossed MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава, showing a moving average cross over. Thus, moving average spreads are good trend indicators.

Extreme values are a little harder to measure in the moving average spreads as there are no pre-set boundaries. The Relative Strength Indicator and Stochastic Oscillator have maximum and minimum values (100 and 0) and levels at MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава which the market is considered overbought/oversold (70% - 30% and 80%-20%, respectively). The MAS, much like the NCO, does not have either of these pre-determined parameters. It can take on any value, positive or negative, of any magnitude. Analysing historical data of past extreme values is necessary, and then these areas can be MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава used for future reference.

Divergence between MAS direction and security price direction gives early indication of trend change. One measure of trend change that is often used in technical analysis is the crossing of moving averages. Crossing of the moving averages which make up the spread necessarily makes MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава the MAS reach zero. Thus, early warning or confirmation of a change in trend is possible using MAS.

Comprehension Questions

1. What do momentum oscillators measure?

2. What are the three important indications in all momentum oscillators?

3. How do momentum oscillators show direction of price moves?

4. Which M. 0's produce false signals?

5. How MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава can M. 0's indicate a reversal of the prior trend?

6. What are the areas of extreme value called?

7. When does divergence occur?

8. What is the formula of Moving Average Spreads?

Exercises

Ex. 1. Put questions to the underlined words.

Ex. 2. Find verbals and state their syntactical function in the MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава sentence.

Ex. 3. Select sentences which are difficult to translate and make a syntactical analysis of them.

Ex. 4. Analyse noun collocations according to the models given in the Reference Grammar.

Ex. 5. Read and translate the text.

TRANSLATION PRACTICE Momentum Crossover Analysis The Momentum Crossover analysis, which can be created in the MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава User defined analysis modules of Reuters Technical Analysis and Reuters Technical Analysis for Unix, combines the trend direction characteristics of the simple moving average and the trend strength capabilities of the momentum analysis. Two of these analyses used together can produce effective buy and sell signals. Vocabulary ou crossover trend MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава direction - trend strength - скрещение (трендов) - направление тренда - сила тренда

The formula parameters are as follows and need to be filled in at the time of charting: vl —timeseries (instrument), nl — observation period for momentum (lag period), n2 — averaging period for moving average. The diagram shows a short MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава and long momentum crossover analysis giving clear buy and sell signals. The momentum crossover analysis is simply a smoothed version of the standard momentum analysis. Two of these analysis on the same chart, one with a long, the other with a short averaging period can be used in MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава the same way as two standard simple movine averages, (i.e. crossover indicates buy and sell signals) except that the lines will oscillate around zero. Uptrends are indicated bv price action below the momen­tum crossover lines. The momentum crossover line cutting through price after a trend has been established (up MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава or down) indicates trend reversal. The analysis should not be used in a sudeways market as it tends to be choppy in the same manner as ordinary moving averages. To create the Momentum crossover analysis, simply add the following formula into the UDA editor of either RTA or MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава RTAu. Then graph the momentum crossover twice with differing length averaging and observation periods overlaid with a price chart. The momentum and moving average oeriod parameters should be the same as those used for short and long moving average crossovers for the instrument you are trading. Exercises Ex. 1. Put MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава questions to the underlined words. Ex. 2. Find verbals and state their syntactical function in th Ex. 3. Analyse noun collocations. e momentum — скорость конфигурации цены moving average — скользящая средняя lag - отставание во времени и: 'smoothed - сглаженный о to'oscillate - колебаться ou ei to overlay — наложить e sentence.

OSCILLATORS (continued) Relative Strength Index MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава (RSI) The formula for the RSI is: RSI = 100— 100/[(Up Average/Down Average) + I]. Where: Up Average = The average of closes in a given amount of time that are higher than the previous close. Down = The average of closes in a given amount of time that are MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава lower than the previous close. The RSI is a momentum indicator based upon price movement over a specified period of time created by Welles Wilder. Some of the Droblems that are apparent in other momentum oscillators are eliminated in the RSI. Namely, by taking the up average and down average instead of MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава the difference of prices, a smoother oscillator is created. For example, in a 14-day RSI the up average of the last 14 days is derived, as is the down average of the last 14 days. A constant band is created as well (from 0 to 100) which facilitates analysis of different MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава securities. The RSI is used as any momentum oscillator. Directional movement, peaks, troughs. Divergence and crossing between short term and long term RSI's are looked for in the chart. Overbought/oversold signals are given by crossing the 70 and 30 lines according to Welles Wilder. Instead of focusing only on the MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава crossing of the overbought/oversold line, peaks and troughs of the oscillator should be examined for signals, with peaks expected to be at higher levels in a bull market than in a bear market, troughs occurring at lower levels in a bear market than a bull market. A peak MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава in the RSI would suggest a price turn around to lower levels could be ahead, while a trough in the RSI suggests the opposite. Longer term RSI's will have less vitality than shorter term RSI's, if many overbought/oversold signals are desired, use of a shorter term MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава RSI would generate them, but these will not have the same weight as the less sensitive RSI in terms of medium to long term trends. Vocabulary
e
momentum - скорость движения
i
to eliminate — уничтожать, снимать
u:
smooth — гладкий, ровненький
ai
to derive - получать
э:
raw — твердый

The stochastic recognizes MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава that in an uptrending market the close tends to be near high, while in a downtrending market, the

close is near the lows of the time period. Using the above formula, a "raw" stochastic is found.

A three—day moving average of the "raw" stochastic is used by MMS MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава, as the "raw" stochastic is very volatile, giving false signals. The three—day moving average is called the %K stochastic. A three—day moving average of the %K stochastic is called the %D, which gives a smoother momentum oscillator. This indicator will range between 100 (when the close is equal to MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава the highest high of the last "x" periods) and 0 (when the close is equal to the lowest low of the last "x" periods).

The stochastic is used as any momentum oscillator, with directional movement, peaks, troughs, divergence, crossing between short term and long term stochastics, and crossing between %K MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава and %D stochastics looked for in the chart.

Bollinger Bands—BB

Bollinger Bands are lines charted above and below the moving average of the closing prices. This analysis varies from other percentage band analysis because the distance of each band from the moving average is not fixed. Instead, the price channel MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава these bands form around the moving average is flexible and determined by the user specifying a number of standard deviations.

The standard deviation is the method used to set the band width about the moving average. Bollinger used a 2% standard deviation to capture 95% of prices within MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава the band. However a 1.5 standard deviation is commonly used for futures.

Bollinger Bands automatically narrow and widen in response to volatility — narrow in calm markets, and widen in volatile markets, making them an effective trend indicator.

Bollinger Bands are used with a simple price graph:

Prices near the lower MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава band may signal an overbought market.

Prices near the upper band may signal an oversold market.

The bands often narrow before a sharp move in price. A narrowing of the bands indicates the start of a new trend, which is confirmed when prices break and close out of the band.

A MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава price that breaks above the top band, followed by another that closes within, may signal a reversal and a good time to sell.

A price that breaks below the bottom band, followed by another that closes within, may signal a reversal and a good time to buy.

Example

If prices MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава are moving in a downtrend and hit the bottom of the band, but close back in the bands, indicates that the trend will not continue to go down but sideways and then probably back up.

Bollinger Bands form an area of Support and Resistance and are used to take MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава profits. If prices break above or below the Bands, it results in a changed Support and Resistance. Bollinger Bands do not indicate trading stops.

Directional Movement Index — DMI

The Directional Movement Index (DMI) determines the strength of any upward or downward trends present in the market. It consists MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава of the following four lines:

+DM measures upward movement in price over time. — DM measures downward movement in price over time. DX measures the overall direction of movement

(whether up/down) in price over time. ADX measures the average direction of movement (up/

down) in price over time. In effect it MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава is the average

of the DX.

ADX measures the strength of the trend in the market. The higher the ADX, the stronger the trend present. This index does not measure the direction of the trend. In other words, it is quite common for the ADX to be rising while prices are MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава falling — this indicates an increasing strength in the down trend.

All four lines are plotted on a scale from 0 to 100.

Comprehension questions

1. Where are Bollinger Bands charted?

2. What does the band width show?

3. What do Bollinger Bands signal?

4. What does the Directional Movement Index show?

Exercises

Ex. 1. Translate from English MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава into Russian and vice versa

1. What are the momentum oscillators?

Momentum oscillators are technical indicators which measure the change in price over a given time period.

2. Where are M.O's used?

They are useful in trendless or sideways trending market, and significant when they reach extreme value:

overbought + 70/80%, oversold - 30/20%.

3. What signals MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава do they give?

M.O's give market signals. Turn divergence between prices and momentum.

4. What is a Relative Strength Index?

Relative Strength Index (RSI) is a smoother oscillator created by taking the up average and down average instead of the difference in prices.

5. What is the formula MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава for RSI?

6. What does a stochastic oscillator measure? A stochastic oscillator measures where closing price is in relation to total price range.

7. Where are closing prices in uptrend?

Uptrend closing prices are in the upper end of the range.

8. What lines does a stochastic oscillator use? Two lines are MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава used: %K line, more solid and sensitive and %D line, smoothed version of the %K line.

9. What is the formula for a stochastic oscillator?

The Formula is %K = 100 C-Lx/Hx-Lx],

Lx — Lowest low of last x period,

Hx — Highest high of last x period,

%D = Moving average MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава of %K 3 day smoothed is used

with 5 day. An example of the stochastic oscillator is shown below:

Ex. 2. Put questions to the underlined words.

Ex. 3. Find verbals and state their syntactical function in the sentence.

Ex. 4. Make a syntactical analysis of the sentences difficult for translation.

Ex. 5. Read and MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава translate the text.

TRASLATION PRACTICE

A Quick Look At Bollinger Bands Bollinger bands is a popular band analysis similar to the Alpha Beta trend. It can be used as a system in itself or with Oscillators such as the Relative Strength Index (RSI). The analysis is standard in both Reuters Technical MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава Analysis (RTA) and Reuters Technical Analysis for Unix (RTAu). Bollinger Bands consist of 3 lines. 2 charted ones above and the other below the moving average of closing prices, which makes up the third line. The moving average of close data needs to be created seoaratelv to complete the bollineer bands MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава analysis. This analysis varies from other percentage band analyses because the distance of each band from the moving average is not fixed. Instead, the price channel these bands form around the moving average is flexible, being determined by specifying a number of standard deviations from it. John Bollineer. who MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава created Bollineer Bands and used them in stock tradine. Used a standard deviation of 2 which captures about 95% of price action within the bands. A different number of standard deviations can be selected dependina on the market traded for example, 1.8 standard deviations would be more appropriate for futures MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава trading. The length of the moving average which is used to calculate the bands is usually 20 days or less. Care should be taken here as these sample sizes are small and statistical error Quite possible. The only statistical inference that should be drawn from this analysis is that most MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава (approx. 95%) of the price action will be contained. A useful feature of Bollinger Bands is automatic narrowing and widening in response to volatility — narrow in calm markets and wide in volatile markets. This makes them an effective trend indicator, especially when used in conjunction with another trend following tool. Trading MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава Rules Use Bollinger Bands with a price chart and simple moving average (the same length as the Bollinger Bands) then keep a look out for the following signals: Fig 1 Bollinger Bands(top) used with an RSI(bottom). Trendlines show divergence between the RSI and Price which confirms the Bollinger MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава Bands. Prices near the lower band may signal an oversold market. Prices near the upper band may signal an overbought market. The bands often narrow before a sharp move in price, either ud or down. A narrowing of the bands often indicates the start of a new trend, which is MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава confirmed when prices break and close out of the band. An interval that closes above the top band, followed by another that closes within, may signal a reversal and a good time to sell. Vocabulary
i: ei
deviation — отклонение
ae
to'capture — обхватывать
э
appropriate — подходящий
to MEDIUM AND SHORT TERM TECHNICAL ANALYSIS 4 глава take care — позаботиться
a:
sample — эталон
i
'inference — вывод
ei
to contain — содержать
to keep a
lockout — смотреть
trend reversal — смена тренда
э:
to confirm — подтверждать
э:
divergence — отклонение
A to comfort — успокаивать


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