This template is designed to standardize the documentation and presentation of Technical Analysis indicators within this wiki. It provides a consistent format for describing the indicator's purpose, calculation, interpretation, strengths, weaknesses, and usage in Trading Strategies. It aims to help both beginners and experienced traders understand and utilize these tools effectively.
Technical Analysis Indicators are calculations based on historical price and volume data, used to predict the direction of future price movements. They are a crucial component of many Trading Systems and can provide valuable insights into market trends and potential trading opportunities. However, it’s vital to remember that indicators are *not* foolproof predictors. They are tools to aid in decision-making, not replacements for sound Risk Management and a comprehensive understanding of the market. This template serves as a guide for documenting each indicator clearly and consistently.
Template Usage
To use this template for a specific indicator, copy the code below and replace the bracketed placeholders with the relevant information. The template assumes a basic understanding of Candlestick Patterns and fundamental Chart Patterns.
indicator_name - The full name of the indicator (e.g., Moving Average Convergence Divergence).
short_name - A shortened version of the indicator name, often used in charts (e.g., MACD).
image - Link to an image illustrating the indicator on a chart. Use the format: `File:ExampleIndicator.png`.
image_description - A brief description of what the image shows.
type - The primary category the indicator falls into. Options include: Trend-Following, Momentum, Volatility, Overlap. Multiple types can be selected using commas (e.g., "Trend-Following, Momentum"). Refer to the Technical Indicators Types article for a detailed explanation of each category.
trend_following - Set to 'yes' if the indicator is primarily used to identify and follow trends. Otherwise, set to 'no'.
momentum - Set to 'yes' if the indicator measures the speed or strength of price movements. Otherwise, set to 'no'.
volatility - Set to 'yes' if the indicator measures the degree of price fluctuation. Otherwise, set to 'no'.
overlap - Set to 'yes' if the indicator is plotted directly on the price chart. Otherwise, set to 'no'.
calculation - A detailed mathematical explanation of how the indicator is calculated. Use LaTeX formatting where appropriate (e.g., `$SMA = \frac{1}{n} \sum_{i=1}^{n} P_i$` for a Simple Moving Average).
interpretation - How to interpret the indicator's values and signals. Explain what different values or patterns suggest about the market. Includes discussion of Support and Resistance levels.
strengths - The advantages of using this indicator. What situations is it particularly effective in?
weaknesses - The limitations of this indicator. What are its common pitfalls and potential for false signals? Consider discussions of Whipsaws.
common_settings - Typical parameter settings used with the indicator (e.g., "MACD: 12, 26, 9"). Explain the impact of changing these settings.
trading_signals - Specific buy and sell signals generated by the indicator. Be precise and clear. Link to relevant Trading Strategies that utilize these signals.
examples - Real-world examples of how the indicator has performed in the past. Include chart screenshots if possible.
related_indicators - Other indicators that are similar or complementary to this one. Internal links to those indicators should be used. For example, Relative Strength Index, Stochastic Oscillator.
external_links - Links to external resources (e.g., Investopedia, TradingView's documentation) that provide more information about the indicator.
Examples of Documented Indicators
Below are examples of how the template would be used to document a few common indicators:
Simple Moving Average (SMA)
```wiki
{{Technical Analysis Indicator
| indicator_name = Simple Moving Average
| short_name = SMA
| image = [[File:SmaExample.png|center|500px]]
| image_description = A chart showing a 50-day SMA over a stock price.
| type = Trend-Following, Overlap
| trend_following = yes
| momentum = no
| volatility = no
| overlap = yes
| calculation = $SMA = \frac{1}{n} \sum_{i=1}^{n} P_i$, where n is the period and P<sub>i</sub> is the price at time i.
| interpretation = The SMA smooths out price data to create a single flowing line. A rising SMA suggests an upward trend, while a falling SMA suggests a downward trend.
| strengths = Easy to calculate and understand. Effective at identifying major trends.
| weaknesses = Lags price movements. Can generate false signals in choppy markets. Sensitive to [[Gap Analysis]].
| common_settings = 20-day, 50-day, 200-day
| trading_signals = Buy when the price crosses above the SMA. Sell when the price crosses below the SMA.
| examples = During a strong uptrend, the price will consistently stay above the SMA.
| related_indicators = [[Exponential Moving Average]], [[Weighted Moving Average]]
| external_links = https://www.investopedia.com/terms/s/sma.asp
}}
```
Relative Strength Index (RSI)
```wiki
{{Technical Analysis Indicator
| indicator_name = Relative Strength Index
| short_name = RSI
| image = [[File:RsiExample.png|center|500px]]
| image_description = A chart showing the RSI oscillating between 0 and 100.
| type = Momentum
| trend_following = no
| momentum = yes
| volatility = no
| overlap = no
| calculation = RSI = 100 - [100 / (1 + (Average Gain / Average Loss))]
| interpretation = The RSI measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. Values above 70 suggest overbought conditions, while values below 30 suggest oversold conditions. Consider this in conjunction with [[Fibonacci Retracements]].
| strengths = Can identify potential reversal points. Useful for confirming trends.
| weaknesses = Can remain in overbought or oversold territory for extended periods. Prone to false signals during strong trends.
| common_settings = 14-period
| trading_signals = Buy when the RSI falls below 30. Sell when the RSI rises above 70. Look for divergences between price and the RSI.
| examples = A significant drop in price followed by a bounce and an RSI reading below 30 suggests a potential buying opportunity.
| related_indicators = [[Stochastic Oscillator]], [[Commodity Channel Index]]
| external_links = https://www.investopedia.com/terms/r/rsi.asp
}}
```
Moving Average Convergence Divergence (MACD)
```wiki
{{Technical Analysis Indicator
| indicator_name = Moving Average Convergence Divergence
| short_name = MACD
| image = [[File:MacdExample.png|center|500px]]
| image_description = A chart showing the MACD line, Signal line, and Histogram.
| type = Trend-Following, Momentum, Overlap
| trend_following = yes
| momentum = yes
| volatility = no
| overlap = yes
| calculation = MACD Line = 12-period EMA - 26-period EMA; Signal Line = 9-period EMA of the MACD Line; MACD Histogram = MACD Line - Signal Line.
| interpretation = The MACD helps identify changes in the strength, direction, momentum, and duration of a trend in a stock's price. Crossovers of the MACD line and Signal line, as well as divergences, can provide trading signals.
| strengths = Effective at identifying trend changes. Can provide early warning signals.
| weaknesses = Can generate false signals in choppy markets. Requires careful interpretation. Consider utilizing [[Elliott Wave Theory]] alongside MACD.
| common_settings = 12, 26, 9
| trading_signals = Buy when the MACD line crosses above the Signal line. Sell when the MACD line crosses below the Signal line. Look for bullish and bearish divergences.
| examples = A bullish MACD crossover during an uptrend confirms the trend's strength.
| related_indicators = [[Exponential Moving Average]], [[Stochastic Oscillator]]
| external_links = https://www.investopedia.com/terms/m/macd.asp
}}
```
Best Practices
**Accuracy:** Ensure all calculations and interpretations are accurate and well-sourced.
**Clarity:** Use clear and concise language, avoiding jargon where possible. Explain complex concepts in a way that beginners can understand.
**Consistency:** Adhere to the template's structure and use consistent formatting throughout.
**Objectivity:** Present the indicator's strengths and weaknesses fairly and objectively.
**Completeness:** Fill out all template parameters as completely as possible.
**Regular Updates:** Keep the documentation up-to-date with any new developments or insights.
**Cross-linking:** Utilize internal links to other relevant articles within the wiki. This improves navigation and knowledge sharing. Examples include: Bollinger Bands, Ichimoku Cloud, Average True Range.
Subscribe to our Telegram channel @strategybin to receive:
✓ Daily trading signals
✓ Exclusive strategy analysis
✓ Market trend alerts
✓ Educational materials for beginners
```
Template:Technical Analysis Indicator - Overview
This template is designed to standardize the documentation and presentation of Technical Analysis indicators within this wiki. It provides a consistent format for describing the indicator's purpose, calculation, interpretation, strengths, weaknesses, and usage in Trading Strategies. It aims to help both beginners and experienced traders understand and utilize these tools effectively.
Introduction
Technical Analysis Indicators are calculations based on historical price and volume data, used to predict the direction of future price movements. They are a crucial component of many Trading Systems and can provide valuable insights into market trends and potential trading opportunities. However, it’s vital to remember that indicators are *not* foolproof predictors. They are tools to aid in decision-making, not replacements for sound Risk Management and a comprehensive understanding of the market. This template serves as a guide for documenting each indicator clearly and consistently.
Template Usage
To use this template for a specific indicator, copy the code below and replace the bracketed placeholders with the relevant information. The template assumes a basic understanding of Candlestick Patterns and fundamental Chart Patterns.
indicator_name - The full name of the indicator (e.g., Moving Average Convergence Divergence).
short_name - A shortened version of the indicator name, often used in charts (e.g., MACD).
image - Link to an image illustrating the indicator on a chart. Use the format: `File:ExampleIndicator.png`.
image_description - A brief description of what the image shows.
type - The primary category the indicator falls into. Options include: Trend-Following, Momentum, Volatility, Overlap. Multiple types can be selected using commas (e.g., "Trend-Following, Momentum"). Refer to the Technical Indicators Types article for a detailed explanation of each category.
trend_following - Set to 'yes' if the indicator is primarily used to identify and follow trends. Otherwise, set to 'no'.
momentum - Set to 'yes' if the indicator measures the speed or strength of price movements. Otherwise, set to 'no'.
volatility - Set to 'yes' if the indicator measures the degree of price fluctuation. Otherwise, set to 'no'.
overlap - Set to 'yes' if the indicator is plotted directly on the price chart. Otherwise, set to 'no'.
calculation - A detailed mathematical explanation of how the indicator is calculated. Use LaTeX formatting where appropriate (e.g., `$SMA = \frac{1}{n} \sum_{i=1}^{n} P_i$` for a Simple Moving Average).
interpretation - How to interpret the indicator's values and signals. Explain what different values or patterns suggest about the market. Includes discussion of Support and Resistance levels.
strengths - The advantages of using this indicator. What situations is it particularly effective in?
weaknesses - The limitations of this indicator. What are its common pitfalls and potential for false signals? Consider discussions of Whipsaws.
common_settings - Typical parameter settings used with the indicator (e.g., "MACD: 12, 26, 9"). Explain the impact of changing these settings.
trading_signals - Specific buy and sell signals generated by the indicator. Be precise and clear. Link to relevant Trading Strategies that utilize these signals.
examples - Real-world examples of how the indicator has performed in the past. Include chart screenshots if possible.
related_indicators - Other indicators that are similar or complementary to this one. Internal links to those indicators should be used. For example, Relative Strength Index, Stochastic Oscillator.
external_links - Links to external resources (e.g., Investopedia, TradingView's documentation) that provide more information about the indicator.
Examples of Documented Indicators
Below are examples of how the template would be used to document a few common indicators:
Simple Moving Average (SMA)
```wiki
{{Technical Analysis Indicator
| indicator_name = Simple Moving Average
| short_name = SMA
| image = [[File:SmaExample.png|center|500px]]
| image_description = A chart showing a 50-day SMA over a stock price.
| type = Trend-Following, Overlap
| trend_following = yes
| momentum = no
| volatility = no
| overlap = yes
| calculation = $SMA = \frac{1}{n} \sum_{i=1}^{n} P_i$, where n is the period and P<sub>i</sub> is the price at time i.
| interpretation = The SMA smooths out price data to create a single flowing line. A rising SMA suggests an upward trend, while a falling SMA suggests a downward trend.
| strengths = Easy to calculate and understand. Effective at identifying major trends.
| weaknesses = Lags price movements. Can generate false signals in choppy markets. Sensitive to [[Gap Analysis]].
| common_settings = 20-day, 50-day, 200-day
| trading_signals = Buy when the price crosses above the SMA. Sell when the price crosses below the SMA.
| examples = During a strong uptrend, the price will consistently stay above the SMA.
| related_indicators = [[Exponential Moving Average]], [[Weighted Moving Average]]
| external_links = https://www.investopedia.com/terms/s/sma.asp
}}
```
Relative Strength Index (RSI)
```wiki
{{Technical Analysis Indicator
| indicator_name = Relative Strength Index
| short_name = RSI
| image = [[File:RsiExample.png|center|500px]]
| image_description = A chart showing the RSI oscillating between 0 and 100.
| type = Momentum
| trend_following = no
| momentum = yes
| volatility = no
| overlap = no
| calculation = RSI = 100 - [100 / (1 + (Average Gain / Average Loss))]
| interpretation = The RSI measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. Values above 70 suggest overbought conditions, while values below 30 suggest oversold conditions. Consider this in conjunction with [[Fibonacci Retracements]].
| strengths = Can identify potential reversal points. Useful for confirming trends.
| weaknesses = Can remain in overbought or oversold territory for extended periods. Prone to false signals during strong trends.
| common_settings = 14-period
| trading_signals = Buy when the RSI falls below 30. Sell when the RSI rises above 70. Look for divergences between price and the RSI.
| examples = A significant drop in price followed by a bounce and an RSI reading below 30 suggests a potential buying opportunity.
| related_indicators = [[Stochastic Oscillator]], [[Commodity Channel Index]]
| external_links = https://www.investopedia.com/terms/r/rsi.asp
}}
```
Moving Average Convergence Divergence (MACD)
```wiki
{{Technical Analysis Indicator
| indicator_name = Moving Average Convergence Divergence
| short_name = MACD
| image = [[File:MacdExample.png|center|500px]]
| image_description = A chart showing the MACD line, Signal line, and Histogram.
| type = Trend-Following, Momentum, Overlap
| trend_following = yes
| momentum = yes
| volatility = no
| overlap = yes
| calculation = MACD Line = 12-period EMA - 26-period EMA; Signal Line = 9-period EMA of the MACD Line; MACD Histogram = MACD Line - Signal Line.
| interpretation = The MACD helps identify changes in the strength, direction, momentum, and duration of a trend in a stock's price. Crossovers of the MACD line and Signal line, as well as divergences, can provide trading signals.
| strengths = Effective at identifying trend changes. Can provide early warning signals.
| weaknesses = Can generate false signals in choppy markets. Requires careful interpretation. Consider utilizing [[Elliott Wave Theory]] alongside MACD.
| common_settings = 12, 26, 9
| trading_signals = Buy when the MACD line crosses above the Signal line. Sell when the MACD line crosses below the Signal line. Look for bullish and bearish divergences.
| examples = A bullish MACD crossover during an uptrend confirms the trend's strength.
| related_indicators = [[Exponential Moving Average]], [[Stochastic Oscillator]]
| external_links = https://www.investopedia.com/terms/m/macd.asp
}}
```
Best Practices
**Accuracy:** Ensure all calculations and interpretations are accurate and well-sourced.
**Clarity:** Use clear and concise language, avoiding jargon where possible. Explain complex concepts in a way that beginners can understand.
**Consistency:** Adhere to the template's structure and use consistent formatting throughout.
**Objectivity:** Present the indicator's strengths and weaknesses fairly and objectively.
**Completeness:** Fill out all template parameters as completely as possible.
**Regular Updates:** Keep the documentation up-to-date with any new developments or insights.
**Cross-linking:** Utilize internal links to other relevant articles within the wiki. This improves navigation and knowledge sharing. Examples include: Bollinger Bands, Ichimoku Cloud, Average True Range.
