Written by Liam Flavelle on 26 November 2018
We've put the finishing touches to four new technical indicators over the weekend that you might find useful to include in your strategies:
- Weighted Moving Average
- Relative Strength Indicator (RSI)
- Commodity Channel Index (CCI)
- Kaufman Efficiency Ratio
- Stochastic Oscillator
We see these new indicators as important tools that will allow us to better time position entries and exits and will be blogging some models showing you how these indicators can be used over the next few weeks.
Weighted Moving Average
We already have access to simple and exponential moving averages on the platform - now we can also use a weighted moving average in our calculations. The weighted moving average (WMA) gives you a weighted average of the last n prices, where the weighting decreases with each previous price
The indicator accepts two parameters - an expression parameter representing the expression you wish to average and a periods parameter indicating the number of periods that should be averaged.
Wma(Close,10) - returns the weighted average of a security's last 10 closing prices.
Relative Strength Indicator
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. Oscillating between 0 and 100, the RSI is traditionally considered overbought when above 70 and oversold when below 30.
The indicator accepts two parameters - a mandatory periods parameter representing the number of working days to include in the calculation and an optional offset parameter to allow you to find the figure from a number of working days-ago. For example:
Rsi(14) - returns the relative strength for the last 14 working days.
Rsi(14,1) - returns yesterdays relative strength for the prior 14 working days.
Commodity Channel Index
The Commodity Channel Index is a versatile indicator that can be used to identify a new trend or warn of extreme conditions. CCI measures the difference between a security's price change and its average price change over a number of working days. High positive readings indicate that prices are well above their average (i.e. a show of strength), whilst low negative readings indicate the opposite.
As with RSI, the indicator accepts two parameters - a mandatory periods parameter representing the number of working days to include in the calculation and an optional offset parameter to allow you to find the figure from a number of working days-ago. For example:
Cci(20) - returns the CCI for the last 20 working days.
Cci(20,1) - returns yesterdays Cci for the prior 20 working days.
Kaufman Efficiency Ratio
The Kaufman Efficiency indicator is a measures the ratio of the relative market speed in relation to the volatility. The Kaufman ratio is often used by traders as a filter to help avoid trading when the market is “choppy” or flat ranging market, and also helps to identify smoother market trends. The Kaufman indicator is an oscillator indicator that oscillates between +100 and -100, where zero is the centre point. +100 is upward trending market and -100 is downwards trending markets.
As with RSI and CCI, the indicator accepts two parameters - a mandatory periods parameter representing the number of working days to include in the calculation and an optional offset parameter to allow you to find the figure from a number of working days-ago. For example:
KaufmanEfficiencyRatio(20) - returns the Kaufman ratio for the last 20 working days.
KaufmanEfficiencyRatio(20,1) - returns yesterdays ratio for the prior 20 working days.
The Stochastic Oscillator is a momentum indicator that shows the location of a security's close relative to the high-low range over a set number of periods. The theory behind this indicator is that in a market trending upward, prices will close near the high, and in a market trending downward, prices close near the low. Transaction signals are created when the %K crosses through a three-period moving average, which is called the %D.
The oscillator is typically used in charts as a pair of lines, so most uses of this function on our platform will include two calls - for example:
Stochastic(14,3) > Stochastic(14,3,3) - returns true if the fast stochastic for the last 14 days is greater than the slow stochastic (a 3-day smoothed average of the 14 day stochastic).
Stochastic(14,3,3) > Stochastic(14,3,3,1) - returns true the slow stochastic is greater than the previous working day's slow stochastic figure.
We hope that these indicators will help better time your entries and exits into positions and that you'll find them a worthwhile addition to our arsenal of indicators. As usual, if you have any other features and functions that you want to see on the platform send them in to us and we'll put them on the wish list!
The InvestorsEdge Team