Indicators Information
At Stocks of Tomorrow, we aim to make learning about stock market signals easy for everyone. Our info page is here to explain all the indicators we show in a simple, straightforward way. Understanding these signals is vital for beginners or anyone who wants to understand the stock market better. Check it out and start feeling more confident about your investment choices and to get the most out of the SOT tool!
Indicators we use
RSI (Relative Strength Index):
Description: A momentum oscillator that measures the speed and change of price movements. It operates on a scale of 0 to 100 and is typically used to identify overbought or oversold conditions in a traded asset. The RSI compares the magnitude of recent gains to recent losses to determine the speed and change of price movements.
Buy Signal: Generally considered when RSI falls below 30, suggesting that the asset may be oversold and potentially due for a reversal or correction.
Sell Signal: When RSI exceeds 70, it may indicate that the asset is overbought and could be primed for a price pullback.
2. MACD (Moving Average Convergence Divergence):
Description: This indicator shows the relationship between two moving averages of a security's price – typically the 12-day and 26-day exponential moving averages (EMAs). MACD is accompanied by a signal line (usually a 9-day EMA of the MACD), which helps identify turns in the market.
Buy Signal: A common buy signal is generated when the MACD line crosses above the signal line, indicating a potential upward trend.
Sell Signal: Conversely, a sell signal is often identified when the MACD line crosses below the signal line, suggesting a possible downtrend.
3. MA (Moving Average):
Description: This is a fundamental technical analysis tool that smooths out price data by creating a constantly updated average price. This average can be taken over different periods of time – anything from 20 days to 30 years. MAs can help identify trends and are often used as a part of other technical analysis indicators.
Buy Signal: When a shorter-term moving average (like the 50-day MA) crosses above a longer-term moving average (like the 200-day MA), it’s seen as a bullish signal.
Sell Signal: The opposite, when a shorter-term MA crosses below a longer-term MA, is viewed as bearish.
4. EMA (Exponential Moving Average):
Description: Similar to a simple moving average, the EMA focuses on recent prices. This means it responds more quickly to price changes. Because of this sensitivity, the EMA can be invaluable for short-term trading strategies.
Buy Signal: A buy signal is typically indicated when the price of an asset moves above its EMA.
Sell Signal: Conversely, a sell signal may be indicated when the price falls below its EMA.
5. MFI (Money Flow Index):
Description: This indicator combines price and volume to measure the buying and selling pressure. Often referred to as volume-weighted RSI, it operates on a scale from 0 to 100 and is used to identify overbought or oversold conditions.
Buy Signal: An MFI below 20 suggests that the asset is oversold, which could be a buying opportunity.
Sell Signal: An MFI above 80 indicates that the asset might be overbought, potentially signaling a selling point.
6. Stochastic RSI:
Description: This is a derivative of the RSI that applies the Stochastic oscillator formula to RSI values, rather than price values. This makes it more sensitive and capable of identifying more overbought and oversold conditions.
Buy Signal: A common buy signal is when the Stochastic RSI moves below 20, indicating oversold conditions.
Sell Signal: Conversely, a move above 80 suggests overbought conditions, potentially signaling a sell.
7. Stochastic Oscillator:
Description: This momentum indicator compares a particular closing price of an asset to a range of its prices over a certain period. It moves between 0 and 100 and is used to predict price turning points by comparing the closing price to its price range.
Buy Signal: A bullish signal is given when the %K line (the main line) crosses above the %D line (the signal line) in the oversold area (below 20).
Sell Signal: A bearish signal is when the %K line crosses below the %D line in the overbought area (above 80).
8. DeMark Indicators (TD Sequential):
Description: Created by Tom DeMark, these indicators are designed to predict the timing of future market trends. They focus on identifying price exhaustion points, which are potential indicators of where trends might start or end.
Buy Signal: A sequential countdown of 9 consecutive price bars closing lower than the close four bars earlier can signal a buy opportunity.
Sell Signal: Conversely, 9 consecutive price bars closing higher than four bars earlier suggest a sell.
9. CCI (Commodity Channel Index):
Description: This versatile indicator fluctuates above and below zero, highlighting when a security's price has moved from its statistical mean. The CCI is not only useful for commodities but for stocks and currencies too.
Buy Signal: When the CCI crosses above +100, it indicates that the asset is in a strong upward trend, suggesting a buy.
Sell Signal: When it falls below -100, it indicates a strong downward trend, suggesting a sell.
10. ADX (Average Directional Index):
Description: This indicator measures the strength of a trend but does not indicate its direction. The ADX is part of a system that includes two other directional movement indicators, and it helps traders determine how robust a trend is.
Buy Signal: A rising ADX indicates a strong bullish trend, but it's important to combine this with other indicators to confirm direction.
Sell Signal: A falling ADX suggests a weakening trend, signaling potential selling opportunities.
11. Bollinger Bands:
Description: This tool consists of three lines: a moving average (middle band) and two standard deviation lines (upper and lower bands). The bands expand and contract based on market volatility.
Buy Signal: When the price drops to the lower band, it may indicate an oversold market, suggesting a buying opportunity.
Sell Signal: Conversely, if the price reaches the upper band, the market might be overbought, indicating a time to sell.
12. Aroon Indicator:
Description: This indicator is used to identify when trends are likely to change and to show the strength of a trend. The Aroon consists of two lines: Aroon-Up and Aroon-Down.
Buy Signal: A bullish signal is generated when the Aroon-Up crosses above the Aroon-Down.
Sell Signal: A bearish signal occurs when the Aroon-Down crosses above the Aroon-Up.