The document provides an overview of technical analysis and indicators used to analyze market patterns and behaviors. It distinguishes between leading and lagging indicators, detailing their roles in generating buy/sell signals and confirming price movements, and explains various indicators including RSI, MACD, and Stochastic. Additionally, it discusses how to interpret buy/sell signals and overbought/oversold conditions in trading strategies.

1. TechnicalAnalysis
TECHNICALINDICATORS
Presented by: Ashwani Kumar Harit

2. “Don’t try to buy at the bottom and sell at the top. It can’t be
done except by liars.”
“Don’t try to buy at the bottom and sell at the top. It can’t be
done except by liars.”
-Bernard Baruch

3. Technical Indicators: Definition
• Technical indicators are mathematical representations of
market patterns and behavior
• The indicators are formed by plugging information such
as price and volume into a mathematical formula.
• Technical indicators are mathematical representations of
market patterns and behavior
• The indicators are formed by plugging information such
as price and volume into a mathematical formula.

4. Why indicators
• Overbought: A technical condition that occurs when there has
been a lot of buying and the price of the stock is considered
too high and susceptible to a decline.
Oversold: A technical condition that occurs when there has
been a lot of selling and the price of the stock is considered
too low and a rally in prices is anticipated.
• Overbought: A technical condition that occurs when there has
been a lot of buying and the price of the stock is considered
too high and susceptible to a decline.
Oversold: A technical condition that occurs when there has
been a lot of selling and the price of the stock is considered
too low and a rally in prices is anticipated.

5. Importance
Essentially traders use technical indicators for two things:
• To generate buy and sell signals
• To confirm price movement
Essentially traders use technical indicators for two things:
• To generate buy and sell signals
• To confirm price movement

6. Types of Indicators
There are two main types of indicators:
• Leading
• lagging
There are two main types of indicators:
• Leading
• lagging

7. Leading Indicators
• A leading indicator precedes price movement, and is often
used to generate buy and sell signals.
• Leading indicators are affected more heavily by recent price
changes and tend to generate more signals and allow more
opportunities to trade than lagging indicators.
• Since the indicators produce more buy and sell signals, they
also produce more false signals.
• When leading indicators are right, they allow you to get into a
trade early and make more money, but when they're wrong
you tend to lose money because you're in and out of trades
more frequently.
• A leading indicator precedes price movement, and is often
used to generate buy and sell signals.
• Leading indicators are affected more heavily by recent price
changes and tend to generate more signals and allow more
opportunities to trade than lagging indicators.
• Since the indicators produce more buy and sell signals, they
also produce more false signals.
• When leading indicators are right, they allow you to get into a
trade early and make more money, but when they're wrong
you tend to lose money because you're in and out of trades
more frequently.

8. Leading Indicators
Some of the more common leading indicators are:
• Relative Strength Index (RSI)
• Parabolic SAR
• Stochastic
• Williams %R
Some of the more common leading indicators are:
• Relative Strength Index (RSI)
• Parabolic SAR
• Stochastic
• Williams %R

9. Lagging Indicators
• A lagging indicator is a confirmation tool because it follows
price movement.
• It happens "after the fact".
• Change of trend
• A lagging indicator is a confirmation tool because it follows
price movement.
• It happens "after the fact".
• Change of trend

10. Lagging Indicators
Two of the more common lagging indicators are:
• MACD
• Moving Averages
Two of the more common lagging indicators are:
• MACD
• Moving Averages

11. Other Indicators
• Bollinger Band
• Ichimoku
• Bollinger Band
• Ichimoku

12. RSI- Introduction
• Developed by J. Welles Wilder and introduced in his book –
New Concepts in Technical Trading System
• It is a momentum oscillator that measures the speed and
change of price movements
• RSI oscillates between zero and 100
• Traditionally, and according to Wilder, RSI is considered
overbought when above 70 and oversold when below 30
• The default look-back period for RSI is 14, but 9 and 7 are also
popular
• Developed by J. Welles Wilder and introduced in his book –
New Concepts in Technical Trading System
• It is a momentum oscillator that measures the speed and
change of price movements
• RSI oscillates between zero and 100
• Traditionally, and according to Wilder, RSI is considered
overbought when above 70 and oversold when below 30
• The default look-back period for RSI is 14, but 9 and 7 are also
popular

13. RSI- Introduction
• 80 and 20 can also be used to indicate overbought and
oversold levels but gives slightly less accurate results than
70-30
• If the market is trending, then signals in the direction of the
trend are likely to be more reliable
• For example if prices are in an up trend, a safer trade entry may be
obtained by waiting for prices to pullback giving an oversold signal and
then turn up again
• 80 and 20 can also be used to indicate overbought and
oversold levels but gives slightly less accurate results than
70-30
• If the market is trending, then signals in the direction of the
trend are likely to be more reliable
• For example if prices are in an up trend, a safer trade entry may be
obtained by waiting for prices to pullback giving an oversold signal and
then turn up again

14. RSI – Howtogeneratebuyandsellsignals
• If the RSI is above 70 and you are looking for the market to
form a top, then the RSI crossing back below 70 can be used
as a sell signal
• The same is true for market bottoms, buying after the RSI has
moved back above 30
• These signals are best used in non-trending markets
• If the RSI is above 70 and you are looking for the market to
form a top, then the RSI crossing back below 70 can be used
as a sell signal
• The same is true for market bottoms, buying after the RSI has
moved back above 30
• These signals are best used in non-trending markets

15. RSI - BullishandBearishDivergence
• Divergence between the RSI and the price indicates that an up
or down move is weakening
• Bearish Divergence occurs when prices are making higher
highs but the RSI is making lower highs.
• This is a sign that the up move is weakening
• Bullish Divergence occurs when prices are making lower lows
but the RSI is making higher lows
• This is a sign that the down move is weakening
• Divergence between the RSI and the price indicates that an up
or down move is weakening
• Bearish Divergence occurs when prices are making higher
highs but the RSI is making lower highs.
• This is a sign that the up move is weakening
• Bullish Divergence occurs when prices are making lower lows
but the RSI is making higher lows
• This is a sign that the down move is weakening

16. RSI – DivergenceConfirmation
• RSI is an indicator not the confirmation
• It is important to note that although Divergences indicate a
weakening trend they do not in themselves indicate that the
trend has reversed
• The confirmation or signal that the trend has reversed must
come from price action, for example a trend line break
• RSI is an indicator not the confirmation
• It is important to note that although Divergences indicate a
weakening trend they do not in themselves indicate that the
trend has reversed
• The confirmation or signal that the trend has reversed must
come from price action, for example a trend line break

17. RSI

18. RSI- Divergence

19. RSI- Trade Confirmation

20. Contd…

21. Parabolic SAR

22. Parabolic SAR - Introduction
• Parabolic Time Price is a system that always has a position in
the market, either long or short
• One can close out the current position and enter a reverse
position when the price crosses the current Stop And Reverse
(SAR) point
• The SAR points resemble a parabolic curve as they begin to
tighten and close in on prices once prices begin to trend
• Parabolic Time Price is usually charted with a bar analysis so
that the stop and reverse points are easily identified
• Parabolic Time Price is a system that always has a position in
the market, either long or short
• One can close out the current position and enter a reverse
position when the price crosses the current Stop And Reverse
(SAR) point
• The SAR points resemble a parabolic curve as they begin to
tighten and close in on prices once prices begin to trend
• Parabolic Time Price is usually charted with a bar analysis so
that the stop and reverse points are easily identified

23. Parabolic SAR - Depiction
• If you are long, the SAR points will be below the prices and the
signal to go short will be when prices cross the current SAR
point from above
• If you are long, the SAR points will be below the prices and the
signal to go short will be when prices cross the current SAR
point from above

25. Parabolic SAR - Depiction
• If you are short, the SAR points will be above the prices and
the signal to go long will be when prices cross the current SAR
point from below
• If you are short, the SAR points will be above the prices and
the signal to go long will be when prices cross the current SAR
point from below

27. Ues of Parabolic
• Signals to stop out of the current position and enter a reverse
position are when prices cross the current SAR point
• For example if the SAR points are below prices you would be
long with an order to close out the current long position and
enter a short position at that period’s SAR point
• Signals to stop out of the current position and enter a reverse
position are when prices cross the current SAR point
• For example if the SAR points are below prices you would be
long with an order to close out the current long position and
enter a short position at that period’s SAR point

28. Entry and Exit Technique
• One would take only long trades when the trend is up and
only short trades when the trend is down

29. Where to place a stop loss
• After a trade has been entered using another method or
technique, the SAR points of Parabolic Time Price are used to
trail a stop on the position
• After a trade has been entered using another method or
technique, the SAR points of Parabolic Time Price are used to
trail a stop on the position

30. Stop Loss by using SAR

31. Stochastic
•Fast Stochastic
•Slow Stochastic
•Fast Stochastic
•Slow Stochastic

32. Stochastic
• Stochastics are oscillators developed by George Lane
• Are based on the following observation
• As prices increase - closing prices tend to be closer to the upper
end of the price range
• As prices decrease - closing prices tend to be closer to the lower
end of the price range
• Stochastics are oscillators developed by George Lane
• Are based on the following observation
• As prices increase - closing prices tend to be closer to the upper
end of the price range
• As prices decrease - closing prices tend to be closer to the lower
end of the price range

33. Stochastic
• Stochastic consist of two lines, %K and %D
• The %K line measures, as a percentage, where the current
close is, in relation to the lowest low over the observation
period.
• This is shown on a scale of 0 to 100, where 0 is the observation
period low, and 100 is the observation period high.
• The %D line is a Simple Moving Average of the %K
• Stochastic consist of two lines, %K and %D
• The %K line measures, as a percentage, where the current
close is, in relation to the lowest low over the observation
period.
• This is shown on a scale of 0 to 100, where 0 is the observation
period low, and 100 is the observation period high.
• The %D line is a Simple Moving Average of the %K

34. Stochastic
• Slow Stochastics are the more commonly used of the two
Stochastic types
• Slow Stochastics are based on Fast Stochastics but provide a
slower, smoother response to price movements
• Slow Stochastics are smoother and are less likely to give false
signals
• Slow Stochastics are the more commonly used of the two
Stochastic types
• Slow Stochastics are based on Fast Stochastics but provide a
slower, smoother response to price movements
• Slow Stochastics are smoother and are less likely to give false
signals

35. Uses of Stochastics
• Indicate overbought and oversold conditions
• An overbought or oversold market is one where the prices have
risen or fallen too far and are therefore likely to retrace. If the %D
line is above 80% then the close is near the top end of the range of
the observation period, while a reading below 20% means that the
close is near the bottom end of the range of the observation period.
• Generally the area above 80 is considered overbought, while the
area below 20 is oversold. The specified overbought/oversold
ranges vary. Other commonly used ranges include 75-25, 70-30 and
85-15.
• Overbought and oversold signals are most reliable in a non-trending
market where prices are making a series of equal highs and lows. If
the market is trending, then signals in the direction of the trend are
likely to be more reliable.
• Indicate overbought and oversold conditions
• An overbought or oversold market is one where the prices have
risen or fallen too far and are therefore likely to retrace. If the %D
line is above 80% then the close is near the top end of the range of
the observation period, while a reading below 20% means that the
close is near the bottom end of the range of the observation period.
• Generally the area above 80 is considered overbought, while the
area below 20 is oversold. The specified overbought/oversold
ranges vary. Other commonly used ranges include 75-25, 70-30 and
85-15.
• Overbought and oversold signals are most reliable in a non-trending
market where prices are making a series of equal highs and lows. If
the market is trending, then signals in the direction of the trend are
likely to be more reliable.

36. Stochastic: Overboughtand Oversold

37. Stochastic: Overboughtand Oversold

38. Stochastic: Generatebuyandsell signals
• For a buy or sell signal the following conditions must be met in
order
• The %K and %D lines move above 80 or below 20
• The %K and %D lines cross
• For a buy or sell signal the following conditions must be met in
order
• The %K and %D lines move above 80 or below 20
• The %K and %D lines cross

39. • Bearish Divergence occurs when prices are making higher highs but the
Stochastics are making lower highs. This is a sign that the up move is weakening.
• Bullish Divergence occurs when prices are making lower lows but the
Stochastics are making higher lows. This is a sign that the down move is
weakening

40. Stochastic: Negative Divergence

41. Wiliams % R
• Developed by Larry Williams
• Williams %R is a momentum indicator that works much like
the Stochastic Oscillator
• It is especially popular for measuring overbought and oversold
levels
• Shows the relationship of the close relative to the high-low
range over a set period of time
• Developed by Larry Williams
• Williams %R is a momentum indicator that works much like
the Stochastic Oscillator
• It is especially popular for measuring overbought and oversold
levels
• Shows the relationship of the close relative to the high-low
range over a set period of time

42. Wiliams % R: Scale
• The scale ranges from 0 to -100
• Readings from 0 to -20 considered overbought
• Readings from -80 to -100 considered oversold
• The nearer the close is to the top of the range, the nearer to
zero (higher) the indicator will be
• The nearer the close is to the bottom of the range, the nearer
to -100 (lower) the indicator will be
• The scale ranges from 0 to -100
• Readings from 0 to -20 considered overbought
• Readings from -80 to -100 considered oversold
• The nearer the close is to the top of the range, the nearer to
zero (higher) the indicator will be
• The nearer the close is to the bottom of the range, the nearer
to -100 (lower) the indicator will be

43. Wiliams % R: Uses
• Identify the underlying trend and then look for trading
opportunities in the direction of the trend
• In an up trend, traders may look to oversold readings to
establish long positions
• In a downtrend, traders may look to overbought readings to
establish short positions
• Identify the underlying trend and then look for trading
opportunities in the direction of the trend
• In an up trend, traders may look to oversold readings to
establish long positions
• In a downtrend, traders may look to overbought readings to
establish short positions

45. Divergence

46. Lagging Indicators
• MACD
• Moving Averages

47. MACD: MovingAverageConvergenceDivergence
• Developed by Gerald Appel
• 26 and 12-week cycles in the stock market
• MACD is a type of oscillator that can measure market
momentum as well as follow or indicate the new trend
• Developed by Gerald Appel
• 26 and 12-week cycles in the stock market
• MACD is a type of oscillator that can measure market
momentum as well as follow or indicate the new trend

48. What is MACD
• MACD consists of two lines
• MACD Line
• Signal Line
• The MACD Line measures the difference between a short
Moving Average and a long Moving Average
• The Signal Line is a Moving Average of the MACD Line
• MACD oscillates above and below a zero line without upper
and lower boundaries
• MACD consists of two lines
• MACD Line
• Signal Line
• The MACD Line measures the difference between a short
Moving Average and a long Moving Average
• The Signal Line is a Moving Average of the MACD Line
• MACD oscillates above and below a zero line without upper
and lower boundaries

49. MACD: Use
• To Generate buy and sell signals
• Signals are generated when the MACD Line and the Signal Line
cross
• A buy signal occurs when the MACD Line crosses from below
to above the Signal Line, the further below the zero line that
this occurs the stronger the signal
• A sell signal occurs when the MACD Line crosses from above
to below the Signal Line, the further above the zero line that
this occurs the stronger the signal
• To Generate buy and sell signals
• Signals are generated when the MACD Line and the Signal Line
cross
• A buy signal occurs when the MACD Line crosses from below
to above the Signal Line, the further below the zero line that
this occurs the stronger the signal
• A sell signal occurs when the MACD Line crosses from above
to below the Signal Line, the further above the zero line that
this occurs the stronger the signal

50. Buy/Sell signals using MACD

51. Indicating trend direction with MACD
• If a trend is gaining momentum then the difference between
the short and long moving average will increase
• This means that if both MACD lines are above (below) zero
and the MACD Line is above (below) the Signal Line, then the
trend is up (down)

52. Divergence with MACD
• Divergence between the MACD and the price indicates that an
up or down move is weakening
• Bearish Divergence occurs when prices are making higher
highs but the MACD is making lower highs. This is a sign that
the up move is weakening
• Bullish Divergence occurs when prices are making lower lows
but the MACD is making higher lows. This is a sign that the
down move is weakening
• Divergence between the MACD and the price indicates that an
up or down move is weakening
• Bearish Divergence occurs when prices are making higher
highs but the MACD is making lower highs. This is a sign that
the up move is weakening
• Bullish Divergence occurs when prices are making lower lows
but the MACD is making higher lows. This is a sign that the
down move is weakening

53. Negative Divergence with MACD

54. Parameters for MACD
• Short averaging period: (default 12)
• Long averaging period: (default 26)
• Signal line averaging period: (default 9)
• You may wish to change the parameters to match another
cycle period you have observed
• Short averaging period: (default 12)
• Long averaging period: (default 26)
• Signal line averaging period: (default 9)
• You may wish to change the parameters to match another
cycle period you have observed

55. OTHER INDICATORS
• Bollinger Band
• Ichimoku

56. BOLLINGER BAND
• Developed by John Bollinger, Bollinger Bands
• charted by calculating a simple moving average of price,
then creating two bands a specified number of standard
deviations above and below the moving average
• Generally +/- 2 standard deviation
• Bollinger Bands gives best results with a bar chart, so that the
proximity of the bands to the prices can be easily observed
• Developed by John Bollinger, Bollinger Bands
• charted by calculating a simple moving average of price,
then creating two bands a specified number of standard
deviations above and below the moving average
• Generally +/- 2 standard deviation
• Bollinger Bands gives best results with a bar chart, so that the
proximity of the bands to the prices can be easily observed

57. BOLLINGER BAND: Use
• Identify overbought and oversold markets
• An overbought or oversold market is one where the prices
have risen or fallen too far and are therefore likely to retrace
• Prices near the lower band signal an oversold market and
prices near the upper band signal an overbought market
• Overbought and oversold signals are most reliable in a non-
trending market where prices are making a series of equal
highs and lows
• Identify overbought and oversold markets
• An overbought or oversold market is one where the prices
have risen or fallen too far and are therefore likely to retrace
• Prices near the lower band signal an oversold market and
prices near the upper band signal an overbought market
• Overbought and oversold signals are most reliable in a non-
trending market where prices are making a series of equal
highs and lows

58. Overbought/Oversold

59. Signal in a trendy market
• If the market is trending, then signals in the direction of the
trend are likely to be more reliable
• For example if prices are in an up trend, a safer trade entry
may be obtained by waiting for prices to pullback giving an
oversold signal and then turn up again
• If the market is trending, then signals in the direction of the
trend are likely to be more reliable
• For example if prices are in an up trend, a safer trade entry
may be obtained by waiting for prices to pullback giving an
oversold signal and then turn up again

60. A typical Bollinger Band

61. Usedincombinationwithanoscillator togenerate
buyorsellsignals
• If we use Bollinger Bands in combination with an oscillator
such as Relative Strength Index (RSI), buy and sell signals
are generated when the Bollinger Bands signal an
overbought/oversold market at the same time the oscillator
signals a divergence
• If we use Bollinger Bands in combination with an oscillator
such as Relative Strength Index (RSI), buy and sell signals
are generated when the Bollinger Bands signal an
overbought/oversold market at the same time the oscillator
signals a divergence

62. NegativeDivergencewith Bollinger Band

63. The bands often narrow just before a sharp price move. A period of low
volatility often precedes a sharp move in prices; low volatility will cause the
bandstonarrow

64. Signal potential tops and bottoms
• A top that breaks above the upper band followed by another
that is between the bands signals a potential top in the market
• A bottom that breaks below the lower band followed by
another that is between the bands signals a potential bottom
• A top that breaks above the upper band followed by another
that is between the bands signals a potential top in the market
• A bottom that breaks below the lower band followed by
another that is between the bands signals a potential bottom

65. Signals

66. Parameters for Bollinger Band
• The length of the moving average is usually 20 days or less i.e.
a simple moving average in the middle of the Bollinger band
• Bollinger used a figure of 2 standard deviations in his work,
which was in stock trading
• The length of the moving average is usually 20 days or less i.e.
a simple moving average in the middle of the Bollinger band
• Bollinger used a figure of 2 standard deviations in his work,
which was in stock trading

67. Signals

68. ICHIMOKU

69. Introduction
• The Ichimoku Kinko Hyo Japanese charting technique was
developed before World War II with the aim of portraying - in
a snapshot - where the price was heading and when was the
right time to enter or exit t
• The word Ichimoku can be translated to mean "a glance" or
"one look". Kinko translates into "equilibrium" or "balance",
with respect to price and time, and Hyo is the Japanese word
for "chart". Thus, Ichimoku Kinko Hyo simply means "a glance
at an equilibrium chart"
• Invented by a Japanese journalist with a pen name of
"Ichimoku Sanjin", meaning "a glance of a mountain man“
• The Ichimoku Kinko Hyo Japanese charting technique was
developed before World War II with the aim of portraying - in
a snapshot - where the price was heading and when was the
right time to enter or exit t
• The word Ichimoku can be translated to mean "a glance" or
"one look". Kinko translates into "equilibrium" or "balance",
with respect to price and time, and Hyo is the Japanese word
for "chart". Thus, Ichimoku Kinko Hyo simply means "a glance
at an equilibrium chart"
• Invented by a Japanese journalist with a pen name of
"Ichimoku Sanjin", meaning "a glance of a mountain man“

70. The Chart

71. Calculation
• The Ichimoku chart consists of five lines
• Tenkan-Sen = Conversion Line = (Highest High + Lowest Low) /
2, for the past 9 periods
• Kijun-Sen = Base Line = (Highest High + Lowest Low) / 2, for
the past 26 periods
• Chikou Span = Lagging Span = Today's closing price plotted 26
periods behind
• Senkou Span A = Leading Span A = (Tenkan-Sen + Kijun-Sen) /
2, plotted 26 periods ahead
• Senkou Span B = Leading Span B = (Highest High + Lowest
Low) / 2, for the past 52 periods, plotted 26 periods ahead
• Kumo = Cloud = Area between Senkou Span A and B
• The Ichimoku chart consists of five lines
• Tenkan-Sen = Conversion Line = (Highest High + Lowest Low) /
2, for the past 9 periods
• Kijun-Sen = Base Line = (Highest High + Lowest Low) / 2, for
the past 26 periods
• Chikou Span = Lagging Span = Today's closing price plotted 26
periods behind
• Senkou Span A = Leading Span A = (Tenkan-Sen + Kijun-Sen) /
2, plotted 26 periods ahead
• Senkou Span B = Leading Span B = (Highest High + Lowest
Low) / 2, for the past 52 periods, plotted 26 periods ahead
• Kumo = Cloud = Area between Senkou Span A and B

72. Signals
• Ichimoku uses three key time periods for its input parameters:
9, 26, and 52.
• A bullish signal is issued when the Tenkan-Sen (orange line)
crosses the Kijun-Sen (purple line) from below
• A bearish signal is issued when the Tenkan-Sen crosses the
Kijun-Sen from above.
• If there was a bullish crossover signal and the price, at that
time, was trading above the Kumo (or cloud), this would be
considered a very strong buy signal
• Ichimoku uses three key time periods for its input parameters:
9, 26, and 52.
• A bullish signal is issued when the Tenkan-Sen (orange line)
crosses the Kijun-Sen (purple line) from below
• A bearish signal is issued when the Tenkan-Sen crosses the
Kijun-Sen from above.
• If there was a bullish crossover signal and the price, at that
time, was trading above the Kumo (or cloud), this would be
considered a very strong buy signal

73. Feature
• Another striking feature of the Ichimoku charting technique is
the identification of support and resistance levels
• These levels can be predicted by the presence of the Kumo
• The Kumo can also be used to help identify the prevailing
trend of the market
• If the price is above the Kumo, the prevailing trend is said to
be up
• And if the price is below the Kumo, the prevailing trend is said
to be down.
• Another striking feature of the Ichimoku charting technique is
the identification of support and resistance levels
• These levels can be predicted by the presence of the Kumo
• The Kumo can also be used to help identify the prevailing
trend of the market
• If the price is above the Kumo, the prevailing trend is said to
be up
• And if the price is below the Kumo, the prevailing trend is said
to be down.

74. Support Level

75. Resistance Level

76. Buy/Sell Signals

77. Buy/Sell Signals

78. Buy/Sell Signals

79. PIVOTS

80. HAPPY TRADING
ASHWANI KUMAR HARIT
9818688537
Ashwani_harit@yahoo.com
kumashwani@gmail.com
HAPPY TRADING
ASHWANI KUMAR HARIT
9818688537
Ashwani_harit@yahoo.com
kumashwani@gmail.com