The 30 day moving average, stochastic and MACD form the regularly used charting indicators. They are also the first three of the 9 analyser indicators. The remaining 6 are the Chaikin Oscillator, Commodity Channel Index, Price Ratio, Relative Strength Index, Directional Movement Index and Force Index.

The construction of these indicators is as follows. If you are not interested in the mathematics of these indicators, feel free to skip this section. Some of the calculations have been simplified so most people can understand them.

Chaikin Oscillator(CHA).

One of the most useful indicators in technical analysis is increasing volume. Nothing important happens without it. As it becomes apparent that a stock is a good buy, more and more people want to own it so they can profit from it. Often increasing volume will precede an increase in price. This is because all the new buyers that come onto the market are met with sellers who are happy to sell at what the market is offering, probably because they have not done their research. Once these shareholders have sold their stock, then the buyers have to then pay a higher price and this starts an uptrend.

The Chaikin Oscillator takes this and the price movement during the day into account as follows. Firstly we take the ratio of the close minus the open price to the high minus the low price.

(Close - Open) / (High - Low)

This is then multiplied by the volume of shares traded for that day.

(Close - Open) / (High - Low) * Volume

Each day's value is added onto the total as we go along. If the close is lower than the open than we will get a negative value and the total will go down. If we have a positive day, the total value will go up. This will cause this number to oscillate around 0. Also the bigger the movement in the stock price or volume for that day, the more effect it will have on the overall result.

To complete the calculation, a 3 day exponential moving average and a 10 day exponential moving average is calculated. The final value for the Chaikin Oscillator is obtained by taking the 10 day average value from the 3 day average value. When the oscillator is positive, then the signal is bullish.

CCI

CCI stands for Commodity Channel Index and is a measure of volatility. What is volatility? Volatility is how much the stock price moves around. Consider a stock with closing prices of 1.00, 1.01, 1.00, and 0.99. The price is relatively stable. This is low volatility. Now the share price starts to increase. We see closing prices of 1.05, 1.10, 1.20, 1.15, 1.18, 1.25, and 1.22. The closing price is different every day as the stock trends up. This stock is now more volatile.

Using the CCI tracks this volatility and does it by noting the price relative to a moving average. To calculate the CCI -

The formula is = (typical price - simple moving avg typical price)/(0.015 * Mean deviation)

To do this -

Firstly, calculate the typical price. This is the sum of the high, low and close prices then divide by 3 to get an average price. Typical price = (high+low+close)/3

Next, calculate a 21 day moving average of the typical price.

We then calculate the mean deviation from the moving average. For today's average value we have taken today's typical price as well as the last 20 days typical price in our calculation. For each of those days, calculate the difference between that day's typical price and the 21 day average of the price. For example we take the first days typical price from the 21 day average, then repeat this for day 2 and so forth. You are after the difference so you take an absolute value. Add up these values and divide by 21 to get the mean deviation.

Finally, calculate the CCI using the above formula.

One of the problems associated with the CCI is coming up with the right moving average that is best for the stock. To overcome this short fall, we do this calculation with three fibonacci numbers of 8, 13 and 21. We then repeat the above calculation again for a moving average of 8 days and 13 days. Once the three CCI numbers have been calculated, we take an average to get the final CCI value.

The CCI is Bullish when it moves below -100 and goes above it. Similarly it is bearish when it moves above 100 then goes below it.

Price Ratio.

When we do a sector analysis, we are looking for a strong stock in a strong sector. The sector index is a reflection of how well all the stocks in that industry are doing, so if the stock is outperforming the index, then it is doing better than average. These are the stocks we want to invest in.

The Price Ratio indicator does just that. It compares the price movement of a stock to an index. We set the ratio of the two values to zero then have a look at how they perform. If the stock goes up and the index stays and the same, then the Price Ratio will go up and visa versa. Normally when a Price Ratio is calculated, only one start date is used and the comparison is done from that point. But what happens if that start date was five years ago? Is that relevant for now? Our Price Ratio does things a little differently. For every day, we look back 3 months and set the ratio of the stock to the index to 0. We then see how they have performed in that time. That way we get a good picture of recent relative performance.

To calculate the Price ratio -

Firstly we calculate the inverse ratio 65 trading days ago. This is done by dividing the sector value by the stock price.

Next we calculate the ratio for 65 days ago. This is equal to the stock price divided by the sector value.

We then multiply these two values together and subtract 1. This gives us our starting point of 0.

For today, we then calculate the ratio which is the stock price divided by the sector value. This value is then multiplied by the inverse ratio we calculated first. Finally we subtract 1 to get the price ratio for today. If it is positive, then stock is bullish. If it is negative, the stock is bearish.

RSI.

RSI stands for Relative Strength Index and is another popular indicator. Put simply, it compares the relative strength in price movement of the up days to the down days.

To calculate the RSI, firstly subtract yesterday's close from today's close.

Next, separate the up days from the down days. Take the absolute value of this movement. So if the price went from $1.00 to $0.90, we would have a value of $0.10 in the down day column. The up day column would have a $0.00.

Take a 14 day exponential moving average of these up and down columns. The relative strength is the average upward price movement divided by the average downward price movement.

RS = 14 day average of up days / 14 day average of down days

The Relative Strength Index is then calculated with the following formula -

RSI = 100 - 100 / (1 + RS)

The RSI is similar to the stochastic in that if it goes above 30 then it is bullish. If it goes below 70 it is bearish.

DMI.

DMI stands for Directional Movement Index and has three components.

The Positive Direction Indicator or +DI is a summary of upward trend movements. The Negative Direction Indicator or -DI is a summary of downward trend movements. And finally the ADX line or Average Directional Movement Index is an indicator to how strong the current trend is. This is a complex indicator in its calculation but is useful in showing if the stock is bullish or bearish and how strong that move is.

To calculate the DMI, firstly calculate Today's high minus yesterdays high and yesterdays low minus today's low. Take the larger of these two values with the other calculation being set to 0. If both are negative, take a value of 0 for both calculations.

Now calculate today's true range. This is the largest of either -

today's high minus today's low,
today's high minus yesterdays close or
yesterdays close minus today's low

Next, calculate a 27 day exponential moving average of all 3 sums. This gives us the values of Directional Movement DM+, Directional Movement DM- and Average True range or TR.

The next step gives us the Directional Indicators. Firstly divide DM+ by the Average True Range to get our DI+ signal. Then divide the DM- by the Average True Range to get the DI- signal.

Finally we need to calculate the ADX line. Firstly, take the absolute difference between the DI+ and DI- values. Next, calculate the DX value as follows

DX = DI diff / (DI14+ + DI14-)

Finally, take a 27 day exponential moving average of the DX value to give the ADX indicator.

Despite its complex calculation, the interpretation is quite easy. We have a bullish condition when the DI+ crosses up through the DI - line and the ADX is heading in an upward movement. The indicator then turns bearish when the DI+ line then turns down through the DI- line.

This interpretation is biased towards a long position. If you were searching for a short position, ideally you would want to enter the trade when the DI- line crosses down through the DI+ line and the ADX trends down. But for automation purposes, we could not do both, so it was biased slightly towards the long position. The effect though will only be minimal on overall short position selection.

Force Index.

Our final indicator again takes into account the important effect of volume and is called a Force Index. It is a simple calculation that takes into account the price movements from day to day and how much those movements are supported with good volume. For example a stock which experiences a 10 or 20% price increase with significant volume has moved with a lot of force. A stock price that stays static and has little turnover has little force to change the price.

The force index is calculated by taking yesterday's close from today's close and then multiplying this value by the volume of shares traded. To smooth out the line, we then take a 13 day exponential moving average of these values.

The force index is bullish when the value is above 0 and bearish when it is below 0.