Knowledge Base

Contrarian Z-Score (Article)

Contrarian Z-Score By Alexandra Guevara Market Technician, TradeStation Lab Summary Standard deviation is a common statistical calculation that is often used in the world of finance to measure risk. The higher the...
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Testing the CBOE Volatility Index (VIX) (Article)

Testing the CBOE Volatility Index (VIX) By Erik Skyba, CMT Senior Market Technician, TradeStation Labs Summary The CBOE Volatility Index, also known to traders as implied volatility, or simply the VIX, represents future...
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Exploiting Volatility to Achieve a Trading Edge: Market-Neutral/Delta-Neutral

Exploiting Volatility to Achieve a Trading Edge: Market-Neutral/Delta-Neutral Trading Using the PRISM Trading Systems by Jeff Morton, MD, CMT Article from the Summer 2000 Issue of the MTA Journal of Technical...
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The Black Scholes Model

The Black Scholes Model Fisher Black and Myron Scholes made a great contribution to the understanding of options when they developed the Black Scholes theoretical equation to evaluate option prices. Before their work...
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Future Volatility

Future Volatility If you an figure out the future market volatility , you will know the proper price of an option and whether it is under or overvalued. This would be somewhat equivalent in outright trading of knowing...
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VIX: Specifications

VIX Specifications The VIX is calculated and disseminated in real-time by the Chicago Board Options Exchange. It is a weighted blend of prices for a range of options on the S&P 500 index. The formula uses a...
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VIX: Example

Examples The following shows an example of a chart of the VIX                         Source: Charts created using...
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VIX: Definition

VIX VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of S&P 500 index options. A high value corresponds to a more volatile market and...
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Predicted Volatility

Predicted Volatility How do you predict market volatility? Some traders simply use the implied volatilities. Others look at a combination of the historical, seasonal, and implied to derive an estimate of future...
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Implied Volatility

Implied Volatility The implied volatility is the volatility the option is actually trading at. In other words, the actual market price of the option assumes a certain volatility which is termed the implied volatility. By...
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Seasonal Volatility

Seasonal Volatility Certain markets tend to be more volatile at different times of the year. The grains often become more active in the summer due to possible drought and supply problems. Orange juice futures can be quite...
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Historical Volatility

Historical Volatility The historical volatility is calculated using price data for a specific time period. The number is sometimes smoothed using moving averages or other mathematical methods. The historical volatility...
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Volatility and Price

Volatility and Price Another relationship is how volatility changes with price. A market may become more volatile as the price increases and large price swings occur. Other times a market may become more volatile after a...
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Volatility: Distribution

Volatility: Distribution It is often convenient to look at a volatility distribution of prices. This can provide you with a graphic indication of where prices might be in the future. The normal bell curve is called the...
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Volatility: Calculation

Volatility: Calculation The first, and simplest way, is to look at the absolute change in price. This is a way many people look at volatility. A market trading at 100 moves to 105. The absolute change is 5. The second...
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Volatility

Volatility: Definition A measure of a stock's tendency to move up and down in price, based on its daily price history over the latest 12-month period. Source: Source: Edwards, Robert and Magee, John.Technical Analysis...
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Fibonacci Percentage Retracements

Fibonacci Percentage Retracements Fibonacci retracements can identify potential support/ resistance levels. The most commonly used Fibonacci levels are 61.8%, 50% and 38.2% with other percentages sometimes serving as...
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Resistance

Resistance Level A price level at which a sufficient supply of stock is forthcoming to stop, and possibly turn back for a time, an uptrend. Source: Murphy, John. Technical Analysis of the Financial Markets; (c)...
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Support

Support Level The price level at which a sufficient amount of demand is forthcoming to stop, and possibly turn higher for a time, a downtrend. Source: Murphy, John. Technical Analysis of the Financial Markets; (c)...
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Origins of the Stochastic Oscillator (Article)

The Origins Of The Stochastic Oscillator by George A. Schade, Jr., CMT This article answers the longstanding question who originated the %K and %D stochastic oscillator used by market technicians. The question has been...
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Investor Intelligence Numbers

Investors Intelligence Numbers Investors Intelligence takes a weekly poll of investment advisors and produces three numbers - the percent of investment advisors that are bullish, those that are bearish, and those that are...
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Investor Sentiment Readings

Investor Sentiment Readings Each weekend Barron's includes in its Market Laboratory section a set of numbers under the heading "Investor Sentiment Readings." In that space, four different investor polls are included to...
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Larry Williams %R

Larry Williams %R Larry Williams %R is based on a similar concept of measuring the latest close in relation to its price range over a given number of days. Today's close is subtracted from the price high of the range for...
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Commodity Channel Index

Commodity Channel Index It is possible to normalize an oscillator by dividing the values by a constant divisor. In the construction of his Commodity Channel Index (CCI), Donald R. Lambert compares the current price with a...
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Stochastic Oscillator

Stochastic Stochastic literally means random. The Stochastic Oscillator The Stochastic Oscillator, developed by George Lane, compares a security's price closing level to its price range over a specific period of...
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McClellan Oscillator

McClellan Oscillator The follow information was gathered from the website www.mcoscillator.com, which is run by MTA Members Tom and Sherman McClellan. Every day that stocks are traded, financial publications list the...
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Oscillator: Definition

Oscillator Definition 1: A form of momentum or rate-of-change indicator which is usually valued from +1 to -1 or from 0% to 100%. Source: Edwards, Robert and Magee, John.Technical Analysis of Stock Trends 9th...
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Increasing Positive Correlation and Momentum (Article)

Increasing Positive Correlation and Momentum By Alexandra Guevara Summary Correlation is often used as a statistical measure to determine whether two securities move in the same direction, move in the opposite direction,...
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NDX100/S&P500 Relative Strength Strategy

NDX100/S&P500 Relative Strength Strategy By Erik Skyba, CMT Summary According to the Capital Asset Pricing Model, when the broad market begins to advance or decline individual stocks will outperform or underperform...
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Conditional XMA Strategy

Conditional XMA Strategy By Frederic Palmliden, CMT Summary Among the well-known shortcomings of trend following systems is that they usually experience frustrating whipsaws when the market is not trending and that they...
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