In order to facilitate the user, indicators are made as standard as possible, meaning equal in the way they are organized and handled;
in particular regarding trading algorithms, the core of Trading Conceiver.
For this reason, some indicators have been 'split'.
Histograms
A typical example are histogram versions, like the MACD (Moving Average Convergence / Divergence Oscillator).
The MACD actually consists of more than one curve:
The MACD itself [1]
The signal line [2]
The histogram [3]
The signals are traditionally given by [1] and [3].
So the MACD is split into two different indicators:
MACD
MACD histogram
Each of them has its derived indicators and, above all, its trading algorithms, exactly like all the others.
Other Examples
Another example is the ADX, a complicated indicator, which has been split into 3 parts.
Channels / Bands
Many overlays come in the form of bands or channels, e.g. Bollinger Bands, Donchian Channels, Keltner channels...
They are basically two curves, a lower line and an upper line, delimiting a central region.
For most of these, two further base indicators are obtained:
Width
Width percentage
For instance:
Bollinger Bands
Bollinger Bands width
Bollinger Bands width percentage
Width
The width is the distance between the upper and lower lines as an absolute value:
width = upper line - lower line
Width Percentage
In order to make the width more consistent for different values, a percentage version is made available, defined as:
upper line - lower line
width % = 100 · ─────────────────────────────
upper line + lower line
───────────────────────
2
Interpretation
Typically, the width, either in its absolute or percentage form, represents volatility.
So you can use these indicators as volatility indicators.
In some cases, the literature reports more specific recommendations.
For instance the Bollinger Band is thought to forecast an imminent strong trend when its width 'squeezes'.
With these indicators we make available, you can trend such strategies.
Exceptions
There are exceptions, though. The width of the Envelope, for example, by the way the Envelope is defined,
represents a fixed percentage multiplied by the moving average of the price. It does not represent volatility.
Stop loss
These width indicators are also used for defining volatility based stop loss algorithms.
Percentage
For some well known indicators, a percentage version is made available, too.
Percentage versions have the advantage of being more consistent in output values, disregarding the range of input data.
Being more uniform over price range, they enable comparison at different prices.
Examples:
In order to facilitate the user, indicators are made as standard as possible, meaning equal in the way they are organized and handled;
in particular regarding trading algorithms, the core of Trading Conceiver.
For this reason, some indicators have been 'split'.
A typical example are histogram versions, like the MACD (Moving Average Convergence / Divergence Oscillator).
The MACD actually consists of more than one curve:
Another example is the ADX, a complicated indicator, which has been split into 3 parts.
Many overlays come in the form of bands or channels, e.g. Bollinger Bands, Donchian Channels, Keltner channels...
They are basically two curves, a lower line and an upper line, delimiting a central region.
For most of these, two further base indicators are obtained: