Glossary

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A

Accumulation/Distribution: A momentum indicator which relates to the changes in price and volume. It is used to gauge the buying and selling pressure of a particular security. The closer the close is to its high, the more volume would be added to the cumulative total. Conversely, the closer the close is to its low, the more volume would be added to the cumulative total.

 

Advance-decline line: A market strength indicator. The Advance-decline line is plotted using the Advance-decline index, which is a cumulative figure based on the changes in the total number advancing securities and declining securities over a given period, e.g. a day (week). At the end of the period, say a day, the total numbers of securities that have declined in value on that day is subtracted from the total number of securities whose value have risen, and the final figure, which can be positive or negative, would be added to the cumulative Advance-decline index. The line is typically used in conjunction with a market average index, such as the Kuala Lumpur Composite Index to provide an indication of market strength and breadth. The Advance-decline line and the market index should trend in the same direction. When the Advance-decline line starts to diverge from the market index, it is often an early signal of a potential trend reversal.

 

Arms index: A market strength indicator developed by Richard Arms. A contrarian indicator by nature, this index is calculated by dividing the average volume of declining securities by the average volume of advancing securities. A reading of more than 1.0 indicates more volume in declining securities whereas a reading of less than 1.0 indicates more volume in rising securities. By using a 10-day average of the Arms index, a reading of over 1.20 would be considered oversold and a reading of below 0.70 is considered to be overbought.

 

Aroon Up/Down: Developed by Tushar Chande, Aroon is used to identify trends in the underlying security. Aroon indicator consists of two lines, namely the Aroon Up line, which measures the strength on an uptrend, and Aroon Down line, which measures the strength of the downtrend. Both Aroon Up and Aroon Down fluctuate between 0 and 100 where 100 indicates strength and 0 indicates weakness in the trend.

 

Aroon Oscillator: Developed by Tushar Chande, Aroon Oscillator is also a trend following indicator that uses aspects of the Aroon Up/Down indicator. The Aroon oscillator is calculated by subtracting Aroon Down from Aroon Up. Readings above zero indicate an uptrend whereas readings below zero indicate a downtrend.

 

Ascending triangle: Generally a bullish continuation price pattern, an ascending triangle is plotted by two converging trendlines in a sideways trading range where the upper line is flat or horizontal and the lower line is rising.

 

Average Directional Index (ADX): Developed by J. Welles Wilder, ADX is derived from the spread between the +DI and –DI lines from the Directional Movement Indicator (DMI) system. ADX is used to gauge the strength of a trend where the DMI is used to gauge the direction of the trend. ADX fluctuates between 0 and 100. Readings below 20 indicate a weak trend whereas readings above 40 indicate a strong trend.

 

Average True Range (ATR): Developed by J. Welles Wilder, ATR is used to measure a security’s volatility. High ATR readings indicate high volatility whereas low ATR values indicate low volatility.

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