Technical Analysis Learning Center

Our Futures Chart Technical Analysis Learning Center comes with numerous studies. Some of the studies display as overlays on the underlying chart data, while other studies are displayed exclusive of the underlying chart data (in a separate pane). Please note that the placement of the study cannot be modified.

Default parameters for each study are shown below (in parentheses after the study name). The user can change the parameters for the study after it has been applied to the chart by accesing the study’s properties (double-click on the plotted study).

How-To Guide: 12+ Candlestick Formations Every Trader Should Know

If you trade the markets technically or looking to get started, this guide is for you! The following strategies and concepts are covered in this 30+ page guide:

• Brian’s top 12 candlestick formations
• A brief and easy-to-understand explanation on each formation
• What to look for when pinpointing candlestick formations on a chart
• What they mean when they are happening, and
• How and when to take action!

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Choose a study from the list to view its description, formula, and typical interpretation.

Interactive Chart Study List

• Bollinger Bands
  Bollinger Bands consist of a Moving Average and two standard deviations charted as one line above and one line below the Moving Average.  The line above is two standard deviations added to the Moving Average.  The line below is two standard deviations subtracted from the Moving Average.  Developed by John Bollinger, this study represents a variation of the Envelope study.
• Commodity Channel Index
  Commodity Channel Index is designed to detect beginning and ending market trends. This study measures the distance between the share prices and their Moving Average, and thus allows a measurement for the trend strength and/or intensity.
• Crack Spread
  The CRACK spread study is a futures transaction that parallels the process of refining Light Crude Oil (CL) into petroleum products, such as Heating Oil (HO) and Unleaded Gas (HU). Since the refining process involves “cracking” crude oil into its major components, the spread is referred to as a crack. Two of the major oil products produced in refineries are heating oil and unleaded gasoline. Therefore, the CRACK spread only involves crude oil (CL), unleaded gasoline (HU), and heating oil (HO).
• Crush Spread
  The CRUSH spread study is a futures transaction that parallels the process of producing bean oil (BO) and soymeal (SM) from soybeans (S). This study will only work with S, BO, and SM contracts on a daily chart.
• Default
  Each study has its own set of properties which may be modified. Certain studies (such as Bollinger Bands, Exponential Moving Average, and Momentum), perform their calculations using a specific value (Field) from the underlying data on which the study is applied. When the study is initially applied to a chart, it “binds” itself to this Field, which is set in the study properties.
• Directional Movement Index
  The concept of Directional Movement is based on the assumption that in an upward trend today’s highest price is higher than yesterday’s highest price, and in a downward trend today’s lowest price is lower than yesterday’s lowest price.
• Envelope
  Envelopes represent bands that are plotted in a certain, identical relationship above and below the Moving Average. Envelopes are a very complex theme with many interpretation and trading rules. Basically, envelopes capture a significant part of price movements. Concrete trading signals are released if prices approach or move away form their envelope.
• Exponential Moving Average
  The Exponential Moving Average gives the recent prices an equal weighting to the historic ones. The calculation does not refer to a fixed period, but rather takes all available data series into account. This is achieved by subtracting yesterday’s Exponential Moving Average from today’s price. Adding this result to yesterday’s Exponential Moving Average, results in today’s Moving Average.
• Exponential Oscillator
  The Exponential Oscillator is plotted as a histogram, using the difference between two Moving Averages. It can be used to help identify divergences, short-term variations from the long-term trend, and to identify the crossing of two Moving Averages, which occur when the oscillator crosses the zero line.
• High Low Moving Average
  The High Low Moving Average study allows you to quickly and easily compute a simple moving average of the high and low for the interval. The length of the moving average may vary for the high and low.
• Highest High / Lowest Low
  The mathematics defines an envelope of values by using the Highest High or the Lowest Low of the Last ‘n’ Periods.
• Historic Volatility
  Although traders cannot predict the future, they must make intelligent guesses as to what the future holds. A standard approach used in option evaluation is to look at the past. What has historically been the volatility of a certain commodity?
• Keltner Channel
  This moving average system by Chester W. Keltner consists of an n-day moving average of the “typical price” (sometimes referred to as “average price,” ((H+L+C)/3), plotted with a channel formed by adding and subtracting an n-bar moving average of the high-low range to or from the moving average of the typical price. Thus, the width of the channel adjusts to market volatility.
• Least Squares Linear Regression
  The Least Squares Linear Regression line indicates the dominant market trend relative to time. In simple terms, is the market trending lower or higher with respect to time? It can inform you when the market is diverging from an established trend, but only when prices fluctuate uniformly around the trendline and within a narrow range. The better the fit of the equation to the data, the more reliable the linear trend. Once the calculations are completed, FutureSource draws the trendline on the screen.
• Line Oscillator
  This study is a combination of two different studies. The first set of calculations compute a simple oscillator. The second part computes a simple moving average of the oscillator. You must specify two values for the moving averages to calculate the oscillator. Next, a third value is specified for a moving average of the oscillator. The application computes the values and displays two lines on the chart.
• Momentum
  Momentum is currently one of the most used technical studies. It is an oscillator-type study used to interpret overbought/oversold markets. It assists in determining the pace at which price is rising or falling. This indicates whether a current trend is gaining or losing momentum, whether or not it is overbought or oversold, and whether the trend is slowing down.
• Moving Average
  Moving Average is generally used to identify or confirm a trend, and works best in trending markets. It will not signal you that a trend change is imminent, but it will help you to determine if an existing trend is still in motion and help you to confirm when a trend reversal has taken place.
• Moving Average Convergence Divergence
  The MACD, developed by Gerald Appel, is both a trend follower and an oscillator. The abbreviation stands for Moving Average Convergence Divergence. It is the difference between a fast Exponential Moving Average (EMA) and a slow Exponential Moving Average. The name “Moving Average Convergence Divergence” originated from the fact that the fast EMA is continually converging towards or diverging away from the slow EMA. A third Exponential Moving Average of the MACD (TRIGGER, or the signal line) is then plotted on top of the MACD.
• Moving Standard Deviation
  Moving Standard Deviation is a statistical measurement of market volatility. It makes no predictions of market direction, but it may serve as a confirming indicator. You specify the number of periods to use, and the study computes the standard deviation of prices from the moving average of the prices.
• Open Interest
  Open Interest shows the number of open contracts of a given option or futures contract. An open contract can be a long or short contract that has not been exercised, closed out, or allowed to expire. Open Interest is only available if your rate data contains an OI field with current Open Interest values.
• Oscillator
  The oscillator can be used to help identify divergences, short-term variations from the long-term trend, and to identify the crossing of two Moving Averages, which occur when the oscillator crosses the zero line.
• Parabolic Stop and Reversal
  J. Welles Wilder’s Parabolic Stop and Reversal is a simple study to use. The study continuously computes “stop and reverse” price points. Whenever the market penetrates this “stop and reverse” point, you liquidate your current position and take the opposite position. If long, you liquidate the long position and establish a short position. If short, you liquidate the short position and establish a long position. The Parabolic Stop and Reversal study always has you in the market.
• Rate of Change
  The Price Rate of Change study is first calculated by dividing the price change over the last ‘n’ periods by the closing price of the instrument ‘n’ periods ago. The result is the percentage by which the price has changed over the last ‘n’ periods. If the share prices increase in this period, the ROC will be a positive number; and a negative number with decreased share prices.
• Relative Strength Index
  The Relative Strength Index, developed by Welles Wilder is a special form of the Momentum and probably the most widely used contra-trend-oscillator. Contrary to the implications of its name, the study does not show the instrument’s strength in comparison to other instruments, but rather the instrument’s internal strength compared to its former prices.
• Slow Stochastic
  The Stochastic study (SSTOC), developed by George Lane, is an oscillator that compares the difference between the closing trade price of an instrument and the period low relative to the trading range over an observation time period. With the help of this study, the position of the price quotation within the prevailing fluctuation margins is quantified.
• Smoothed Moving Average
  A Smoothed Moving Average is an Exponential Moving Average, only with a longer period applied. The Smoothed Moving Average gives the recent prices an equal weighting to the historic ones. The calculation does not refer to a fixed period, but rather takes all available data series into account. This is achieved by subtracting yesterday’s Smoothed Moving Average from today’s price. Adding this result to yesterday’s Smoothed Moving Average, results in today’s Moving Average.
• Smoothed Oscillator
  A Smoothed Oscillator is an Exponential Oscillator, only with a longer period applied. The Smoothed Oscillator is plotted as a histogram, using the difference between two Moving Averages. It can be used to help identify divergences, short-term variations from the long-term trend, and to identify the crossing of two Moving Averages, which occur when the oscillator crosses the zero line.
• Stochastic
  The Stochastic Study, developed by George Lane, is an oscillator that compares the difference between the closing trade price of an instrument and the period low, relative to the trading range over an observation time period. With the help of this study, the position of the price quotation within the prevailing fluctuation margins is quantified.
• Variable Moving Average
  The Variable Moving Average study allows you to get very creative with the moving averages. Three moving averages are applied (normal, exponential, and smoothed).
• Volume
  Volume can provide insight into the strength or weakness of a price trend. This study has no calculations. The values for volume are transmitted from the exchanges. However, the actual volume figures are always one day behind price information. You will not know Monday’s volume until Tuesday at approximately noon (for U.S. markets - central time). That is due to the exchanges and their reporting requirements.
• Volume and Open Interest
  Volume and Open Interest can be a barometer of future activity and direction. Volume measures the number of contracts that exchanged hands during the trading session. It measures market activity. Open Interest is the total number of outstanding contracts. It gauges market participation.
• Weighted Close
  The Weighted Close study is another way of viewing the price data. It is an average of each day’s price, placing a greater emphasis on the closing price rather than the high or low. This process creates a single line chart.
• Williams’ %R
  The Williams’ %R, developed by Larry Williams, is very similar to the Stochastic Study, except that the Stochastic has internal smoothing whereas the %R is plotted on an upside-down scale, with 0 at the top and -100 at the bottom.

Content Source: Futuresource

How-To Guide: 10 Rules for Technical Futures Trading

Learn how to think like a technical trader! If you trade the markets technically or looking to get started, this guide is for you! The following strategies and concepts are covered in this 40-page guide:

• How to interpret trend lines and market moves
• Understanding supply and demand through charts
• How and when to apply stop-loss orders
• And more!

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