The Advance/Decline Line (A/D Line) is very often used as a gauge of the market breadth. It is a joint sum of the Advancing-Declining Issues indicator. The Advance/Decline Line (A/D Line) is an extremely efficient measure of the market's strength.

How to calculate the A/D Line correctly? It's a running total of advancing stocks minus decreasing stocks. A/D Line has been created for gauging the market's strength. It says that as long as there are more advancing issues than decreasing issues, the market is in strong position. As well as the stock index is a compound of stock prices the A/D Line is a compound of stock fluctuations. That's why A/D Line is declining every day much quicker compared to the weekly trend and the indices based on prices. There is a tendency of having the same number of so-called "up days" and "down days". And the foregoing trend is a result of the average stock. However at last the profit starts to increase more quickly than the losses.
 

There's an opinion that the A/D Line depicts the strength of the market more efficiently than the more often used Dow Jones Industrial Average (DJIA) or the S&P 500 Index. If one examines thoroughly how the A/D Line is changing he's aware if the market is in a rising or falling trend, if the trend is still stable, or how long the ongoing trend has been on the market. Sometimes the A/D Line also works as a gauge of general strength of the market. The A/D Line goes up if advancing stocks outnumber declining ones. The A/D Line moves down if there are more declining stocks than advancing ones. Sometimes the A/D Line is also used for highlighting a show between itself the DJIA or the same index.

In many cases it's possible to forecast the bull market's end when the A/D Line starts to round over even when the DJIA is trying to reach new peaks. Usually when a discrepancy between the DJIA and the A/D Line is growing, it means that the DJIA has changed its direction and moved towards the A/D Line.

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Exponential Moving Average (EMA)
Ichimoku Kinko Hyo (IKH)
Parabolic SAR (pSAR)
Alligator

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To measure an exponential moving average you should unite a definite percentage of the actual value with an inverse percentage of the latter value of the exponential moving average (e.g., if you've given 25% weight to the actual value, you should sum up 25% of the actual value to 75% of the previous moving average to get the actual moving average). To define the corresponding weight which previous values should be given you should use the period. To determine the percentage you use the formula 2/ (period+1) (e.g., a period of 7 will result in 25% (2/ (7+1)) of the actual value and you use 75% of the previous exponential moving average value).






Caution: All previous values, even values from before the period, form an actual exponential moving average. The period is used as an approximate calculation of the time period for which values will stay essential in the estimation. At the start of a data series the value is supposed to be zero so you may pay mo attention to the values until the period is finished.

Moving Averages may turn out to be helpful for smoothing raw, noisy data, for example, daily prices. Price data can change very much from every day and still conceal if the price is growing or decreasing. You see even a more general picture of the basic trends can if you watch the moving price average.

As moving averages are sometimes applied for the trend defining, they can also be used to see whether data is opposing the trend. Entry and exit systems usually compare data to a moving average to determine if it is supporting a trend or starting a new one. That's why the exponential moving average is just one of the types of a moving average.

In an ordinary moving average, all price data has the same weight in the calculation of the average with the oldest eliminated value as each new value is added. And in the exponential moving average equation as the average is being measured the most recent market action gets greater importance. Still the oldest pricing data in the exponential moving average is never eliminated.

A sell signal occurs if the short and intermediate term averages cross from the top to the bottom the longer term average. On the contrary, a purchase signal happens if the short and intermediate term averages cross from bottom over the longer term average. If you trade only 2 exponential moving averages in a crossover system it's better to use longer term averages.

It's rather important to know that a 5-day exponential moving average usually consists of over 5 days worth of data and can comprise data from all the life of a futures contract. So such moving averages can be more successfully searched by their actual "smoothing constants," as the number of days of data in the computation remains equal for the 5-day average as for the 10-day average. Exponential calculations are held at various moving average values depending on the point you start with.

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Ichimoku Kinko Hyo is translated from Japanese as "Chart Equilibrium at a glance. It is a charting technique created by Goichi Hosod, a Japanese journalist, who took the nick-name of "Ichimoku Sanjin" before the World War II.

Ichimoku Kinko lets indicate in which direction the market is moving, its entry and exit points. It is used for determining of a market trend, support and resistance levels and for creating sale and purchase signals.






The main terms of this technique are:

Kijun-sen demonstrates the average value of the price for the second period of time. Kijun-sen is a fluctuations' parameter in the Forex market. The price can grow if it's higher than the Kijun-sen. When the price crosses this line, movements in the trend are predicted. Another variant of the Kijun-sen usage is the signals' submission of. Kijun Sen resembles the Tenkan Sen but consists of more than 26 periods. (Brown)

Tenkan-sen demonstrates the average value of the price for the first period of time; defined as the sum of a maximum and the minimum for this time frame, divided by two. The purchase signal is provided when the line Tenkan-sen intersects Kijun-sen bottom-up and a sell signal is generated when the Tenkan-sen crosses Kijun-sen top-down. Tenkan-sen is used as the indicator of a Forex trend. The trend exists if this line grows or falls. When it moves horizontally, the Forex market has come into the channel. Tenkan Sen is an average of the highest high and lowest low over 9 periods. (Red) There is a signal for selling when Tenkan-sen line crosses Kijun-sen from bottom-up, the purchase signal is provided, if it moves from top to down.

Tenkan-sen is used as the indicator of a market trend. If this line grows or falls - the trend exists. When it goes horizontally - the market has entered in the channel.

Senkou Span is a shaded region between the 2 Senkou lines.

Senkou Span A - demonstrates the middle between the previous 2 lines, moved forward on value of the second time frame. Senkou Span B - demonstrates the average value of the price for the third time frame, moved forward on value of the second time frame. The area between them depicts the trend and is also used as the price's support and resistance. This leads the actual time by 26 periods. (Green/Blue shaded area) Chinkou Span demonstrates the actual candle's closing price, moved back on value of the second time frame.

A cloud is the distance between the lines, Senkou, is shaded on the schedule with other color. The market is considered without a trend and the edges of a cloud will derivate levels of support and resistance if the price is placed between these lines. If the line, Chinkou Span, crosses the chart of the price from bottom upwards, it is a signal for purchasing. And it is a signal for selling if it crosses from top downwards. Chikou Sen: the lagging price, 26 periods ago. (Pink)

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