simple moving average

(Example: the line is a fifteen day Simple Moving Average)


A simple moving average is the average stock price over a period of time, it is calculated by adding the stock closing price over a period of time and then dividing this total by the number of time periods. For instance, a fifteen days SMA is the average price of previous fifteen days closing price.

Formula:
SMA =P 1( the first day price of previous days)+P2+P3…+Pn/N



N=the N day

Relative Strength Index ( RSI)

Relative Strength Index ( RSI) is one of most useful and leading oscillator, it is developed by J.Welles Wilder, it measures strength of a stock by comparing recent stock gain and loss .It uses the number from 0 to 100,usually it is considered to be oversold when the RSI is under 30(or 25), the stock is likely to be undervalued and stock price will pull back. When RSI is above 70(or 75) range, the stock is likely to be overvalued and stock price will go down. When the RSI is between oversold and overbought area, see the trend for internal strength is improving or weaking.

RSI Formula
RSI = 100 -100/(1+RS)

RS= Average of UP closing price changes for the number of days selected/
Average of net Down closing price changes for the number of days selected

For example:
To calculate a 14 days RSI,
1)find all the days where the market closing price higher than previous day and add all the increased amount,then divide the sum by 14 to get the average up closing price changes.
2)find all the days where the market closing price lower than previous day and add all the decreased amount, the divide the sum by 14 to get the averge down closing price changes.
3)divide average of up closing price changes by average down closign price changes to get RS.
4)calculate RSI provided by the above formula.

What is technical analysis?

There are two opposite trend in the financial markets, bulls and bears market. Bulls pushed the price and bears push down the price.Technical analysis is to study the past price and volume market data to forecast the future trend is bullish or bearish,( the price will go up or go down).
There are many popular technical indicators such as SMA(Simple Moving Average).EMA.(Exponential Moving Average).MACD(Moving Average Convergence/Divergence).MACD-Histogram, RSI(Relative Strength Index),Stochastic, Williams %R, Accumulation/Distribution are widely used by traders, particularly day traders, most long term traders use fundamental analysis to buy stocks.