Calculations
Here are the underlying calculations in Trade Tutor
Simple Moving Average
We calculate the Simple Moving Average (SMA) by utilizing the average value over the specified window for each symbol over the specified period of time.
Exponential Moving Average (EMA)
EMA is another form of moving average. Unlike the SMA, it places a greater weight on recent data points, making data more responsive to new information. When used with other indicators, EMAs can help traders confirm significant market moves and gauge their legitimacy.
Common EMAs include 12- and 26-day for short-term trends and 50- and 200-day for long-term trends.
Stochastic Oscillator
A stochastic oscillator measures momentum by comparing a closing price to its price range over time, scaled from 0 to 100. A reading below 20 generally indicates oversold conditions; a reading above 80 indicates overbought. However, if a strong trend is present, a correction or rally will not necessarily ensue.
MACD (Moving Average Convergence Divergence)
MACD is an indicator that tracks momentum shifts by comparing two moving averages. It can help traders identify possible buy and sell opportunities around support and resistance levels.
‘Convergence’ means that two moving averages are coming together, while ‘divergence’ means that they’re moving away from each other.
If moving averages are converging, it means momentum is decreasing, whereas if the moving averages are diverging, momentum is increasing.
Bollinger Bands
A Bollinger band is an indicator that provides a range within which the price of an asset typically trades. The width of the band increases and decreases to reflect recent volatility.
The closer, or narrower, two bands are to each other, the lower the perceived volatility of the financial instrument. The wider the bands, the higher the perceived volatility.
Bollinger bands are useful for recognising when an asset is trading outside of its usual levels and are used mostly as a method to predict long-term price movements.
When a price continually moves outside the upper parameters of the band, it could be overbought, and when it moves below the lower band, it could be oversold.
RSI (Relative Strength Index)
RSI is mostly used to identify momentum, market conditions and warning signals for dangerous price movements. RSI is gauged on a scale of 0-100. An asset at or around 70 is often considered overbought, while an asset at or near 30 is often considered oversold.
An overbought signal suggests that short-term gains may be reaching a point of maturity and assets may be in for a price correction. In contrast, an oversold signal could mean that short-term declines are reaching maturity and assets may be in for a rally.
Fibonacci Retracement
We calculate Fibonacci Retracement levels by identifying a significant price high and low over the selected time range and applying standard Fibonacci ratios to determine potential support and resistance levels for each symbol.
Standard Deviation
Standard deviation indicates the likelihood of significant price volatility (but not the direction) by comparing current movements to historical patterns. Consequently, traders can identify how likely volatility is to affect the price in the future.
Average Directional Index (ADX)
The ADX illustrates the strength of a price trend. It works on a scale of 0 to 100, where a reading of more than 25 is considered a strong trend, and a number below 25 is considered a drift. Traders can use this information to gather whether an upward or downward trend is likely to continue.
ADX is normally based on a moving average of the price range over 14 days, depending on the frequency that traders prefer. It never shows how a price trend might develop, it simply indicates the strength of the trend.
Heikin Ashi candles
Heiken-Ashi, means "average bar" in Japanese. The Heikin-Ashi is a variation of candlestick charts that smooths price data, making trends easier to interpret.
We calculate Heikin Ashi candles by averaging price data from the current and previous periods to produce modified open, high, low, and close values, resulting in a smoothed candlestick representation that highlights trend direction and momentum.
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