Indicator Guide

What are Indicators and Overlays?

Technical analysis focuses on price action, price movement and volume behaviour to anticipate what is likely to happen in the future.

Technical analysts believe that the market already factors in all available information and discounts the same in the current price level. Technical analysts use a variety of tools including charts and graphs to analyse this price and volume movement and behaviour over different time-periods.

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This helps analysts identify distinct patterns of trading that have occurred in the past and are likely to happen again. In other words, technical analysis focuses on what is happening in the market rather than why it is happening. Therefore, technical analysis considers the price action and the price movement as paramount to help identify the dominant market sentiment and discern any patterns of trading that potentially indicate which way the price is likely to move.

An important part of the toolset used by Technical Analysts includes Technical Indicators and Overlays. In simple terms, an indicator is a mathematical formula that is applied to the price or volume of a security.

The formula generates a series of new calculated data points that give a trader a different way to analyze a chart with the intention of predicting the future price. Common examples of technical indicators are the MACD, Price Oscillator, and RSI. These are typically drawn above, below or overlaid on top of a price chart.

Overlays are generally drawn on top of the price or volume chart. These include calculated values, but may also be derived by observation of the price or volume charts and identification of patterns. Examples of common overlays include supports and resistances, trend lines, Moving averages, etc.

All editions of BlastChart come preloaded with over 60 indicators. To view a detailed description and explanation for any of the supported indicators, click on the indicator or overlay listed in the column to the left.

 

Chaikin Money Flow (CMF) Indicator

Chaikin Money Flow (CMF) indicator with 5 smoothing averages.