Technical Indicators: T (part 1)
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TD Moving Average
Tom Demark describes his TD Moving Average study as "a means of identifying logical locations to either exit a trade or to place stop loss orders."
If the Moving Average of lows goes into effect, use the price level represented by the Moving Average to determine a place to exit the long position or to place a stop loss on a trade. If the Moving Average of highs goes into effect, use the price level represented by the Moving Average to spot a place to exit the short position or to place a stop loss on a trade.
The plot of the Moving Average remains in force for a period of 4 bars or until the required conditions are no longer valid. Note that once the lowest low in X bars condition is no longer true, the plot continues for a period of 4 bars. Conversely, if the most recent high has achieved a value higher than the high of all previous 12 bars, then a 3 period Moving Average of the highs is calculated and plotted until either the condition is no longer true or for a period of 4 bars, whichever is less.
See Simple Moving Average for additional information regarding interpretation.
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TD Range Expansion Index
Developed by Tom Demark, the TD Range Expansion Index is a market-timing oscillator which identifies risk areas for buying and selling. The oscillator is arithmetically calculated and is designed to overcome problems with exponentially calculated oscillators, like MACD.
The oscillator typically produces values from -100 to +100 with 45 or higher indicating overbought conditions and -45 or lower indicating oversold conditions. Tom Demark notes that when REI rises above +45 and falls below +45, price weakness normally occurs. Conversely, when REI falls below -45 and rises above -45, price strength should become apparent.
TD Range Projections
Developed by Tom Demark, the TD Range Projections allows you to project or anticipate the next bar's range, its expected high and low. The projections are dependent on the relationship of the open to close of the most recent period.
If the close of the most recent bar is less than the open then the calculations are:
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(Current High + 2 * Current Low + Current Close) = X
Projected High = X - Current Low
Projected Low = X - Current High
If the close of the most recent bar is greater than the open:
(2 * Current High + Current Low + Current Close) = X
Projected High = X - Current Low
Projected Low = X - Current High
If the close of the most recent bar is equal to the open then:
(Current High + Current Low +2 * Current Close) = X
Projected High = X - Current Low
Projected Low = X - Current High
These projections serve as benchmark expectations for the next day's range. If the open is within the projected range, it should remain within that range. If prices open outside the channel (above or below the projected high or low) then expect to see prices continue in the direction of the breakout.
TD Rate of Change
Developed by Tom Demark, the TD Rate of Change indicator can be useful in the identification of potential market turns. It functions by comparing the current close to the close 12 bars ago as a means to determine the degree that the market is overbought or oversold.
See Rate of Change for additional information regarding interpretation.
The Time Series Forecast
The Time Series Forecast function displays the statistical trend of a security's price over a specified time period based on linear regression analysis. Instead of a straight linear regression trendline, the Time Series Forecast plots the last point of multiple linear regression trendlines. This is why this indicator may sometimes referred to as the "moving linear regression" indicator or the "regression oscillator."
Because a linear regression line is a straight line as close as possible to all of the given values, a Time Series Forecast does not exhibit as much delay as a Moving Average when adjusting to price changes. This is because the indicator is continuously "fitting" itself to the data rather than simply averaging them. Note that this type of prediction is purely mathematical as it is ultimately the equivalent of drawing a line through the recent points and projecting that line forward.
The Time Series Forecast at the beginning of a data series will not be defined until there are enough values to fill the given period.
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