Technical Indicators For Charts

Yahoo! Finance Charts enable you to conduct a more thorough technical analysis utilizing the TECHNICAL INDICATORS functionality in your charts. Technical indicators are tools used by market technicians to determine trend, market sentiment and various buy and sell signals, and your Yahoo! Finance Charts offer a suite of 13 customizable technical indicators.

To access these indicators and add them to your chart, place your cursor above the TECHNICAL INDICATORS button. As you do so, a new window will appear listing all 13 indicators. You can tell from this window which indicators you are currently viewing on your chart because a checkmark appears next to each live indicator. To add a new indicator to your chart, click on the name of the indicator you would like to add.

Using Technical Indicators

Each technical indicator on this list serves a unique purpose when conducting a technical analysis. That being said, there will never be a time when you will want to add all 13 indicators to your chart at the same time. Market technicians refer to this over use of technical indicators as “indicator piling,” and it can hurt your investing performance. To enhance your investing success when using technical indicators, identify one or two indicators you can get to know well, and then apply those indicators to your charts. By doing so, you will remove most of the excess noise created by trying to apply too many indicators.

When identifying the indicators you wish to include on your chart, consider taking only one indicator from the following groupings: trending indicators, oscillating indicators and volume-based indicators.

Trending indicators are those that follow the trend—whether up or down—of a security and are not limited by any predetermined ranges. Because trending indicators move in sync with the price movement of a security, they are usually plotted on top of the price chart. Using Yahoo! Finance Charts, you have access to four trending indicators:

Oscillating indicators are those that move back and forth, based on the price movement of the equity, within a predetermined range. Because oscillating indicators do not move in sync with the price movement of a security, they are usually plotted below the price chart. Using Yahoo! Finance Charts, you have access to seven trending indicators:

Volume-based indicators are those that—unlike trending and oscillating indicators—are based on volume rather than price. Because volume-based indicators are not derived from the price movement of a security, they are usually plotted below the price chart. Using Yahoo! Finance Charts, you have access to two volume-based indicators:

Adding Technical Indicators to Your Charts

When you click on an indicator in the TECHNICAL INDICATORS window, a new window will appear. This window gives a brief description of what your selected indicator is and how you can customize it within your Yahoo! Finance Charts.

You can customize your indicator(s) by changing the numbers found in the field(s) at the top of the box. The numbers you enter will tell the indicator(s) how many past time periods to include in its calculations. For example, in the SIMPLE MOVING AVERAGE window, entering “30” in the Line1 Period field tells the indicator to take the past 30 time periods into account when calculating its value. If you were viewing a one-year chart, it would base its calculation on the past 30 days because each period on a one-year chart is equal to one day. If you were viewing a one-day chart, it would base its calculation on the past 30 minutes because each period on a one-day chart is equal to one minute. Once you have determined the time frame(s) for your indicator(s), click on the DRAW button, and the charts will automatically add your new indicator(s).

Once you have plotted your indicator on your chart, you can read its value by placing your cursor above the time period you wish to analyze and looking at the indicator value reading in the right corner. For example, looking at the chart of Apple Computer (AAPL) on February 1, 2006, you can see that the value of the 30-period moving average was 76.2373, the value of the 200-period moving average was 52.4747, and the volume amount was 18,613,800.

If you ever need to remove an indicator you have plotted on your chart, click on the TECHNICAL INDICATORS link again, and select the indicator you wish to remove. Doing so will launch that indicator’s window again, but now you will see an additional button—the REMOVE button. To remove the indicator from your chart, simply click this button.

Now that you are familiar with how to add, read and remove indicators on your Yahoo! Finance Charts, let’s discuss how you can use each of these indicators in your analysis. As you read about the various uses for each of these indicators, however, remember that this guide is only scratching the surface of what you can do with these indicators. Once you have identified those indicators you will be using in your investing, consider conducting a more in-depth analysis on those indicators.

Now that you're finished reading the text version of this tutorial, watch the video.

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