TrendSpider is happy to announce the availability of lower indicators and will be adding more as time progresses. We believe the addition of these resources will greatly help traders utilize the ability to backtest price vs. indicator action. In this strategy guide blog post, we will show traders how to utilize these correctly on the platform as well as general ways to spot repeating patterns in the market.
What is a Lower Indicator?
A lower indicator is simply an indicator that is shown below the chart. In contrast, an upper indicator is simply one that shows up on the chart that the price action is also on. These lower indicators are very strong for backtesting different studies which will be discussed more in the next section. We are huge believers in using as many resources as possible to get the best data. By cross-referencing these with price action, volume, moving average crosses, and candlestick patterns, users will be able to get a much better picture of what is going on.
Figure one: This is an example of some of the lower indicators currently available on the TrendSpider platform. Notice these indicators are below the main price chart.
Figure two: This is an example of the upper indicators that are on the actual price chart. These generally are moving averages, Bollinger Bands (R), and Keltner Channels.
There are many examples of lower indicators, but we will be focusing on the ones that are currently offered at TrendSpider. Most of these indicators currently available are momentum oscillators and can be very useful in finding repeating patterns in the market. To learn more about momentum oscillators and how they work, check out our blog post here.
Lower Indicators Currently Available on TrendSpider:
- Average True Range (ATR)
- Moving Average Convergence-Divergence (MACD)
- Williams % Range
- Stochastic Oscillator
- Aroon Oscillator
- Chaikin AD Oscillator
- Average Directional Index
- Commodity Channel Index (CCI)
- On Balance Volume (OBV)
- Percentage Price Oscillator
- Rate of Change (ROC)
- Absolute Pirce Oscillator
- Balance of Power
- Chande Momentum Oscillator
- Money Flow Index
- Directional Movement Index
- Ultimate Oscillator
Backtesting Lower Indicators
One of the most useful ways to utilize lower indicators is to simply backtest the price action vs. the lower indicator action. There are many ways traders will define a backtest, but generally speaking, a backtest is simply a system that looks for repeatable bullish or bearish patterns that have provided a return from a particular signal in the past. A lot of lower indicators (especially momentum oscillators) have overbought and oversold values that help traders get an idea of when price action may start to reverse. By using a mix of upper and lower indicators, traders increase their chances if finding higher probability trades.
Figure three: This image shows the price action for MU with the green circles showing the areas price bottomed out at while the Williams % Range was also hitting very oversold levels. Notice how the support trendline is correlated with the oversold Williams % Range.
One that thing also sets TrendSpider apart from the rest is the ability to perform multi-time frame analysis on any indicators. In general, short-term price action generally respects long-term trendlines so when these areas are broken to the upside or downside, it is typically something to watch closely.
Figure four: This image shows a backtest of the daily Williams % Range with a weekly Williams % Range overlay. Notice when the daily Williams % Range breaks to the upside through the weekly, there usually is a breakout or breakdown (there was a false signal early on shown by the orange circle).
Adding Lower Indicators on the TrendSpider Platform
Now that you have seen how to use these types of indicators, it is time to give this a shot on your own! Follow these steps below to add lower indicators on your chart and start trying out different backtest setups today. It is important to note that no matter how strong a backtest is, it can always breakdown especially if there is systemic risk in the market.
Step One: The first step for pulling up lower indicators on the TrendSpider platform is to make sure the “Indicators” feature is turned on (highlighted green). Click the three vertical dots to be taken to the “Manage Indicators” page.
Step Two: Once you have arrived at the “Manage Indicators” page, you will be able to choose from a variety of lower indicators (see above for a full list). Once you choose an indicator, it will move this over to the right-hand screen which gives the user the ability to change the settings. Make sure to click “Apply” when you are finished!
Step Three: Once you have clicked “Apply”, all the lower indicators that were selected will appear below the price chart (highlighted in yellow).
Step Four: Start looking for meaningful oversold and overbought signals with price action!
REMEMBER: These are charts that have interesting technical setups based on automated technical indicator analysis included. Charts and analysis provided for educational reasons only. TRENDSPIDER IS A CHART ANALYSIS PLATFORM. IT IS NOT INTENDED TO BE TRADING OR INVESTING ADVICE. ALWAYS DO YOUR OWN DUE DILIGENCE USING MULTIPLE SOURCES OF INFORMATION AND/OR SEEK THE ADVICE OF A LICENSED PROFESSIONAL BEFORE TRADING OR INVESTING. Please read our full risk disclaimer on our website by clicking here.