Technical Analysis

Question 1

Technical Analysis metrics

Answer 1

Price and Volume only

Compute statistics to find indicators called heuristics

Question 2

When is Tech Analysis effective?

Answer 2

Combining multiple indicators
Look for contrasts (stock behavior vs market)
Shorter time periods

Question 3

Technical Indicators

Answer 3

Momentum
Simple Moving Average
Bollinger Bands

Question 4

Momentum Formula

Answer 4

(price [day] / price [day - x]) - 1

Generally ranges -.5 to +.5

Question 5

Simple Moving Average Indicators

Answer 5

Look where current price crosses Simple Moving Average

Proxy for true underlying value - large movements from the average indicate trade opportunity

Question 6

Simple Moving Average Formula

Answer 6

(price[day] / price[n previous days].mean()) - 1

Generally ranges -.5 to +.5

Question 7

Bollinger Band

Answer 7

Add deviations 2 above and below SMA

Look for crossing from outside to inside the bands

Question 8

Bollinger Band Formula

Answer 8

(price[day] - SMA[day]) / 2 * deviation[day]

Look for x < -1 (buy) or x > 1 (sell)

Question 9

Normalization

Answer 9

Ensure indicators are compared on same scale

Question 10

Normalization Formula

Answer 10

(values - mean) / values.standard deviation