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THE NEW TRADING OF A LIVING- GENERAL MARKET INDICATORS

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THE NEW TRADING OF A LIVING GENERAL MARKET INDICATORS You can use technical indicators to analyze any trading vehicle: a stock, a future, an index, etc. Such tools as moving averages, MACD, Force index, and others, can provide signals for any ticker in any timeframe. Now we turn to a different group of tools: general market indicators, which analyze the entire market rather than any specific stock. They are worth following because general market trends are responsible for as much as half the movement in individual stocks. While there are dozens of general market indicators, this is not an encyclopedic review—I’ll simply share the tools that help me trade. You may use the same or different tools—select those that appeal to you and test them on your market data. We can trust only those indicators that we have tested. The New High–New Low Index Stocks that reach their highest level in a year on any given day are the leaders in strength. Stocks that fall to their

THE NEW TRADING OF A LIVING- THE DIRECTIONAL SYSTEM

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THE NEW TRADING OF A LIVING THE DIRECTIONAL SYSTEM The Directional system is a trend-following method developed by J. Welles Wilder,  Jr., in the mid-1970s and modified by several analysts. It identifies trends and shows  when a trend is moving fast enough to make it worth following. It helps traders to  profit by taking chunks out of the middle of important trends. How to Construct the Directional System Directional Movement is defined as the portion of today’s range that is outside of the  previous day’s range. The Directional system checks whether today’s range extends  above or below the previous day’s range and averages that data over a period of time.  These complex calculations are best performed on a computer. The Directional  system is included in most programs for technical analysis. FIGURE  Directional Movement. 1. Identify “Directional Movement” (DM) by comparing today’s high-low range  with yesterday’s high-low range. Directional Movement is the large