Introduction to indicators

Financial Trading in R

Ilya Kipnis

Professional Quantitative Analyst and R programmer

Why use indicators?

  • Market data are exceptionally noisy
  • In order to gain insights, you need to transform the data through indicators
Financial Trading in R

What are indicators?

  • Indicators are transformations of market data

  • Indicators gain smoothness and incur a lag penalty compared to raw market data

  • Indicators can range from short term to very long term

Financial Trading in R

Indicator examples

  • Trend indicators: eg 200-day moving average

Financial Trading in R

Indicator examples

  • Oscillation indicators

    • Generate a signal of when it may be a good time to enter in short term position

    • often, scale of 0 to 100, -2 to 2,…

    • wait until price has pulled back with eye on future profit

Financial Trading in R

In this class

  • Combination of:
    • basic moving average crossover
    • oscillation indicator
Financial Trading in R

Let's practice!

Financial Trading in R

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