Technical Analysis

Question 1

Characteristics

Answer 1

Only looks at price and volume

Question 2

When is it effective

Answer 2

combination of indicators

compare against overall market

shorter time periods

Question 3

Momentum

Answer 3

measure of price change over period of time

momentum = price[day] / price[day - n] - 1

where n is number of days prior

Question 4

Simple moving Average

Answer 4

Look back n days and take average

indicator 1 - where price crosses SMA, especially when combined with momentum

indicator 2- Represents underlying value, and large movements from it represent trade opportunity

indicator = price[day] / price[SMA] - 1

Question 5

Bollinger Bands

Answer 5

Quantify price movements from mean by using standard deviation

Look for when it crosses outside band to inside band

Question 6

Normalization

Answer 6

Prevent indicators with greater values from overwhelming those with smaller ones

(value - average ) / std()