Technical Indicator Classes

Thanks to Brian for providing this beneficial post

"Trends are NOT indicators. They are what you have to know before you can interpret indicators or anything else connected to the future movement of prices."
D. WORDEN

There are dozens and dozens of technical indicators, but in reality, very few are truly unique at their mathematical core. The fact is most indicators are designed to measure one of four technical phenomena:

• Momentum

• Trend (to visually examine Trend use a lookback of +/- 65 daily periods, and for S & R use 240 daily periods)

• Volatility (aka Standard Deviation, to visually examine Volatility risk, use a look back of  +/- 25 daily periods).

• Volume

By carefully choosing an indicator from each of these four broad categories for a trading system, diversity and robustness are greatly increased. [Click Read More to view full article]

Using exhaustive yet prudent system testing techniques, four diverse technical indicators can be used to confirm buy and short signals. These could include, Ultimate Oscillator (a Velocity class indicator), dual moving averages (a Verticality class indicator), Trading Bands (a Volatility class indicator), and Ease of Movement (a Volume class indicator).
S. NISON

Ultimate Oscillator (Velocity class or "Momentum"):

A technical indicator developed by Larry Williams (%R) that uses the weighted average of three different time periods to reduce the volatility   and false transaction signals that are associated with many other indicators that mainly rely on a single time period.This is a range-bound indicator, which means the value fluctuates between 0 and 100. Similar to the RSI, levels below 30 are deemed to be oversold, and levels above 70 are deemed to be overbought. Transaction signals are derived by finding situations where the price is going in opposite directions than the indicator. Once this divergence has been identified the trader  will wait to confirm the transaction by using other technical indicators.  Other Momentum indicators include Rate of Change (ROC), MACD, Stochastic, Williams %R, Relative Strength Index (RSI), CCI (designed to detect beginning and ending market trends),  and Price Oscillator.

Moving Averages (Verticality class):

Trading Bands (Volatility class):

Simple trading bands consists of lines which are drawn above and below data prices based on various conditions, such as a standard deviation. Adaptive  trading bands examples are  Bollinger Bands, Keltner Channels, Price Channel.
Envelopes define the upper and lower boundaries of a security’s normal trading range. A sell signal may be generated when the security reaches the upper band whereas a buy signal may be generated at the lower band. The optimum percentage shift depends on the volatility of the security–the more volatile, the larger the percentage.
The logic behind envelopes is that overzealous buyers and sellers push the price to the extremes (i.e., the upper and lower bands), at which point the prices may stabilize by moving to more realistic levels.  Projection Oscillator is  a slope adjusted stochastic, and an adaptation of Mel Widner’s Projection Bands.

Ease of Movement (Volume class):

A technical momentum indicator developed by volume guru Richard Arms (TRIN) that is used to illustrate the relationship between the rate of an asset’s price change and its volume, similar in readout to equivolume charts. This indicator attempts to identify the amount of volume required to move prices. Generally a value greater than zero is an indication that the stock  is being accumulated (bought) and negative values are used to signal increased selling pressure.  A high positive value appears when prices move upward on low volume. Strong negative numbers indicate that price is moving downward on low volume. Other examples of Volume class indicators are Chaikin Oscillator, Chaikin Money Flow, On Balance Volume, and Accumulation Distribution Index.