Investing & Trading

Marker Indicator Study

By Samantha Baltodano


TL;DR:

The Marker Indicator is a technical analysis tool used to predict trend reversals by comparing changes in high and low prices. It uses an 8-day Simple Moving Average to calculate the percentage ratio of the higher average to the sum of both averages. 


A value below 30 is considered a signal for a bullish reversal, while a value above 70 suggests a bearish reversal. It can be used to make entry and exit decisions for trading positions.


What Is The Marker Indicator Study?

The Marker Indicator is a study used to predict trend reversals based on changes in high and low prices. It compares the current high price to its previous value and the previous low to its current value, finding the two differences. 


If the difference is negative, zero is taken instead. 


The next step is to apply an 8-day Simple Moving Average (SMA) to each difference. Finally, the indicator is calculated as the percentage ratio of the higher average to the sum of both averages.


Calculation

To calculate the Marker Indicator, follow these steps:


  1. Find the difference between the current high price and the previous high price. If the difference is negative, use zero instead.
  2. Find the difference between the previous low price and the current low price. If the difference is negative, use zero instead.
  3. Apply an 8 period SMA to each difference.
  4. Calculate the indicator as the percentage ratio of the higher average to the sum of both averages.


Trade Signals

The Marker Indicator is considered a signal for a bullish reversal when its value falls below 30. This indicates that the trend may be reversing and it may be a good time to enter a long position. 


Conversely, a bearish reversal may be expected if the indicator surpasses the 70 level. This suggests that the trend may be reversing and it may be a good time to enter a short position.


Example

For this example, let’s say we have a stock that has been in a downtrend for a while. The Marker Indicator shows values above 70, indicating that the bearish trend may be continuing.


However, the next day the Marker Indicator falls below 30, signaling a possible bullish reversal. This could be a good entry point for a long position. 


As the stock continues to rise, the Marker Indicator may reach values above 70 again, indicating a potential bearish reversal and a good exit point for the long position.


Summary

  • The Marker Indicator is a study used to predict trend reversals based on changes in high and low prices.
  • It compares the current high price to its previous value and the previous low to its current value, finding the two differences.
  • The indicator is calculated as the percentage ratio of the higher average to the sum of both averages after applying an 8-day SMA to each difference.
  • The Marker Indicator is a bullish signal when its value falls below 30 and a bearish signal when it surpasses the 70 level.
  • It can be used as an entry point for a long position when the Marker Indicator falls below 30 and an exit point for the long position when it reaches values above 70.


Marker Indicator is just one of many studies that Archaide automates. For a full list of strategies and studies available click here.


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