V.13:11 (470-472): The Accumulative Swing Index by Bruce R. Faber

V.13:11 (470-472): The Accumulative Swing Index by Bruce R. Faber
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The Accumulative Swing Index by Bruce R. Faber

Here's an indicator developed by J. Welles Wilder that determines the true direction of the market by comparing today's trading range with yesterday's activity.

Each day a market has an opening, high, low and closing price. Most technicians focus on the change of the closing price for their indicators because that is the final tally for today's trading activity. But J. Welles Wilder postulated that the market trend could be better identified by comparing the relationships between each day's opening, high, low and closing price, and this trend then should be represented by a line that denotes an evaluation of the comparisons. The line would have to flow from day to day, similar to the closing price, but it would be a better representation of the market trend and it could lend itself to analysis by other methods.

Wilder referred to this line as the accumulation swing index . It is a comparison of each day's action within the day and with that of the previous day's. The original method was designed for futures markets, but the technique can be modified for stocks. Wilder also used notation counting the number of days from left to right. If today were Tuesday, for example, then Monday's close would be C1 and Tuesday's close would be C2.

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