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Qstick Indicator
Description
The Qstick indicator was developed by Tushar Chande. Qstick provides
a way to quantify candlesticks. The distance between the open and
close prices lies at the heart of candlestick charting. For those
unfamiliar with candlestick charting, the body of a candlestick is
black if today’s close is less than the open; it is white if today’s
close is greater than the open. A majority of white candlesticks
over a specified range is considered bullish. Whereas a majority of
black candlesticks over a specified range is considered bearish.
The Qstick indicator is simply a moving average of the difference
between open and close prices.
For more information on the Qstick indicator, refer to the book
The New Technical Trader by Tushar Chande and Stanley Kroll.
Interpretation
Qstick values below zero indicate a majority of black
candlesticks (over the time periods specified) and therefore a
bearish bias for the security. Values above zero indicate a majority
of white candlesticks (over the time periods specified) and
therefore a bullish bias for the security.
There are several ways to trade the Qstick indicator:
- Crossovers: Buy when the indicator crosses above
zero. Sell when it crosses below zero.
Extreme Levels: Buy when the Qstick indicator is at an extremely
low level and turning up. Sell when the Qstick indicator is at
an extremely high level and turning down. You may even want to
plot a short-term moving average on the Qstick to serve as a
trigger line.
- Divergences: Buy when the Qstick is moving up and
prices are moving down. Sell when the Qstick is moving down and
prices are moving up. You may want to consider waiting for the
price to confirm the new direction before placing the trade.
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