Best stock market analysis tools are software programs that support you in technical stock analysis. You will find here information about free technical analysis software with buy sell signals, indicators, price action trading tips, tricks about how to identify candlestick patterns and learn more about successful long-term investing on the stock market.
Discover the best free stock market analysis tools that have helped thousands of traders to identify trade signals, put their trades on autopilot.
The On-Balance-Volume indicator (OBV)
The On-Balance-Volume is a technical analysis indicator used to measure the positive and negative flow of volume in a security over time. It is a momentum indicator which measures positive and negative volume flow.
This indicator was developed by Joseph Granville. According to him, when volume increases sharply without a significant change in the stock’s price then the price will eventually jump up and when volume decreases sharply without a significant change in the stock’s price then the price will eventually jump down.
Calculation:
There are three rules implemented when calculating on balance volume (OBV):
- If today’s closing price is higher than yesterday’s closing price
Current OBV = Previous OBV + today’s volume
- If today’s closing price is lower than yesterday’s closing price
Current OBV = Previous OBV – today’s volume
- If today’s closing price equals yesterday’s closing price
Current OBV = Previous OBV
Interpretation
According to Granville theory, a rising OBV reflects positive volume pressure which can lead to higher prices. Whereas falling OBV reflects negative volume pressure which can lead to lower prices. OBV will often move before prices. One can expect prices to move higher if OBV is rising while prices are either flat or moving down.Similarly one can expect prices to move lower if OBV is falling while prices are either flat or moving up.
From the above chart of ITC we can see that the prices were moving up although OBV was moving down. Eventually, the prices fell down.
The Accumulation/Distribution line (A/D line)
Accumulation and Distribution are among the most commonly used technical analysis indicators to determine the money flow in and out of security.
This indicator is developed by Marc Chaikin to measure the cumulative flow of money in and out of the security. This indicator was named earlier as the Cumulative Money Flow Line.
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This indicator attempts to gauge supply and demand by determining whether the investors are buying (accumulating) or selling (distribution) a particular stock.
Calculation:
The money flow indicator is calculated by :
(close – low) – (high – close)
This value is then divided by the high minus the low.
(close – low) – (high – close) / (high – low)
The final number is the money flow multiplier.
Interpretation:
This indicator helps to show how demand and supply factors are influencing the price. Accumulation/ Distribution can move in the same direction as price or may have an inverse slope.
If the security’s price is in a downtrend while accumulation/distribution line is in an uptrend then the indicators shows that there may be buying pressure and the prices may reverse. Similarly if a security’s price in an uptrend while accumulation/distribution line is in downtrend then the indicator shows that there may be selling pressure and the prices may reverse.
We can see from the above daily chart of ONGC that the prices were in uptrend whereas the accumulation / distribution line was sloping downwards which showed the selling pressure in ONGC and prices eventually reversed and the trend became bearish.
The Average Directional Index (ADX)
The Average Directional Index (ADX) is a trend indicator used to measure the strength and momentum of a trend. Trading in the direction of trend reduces risk and also increases profit potential.
The Average Directional Index (ADX) is used to assess when the price is trending strongly. ADX calculations are based on a moving average of price range expansion over a period of time. The default setting is 14 bars.
Trend Strength
The values are important for differentiating between trending and non- trending conditions. ADX readings above 25 suggest that the trend is strong enough for trend trading strategies. Similarly ADX below 25 suggests avoiding trend trading strategies.
| ADX Value | Trend Strength |
| 0-25 | Absent or Weak Trend |
| 25-50 | Strong Trend |
| 50-75 | Very Strong Trend |
| 75-100 | Extremely Strong Trend |
From the chart below of HCL Technologies, we can see that the stock is in downtrend and ADX is confirming that it is a strong downtrend.
Aroon
Aroon Indicator is a technical analysis indicator used to measure whether a security is in a trend. It is used to identify when trends are likely to change direction. This indicator measures the time it takes for the price to reach the highest or lowest points over a particular timeframe.
The indicator consists of the “Aaroon up” line and “Aroon down” line. The Aaron up line measures the strength of the uptrend whereas the “Aaron down” line measures the strength of the downtrend.
Calculation:
- Aroon Up – ((N – Days Since N-day High) / N) x 100
- Aroon Down – ((N – Days Since N-day Low) / N) x 100
The “N” indicates the number of periods used for the indicator. By default many traders uses the Aroon indicator over 14 periods.
Interpretation:
There are three stages for in order to identify up trend signal:
- Firstly the aroon lines will cross. The upward signal is when Aroon-Up moves above Aroon-Down. This shows that new highs are becoming more recent than new lows.
- Secondly the Aroon lines will cross above or below 50.
- Thirdly one of the lines will reach 100. Aroon up reaches 100 and Aroon down remains at low levels.
Reverse engineering these stages will give you the downward signal.
Moving Average Convergence Divergence (MACD) Indicator
The Moving Average Convergence Divergence (MACD) is a trend following indicator and momentum indicator which shows the relationship between two moving averages of a security’s price.
Calculation:
Step1. Calculate a 12 period exponential moving average of the close price.
Step2. Calculate a 26 period exponential moving average of the close price.
Step3. Subtract the 26 period moving average from the 12 period moving average. This is the fast MACD line.
Step4. Calculate a 9 period exponential moving average of the fast MACD line calculated above. This is the slow or signal MACD line.
Interpretation:
As shown on the following chart, when the MACD falls below the signal line, it is a bearish signal line and when the MACD rises above the signal line then the indicator gives a bullish signal.
Crossovers are more reliable when they confirm to current trend. If the MACD crosses above its signal line after a brief correction then it qualifies a bullish confirmation.
Conclusion
The Best Stock Trading Analysis software should be able to deliver this. Many people make use of the Stock Market Software today since they are searching for a way to make their stock trading more effective. You can rely on software to make your abilities better when dealing with stocks and other investments.