[LanZhu] - Bias With Divergence

26 thg 10, 2021

Description

Bias is also known as deviation rate which is a technical index derived from the moving average principle. Its function is to measure the deviation degree between the stock price and the moving average line in the process of fluctuation.

Usage

Generally,

Moving averages of period 6,12,24 and 72 are used in the calculation. Of course, it is adjustable and result in different sensitivity of the deviation rate.

When the stock price is above the moving average, it is positive.
When the stock price is below the moving average, it is negative.
When the stock price is consistent with the moving average, it is zero.

Example,

1. During weak market, we may take when 6-day deviation rate cross both 5 and -5 level to indicate possible overbought and oversold respectively. Reversal or rebound might happen.
2. During strong market, we may take when 6-day deviation rate cross both 8 and -8 level to indicate possible overbought and oversold respectively. Reversal or rebound might happen.
3. When all the bias lines are moving upward and across 0 line, a strong bullish trend might formed and Vice Versa for strong bearish trend
4. Divergence also added to find possible bull or bear reversal on the default bias period which is configurable.