I started technical analysis by studying a book by Dr. Alexander Elder entitled Come Into My Trading Room. It is a very good book for beginners, because it demystifies the stock market and explains in simple terms how to get started. However, traditional indicators such as those used by Dr. Elder are based on end-of-day data and do not combine price to volume; these are clearly not reliable enough to trade in the present environment. The indicators that I present here, though, will give you a trading advantage.

I developed a set of three new indicators that work on different time frames:

1. The Active Boundaries^TM: long term time frame.
   The goal of the Active Boundaries^TM indicator is to catch value. This indicator calculates the average Return on Investment (ROI) of the active traders. This average ROI moves between the Upper and the Lower boundaries, which can be interpreted similarly to the well known support and resistance lines:
   • The upper boundary offers a resistance line because at this point the average ROI of the active traders is high enough to trigger profit taking
   • The lower boundary offers a support line because at this point the average ROI of the active traders is low enough to trigger buying
   
   The Active Boundaries indicator gives us a three- to six-month picture of a trend, which is usually sufficient for a position trader. The Active Boundaries indicator helps us to understand if we are at a reversal point within a trend. To learn more, click here
2. The Divergence Analysis: medium term time frame.
   The Divergence Analysis will compare the trend of Effective Volume to the price trend. Since Effective Volume is the volume responsible for price changes, comparing both allows discovering "divergences" or specific behaviour that could impact the stock price. I use to say that Effective volume is to the stock price what the fuel is to the rocket altitude. The more fuel that a rocket burns within a certain period of time, the quicker it will rise. Measuring the rate of change of fuel consumption and comparing it to the change of rocket altitude could give you a good indication whether your rocket will soon be losing altitude. To find out more, click here
3. The Effective Volume^TM: the short-term time frame.
   The Effective Volume tool is a tactical tool that allows us to see what large players and trendsetters are doing To learn more, please visit chick here