Market indicators
Market indicators do not analyze individual securities, but several values (index) of a market segment or the overall market.
To use a market indicator sensibly, open an index whose index composition is stored as a chart and display the market indicator for this index. The compositions of the most important indices such as DAX or EURO STOXX 50 are of course maintained for you by Market Data Pool. You can check the composition using the PAPER, INDEX COMPOSITION command in the context menu of an index. However, you can also maintain your own indices and their composition. Read the chapter Calculate your own indices. You can also display market indicators for individual shares, but these are then interpreted as indices with only one element and the informative value is correspondingly low.
In contrast to other indicators, you can insert market indicators in the open chart window using the "Insert new time series" icon.
For example, the number of rising shares is compared with the number of falling shares on a trading day, or the volume (turnover) of rising shares is compared with the volume of falling shares. These comparisons are primarily used to analyze the overall market, i.e. the share indices. The aim is either to examine the "breadth" of an ongoing trend movement or to identify the "exaggerations" of the stock market.
Interpretation
A "broad" trend is when the majority of shares follow the index direction. In this case, it can be assumed that the movement is quite well-founded, as it is based on many individual titles. If, on the other hand, only a few stocks follow the index direction, these are the highly capitalized stocks that make up the trend. In this case, the movement lacks foundation, i.e. the overall market is more susceptible to a trend reversal.
An "exaggeration" of the stock market is indicated when the majority of shares rise or fall over a longer period of time. There is an extreme preponderance of buyers and sellers here. This excess weight may well persist for a few weeks, but will not be permanent. In this phase, the stock market is out of balance and a countermovement should be imminent.
For more detailed interpretations and background information on the indicators, please refer to our recommended reading.