Presentation

These indicators are numerous but only a few of them are commonly referred to. They correspond to the graphical representation of mathematical calculations. The latter represents the prices evolution, not their absolute level. They are called oscillators, as they correspond to an estimate of market tensions and behave like a derivative function.

Divergences

The main analysis element of indicators, though often underestimated, lies in the divergences principle. This corresponds to a disconnection between the prices evolution and that of the indicator (cf. graph). One will thus consider a downward (upward) divergence when the oscillator is following a downward (upward) trend while prices are still rising (falling).

The RSI

This indicator (aka Relative Strength Index) aims at establishing a reference scale independently from the stock prices levels themselves. As the RSI has boundaries (0 and 100), it then becomes very easy to determine overbought and oversold areas. Thus, the RSI is one of the most commonly used counter-trend indicators.
It is based on the average of rises and drops of a stock, with the formula :

Stochastic Oscillator

The Stochastic Oscillator compares where a security's price closed relative to its trading range over the last x-time periods.
The formula for the %K parameter of the Stochastic is :