trader-hand-skill

name trader-hand-skill version 1.0.0 description Expert knowledge for autonomous market intelligence and trading — technical analysis, risk management, Alpaca API, financial data sources author OpenFang tags ["trading","finance","stocks","crypto","technical-analysis","risk-management"] tools ["shell_exec","file_read","file_write","web_fetch","web_search","memory_store"] runtime prompt_only Trading Expert Knowledge Reference Knowledge 1. Technical Analysis Indicators Reference RSI (Relative Strength Index) Formula: RSI = 100 - (100 / (1 + RS)) Where: RS = Average Gain / Average Loss over N periods (default N = 14) Step-by-step calculation: 1. For each period, compute change = Close(t) - Close(t-1) 2. Gains = max(change, 0), Losses = abs(min(change, 0)) 3. First average: simple mean of first 14 gains/losses 4. Subsequent: AvgGain = (PrevAvgGain * 13 + CurrentGain) / 14 (Wilder smoothing) 5. RS = AvgGain / AvgLoss 6. RSI = 100 - (100 / (1 + RS)) Worked example (14-period): Avg Gain over 14 periods = 1.02 Avg Loss over 14 periods = 0.68 RS = 1.02 / 0.68 = 1.50 RSI = 100 - (100 / (1 + 1.50)) = 100 - 40 = 60.0 Interpretation: RSI < 30: Oversold territory (potential buy signal) RSI > 70: Overbought territory (potential sell signal) RSI = 50: Neutral — price momentum balanced Advanced RSI Signals: Signal Description Strength Bearish divergence Price makes new high, RSI makes lower high Strong reversal warning Bullish divergence Price makes new low, RSI makes higher low Strong reversal warning Bullish failure swing RSI drops below 30, bounces, pulls back above 30, breaks prior RSI high Very strong buy Bearish failure swing RSI rises above 70, drops, bounces below 70, breaks prior RSI low Very strong sell Range shift RSI oscillates 40-80 in uptrend, 20-60 in downtrend Trend confirmation Best practices: Never use RSI as a sole signal. Combine with trend direction (moving averages) and volume. In strong trends, RSI can stay overbought/oversold for extended periods. MACD (Moving Average Convergence Divergence) MACD Line = EMA(12) - EMA(26) Signal Line = EMA(9) of MACD Line Histogram = MACD Line - Signal Line EMA formula: EMA(t) = Price(t) * k + EMA(t-1) * (1 - k) Where: k = 2 / (N + 1) For EMA(12): k = 2/13 = 0.1538 For EMA(26): k = 2/27 = 0.0741 Worked example: EMA(12) = 155.20 EMA(26) = 152.80 MACD Line = 155.20 - 152.80 = 2.40 Previous Signal Line = 1.80 Signal Line = 2.40 * (2/10) + 1.80 * (8/10) = 0.48 + 1.44 = 1.92 Histogram = 2.40 - 1.92 = 0.48 (positive = bullish momentum increasing) Interpretation: Signal Condition Strength Bullish crossover MACD crosses above Signal Line Moderate buy Bearish crossover MACD crosses below Signal Line Moderate sell Zero-line bullish cross MACD crosses above zero Trend change to bullish Zero-line bearish cross MACD crosses below zero Trend change to bearish Histogram expansion Bars growing taller Momentum accelerating Histogram contraction Bars shrinking Momentum weakening, reversal may come Bullish divergence Price new low, MACD higher low Strong reversal signal Bearish divergence Price new high, MACD lower high Strong reversal signal Bollinger Bands Middle Band = SMA(20) Upper Band = SMA(20) + 2 * StdDev(20) Lower Band = SMA(20) - 2 * StdDev(20) Bandwidth = (Upper - Lower) / Middle %B = (Price - Lower) / (Upper - Lower) Worked example: SMA(20) = 150.00 StdDev(20) = 3.50 Upper = 150.00 + 2 * 3.50 = 157.00 Lower = 150.00 - 2 * 3.50 = 143.00 Bandwidth = (157.00 - 143.00) / 150.00 = 0.0933 (9.33%) Current price = 155.00 %B = (155.00 - 143.00) / (157.00 - 143.00) = 12/14 = 0.857 Interpretation: Price is 85.7% of the way from lower to upper band — near upper band Key Bollinger Band Signals: Signal Condition Meaning Squeeze Bandwidth at 6-month low Volatility contraction, big move imminent Squeeze breakout up Price breaks above upper band after squeeze Strong bullish breakout Squeeze breakout down Price breaks below lower band after squeeze Strong bearish breakout Walking the upper band Price hugs upper band with middle band rising Strong uptrend — do NOT short Walking the lower band Price hugs lower band with middle band falling Strong downtrend — do NOT buy Mean reversion touch Price touches outer band, %B reverses Potential reversion to middle band W-bottom Price hits lower band twice, second low has higher %B Bullish reversal pattern M-top Price hits upper band twice, second high has lower %B Bearish reversal pattern VWAP (Volume Weighted Average Price) VWAP = Cumulative(Typical Price * Volume) / Cumulative(Volume) Typical Price = (High + Low + Close) / 3 Worked example (first 3 bars of the day): Bar 1: TP = (101+99+100)/3 = 100.00, Vol = 10,000 -> cumTP*V = 1,000,000 Bar 2: TP = (102+100+101)/3 = 101.00, Vol = 15,000 -> cumTP*V = 2,515,000 Bar 3: TP = (103+101+102)/3 = 102.00, Vol = 8,000 -> cumTP*V = 3,331,000 Cumulative Volume = 33,000 VWAP = 3,331,000 / 33,000 = 100.94 Usage: Institutional benchmark : If price > VWAP, buyers dominate; price < VWAP, sellers dominate Intraday S/R : VWAP acts as dynamic support in uptrends, resistance in downtrends Entry filter : Buy only when price pulls back to VWAP (not chasing extended moves) Standard deviations : VWAP +1/-1 and +2/-2 StdDev bands serve as profit targets Resets daily : Do NOT carry VWAP across sessions — it is an intraday metric Moving Averages SMA(N) = (Close_1 + Close_2 + ... + Close_N) / N EMA(N) = Close * (2/(N+1)) + PrevEMA * (1 - 2/(N+1)) Key Moving Averages: EMA(9) — very short-term trend (scalping, day trading) EMA(20) — short-term trend EMA(50) — medium-term trend SMA(100) — intermediate trend SMA(200) — long-term trend (institutional benchmark) Critical Cross Signals: Cross Name Meaning Reliability 50 MA > 200 MA Golden Cross Bullish trend reversal High (lag ~2 weeks) 50 MA < 200 MA Death Cross Bearish trend reversal High (lag ~2 weeks) 9 EMA > 21 EMA Fast bullish cross Short-term momentum shift Moderate Price > 200 SMA Above long-term trend Bullish regime Very High Price < 200 SMA Below long-term trend Bearish regime Very High Moving Average Ribbon (20/50/100/200 MAs all fanning out): Indicates a very strong trend. When all are stacked in order (20 > 50 > 100 > 200 for uptrend), the trend is highly reliable. ATR (Average True Range) True Range = max(High - Low, |High - PrevClose|, |Low - PrevClose|) ATR(14) = Simple or Wilder Moving Average of True Range over 14 periods Worked example: Today: High = 105, Low = 101, PrevClose = 102 TR = max(105-101, |105-102|, |101-102|) = max(4, 3, 1) = 4 If ATR(14) was 3.50 yesterday: ATR(14) = (3.50 * 13 + 4) / 14 = (45.50 + 4) / 14 = 3.536 Practical Applications: Use Case Formula Example Stop-loss placement Entry - 2 * ATR Entry $100, ATR $2.50 -> Stop at $95.00 Take-profit target Entry + 3 * ATR Entry $100, ATR $2.50 -> Target $107.50 Position sizing Risk$ / ATR $200 risk / $2.50 ATR = 80 shares Volatility filter ATR > threshold Only trade when ATR > daily average (avoid dead markets) Trailing stop Highest close - 3 * ATR Locks in profit as price rises Volume Analysis OBV (On-Balance Volume): If Close > PrevClose: OBV = PrevOBV + Volume If Close < PrevClose: OBV = PrevOBV - Volume If Close = PrevClose: OBV = PrevOBV Volume Rate of Change: VROC = (Volume - Volume_N_ago) / Volume_N_ago * 100 Volume Confirmation Rules: Price Action Volume Interpretation Price up Volume up Strong bullish — legitimate move Price up Volume down Weak rally — likely to reverse Price down Volume up Strong bearish — capitulation or breakdown Price down Volume down Weak decline — may be nearing bottom Breakout Volume > 150% of 20-day avg Confirmed breakout — take the trade Breakout Volume < average Failed breakout likely — wait or fade Volume climax Extreme volume spike (3x+ average) Potential exhaustion/reversal point Support & Resistance Fibonacci Retracement Levels: After a move from Low (L) to High (H): 23.6% level = H - (H - L) * 0.236 38.2% level = H - (H - L) * 0.382 50.0% level = H - (H - L) * 0.500 61.8% level = H - (H - L) * 0.618 (Golden Ratio — strongest level) 78.6% level = H - (H - L) * 0.786 Worked example (move from $80 to $120): Range = $40 23.6% = 120 - 40 * 0.236 = 120 - 9.44 = $110.56 38.2% = 120 - 40 * 0.382 = 120 - 15.28 = $104.72 50.0% = 120 - 40 * 0.500 = 120 - 20.00 = $100.00 61.8% = 120 - 40 * 0.618 = 120 - 24.72 = $95.28 (most likely bounce) 78.6% = 120 - 40 * 0.786 = 120 - 31.44 = $88.56 Pivot Points (Standard): PP = (High + Low + Close) / 3 S1 = 2 * PP - High S2 = PP - (High - Low) R1 = 2 * PP - Low R2 = PP + (High - Low) Worked example (prev day: High=155, Low=148, Close=152): PP = (155 + 148 + 152) / 3 = 151.67 S1 = 2 * 151.67 - 155 = 148.33 S2 = 151.67 - (155 - 148) = 144.67 R1 = 2 * 151.67 - 148 = 155.33 R2 = 151.67 + (155 - 148) = 158.67 2. Candlestick Patterns Single-Candle Patterns Pattern Signal Body Wicks Context Required Doji Indecision Open = Close (or nearly) Long both sides At S/R level = reversal Hammer Bullish reversal Small, at top of candle Lower wick > 2x body Must appear at bottom of downtrend Inverted Hammer Bullish reversal Small, at bottom of candle Upper wick > 2x body At bottom of downtrend, needs confirmation Shooting Star Bearish reversal Small, at bottom of candle Upper wick > 2x body Must appear at top of uptrend Hanging Man Bearish reversal Small, at top of candle Lower wick > 2x body At top of uptrend (same shape as Hammer) Marubozu (Bullish) Strong continuation Full green body, no wicks None Strong buying pressure Marubozu (Bearish) Strong continuation Full red body, no wicks None Strong selling pressure Spinning Top Indecision Small body centered Equal wicks both sides Trend may be losing steam Dragonfly Doji Bullish reversal Open = Close = High Long lower wick only At support = strong reversal signal Gravestone Doji Bearish reversal Open = Close = Low Long upper wick only At resistance = strong reversal signal Multi-Candle Patterns Pattern Signal Description Reliability Bullish Engulfing Reversal up Large green candle fully engulfs prior red candle High at support Bearish Engulfing Reversal down Large red candle fully engulfs prior green candle High at resistance Morning Star Bullish reversal Red candle, small body/doji with gap, large green candle Very High Evening Star Bearish reversal Green candle, small body/doji with gap, large red candle Very High Three White Soldiers Strong bullish Three consecutive large green candles, each closing higher Very High Three Black Crows Strong bearish Three consecutive large red candles, each closing lower Very High Bullish Harami Potential reversal Large red, then small green contained within red's body Moderate (needs confirmation) Bearish Harami Potential reversal Large green, then small red contained within green's body Moderate (needs confirmation) Tweezer Bottom Bullish reversal Two candles with matching lows at support High Tweezer Top Bearish reversal Two candles with matching highs at resistance High Piercing Line Bullish reversal Red candle, then green opens below red's low and closes above 50% of red's body Moderate-High Dark Cloud Cover Bearish reversal Green candle, then red opens above green's high and closes below 50% of green's body Moderate-High 3. 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