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Section 8: Overlays

Indicators are typically plotted above or below price data, sharing the time axis but measured independently from the price level on the other axis. Overlays are the application of indicators directly on top of price data to help identify trends, reversals and divergences more easily. They come in several forms.


Some overlays are actually indicators that are best plotted on top of price since they are measured in price and time similarly to the price data chart. Examples include the following.

Moving Averages

Moving averages are used to approximate trend direction and magnitude (slope). They are typically plotted as overlays and can be used to build crossover systems and volatility envelopes.

Fibonacci Ratios

Fibonacci retracements of prior moves and projections of possible price objectives are also a common price overlay.

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