This article is from the Glossary of Technical Analysis Terms.
The Alpha-Beta Trend Channel study uses the standard deviation of price variation to establish two trend lines, one above and one below the moving average of a price field. This creates a channel (band) where the great majority of price field values.will occur.
Developed by Richard W. Arms, Jr., this analysis routine expands on Mr. Arms' Equivolume charting tool by quantifying the shape aspects of the plotted boxes. The purpose of this quantifying is to determine the ease, or lack thereof, with which a particular issue is able to move in one direction or another. The ease with which an issue moves is a product of a ratio between the height (trading range) and width (volume) of the plotted box. In general, a higher ratio results from a wider box and indicates difficulty of movement. A lower ratio results from a narrower box and indicates easier movement. This ratio is then related to a comparison between today's and yesterday's trading-range midpoint values to determine the ease of movement value (EMV). A moving average is then applied to the EMV value - the moving average period can be varied in order to make the EMV flexible as a trading tool.
True range is the greatest of the following differences:
The range is normally the "high - low". However, any time the value of yesterday's close is not within the range of today's bar, rule b) or rule c) applies. As with most other indicators, the periodic value is summed and smoothed to create the final indicator.