Deviation rate (BIAS) is an indicator that measures how much stock price deviates from the moving average. It expresses the difference between the stock price and the average moving line in the form of a percentage. When the stock price deviates from the market average cost too much, there is a process of regression, that is, the so-called "things must be reversed."
BIAS indicator (deviation rate indicator) believes that if the stock price is too far away from the moving average, no matter if the stock price is above or below the moving average, it will not remain for too long, and there will be a reversal at any time. This phenomenon occurred, causing the stock price to trend toward the moving average again.
Causes of Deviation Rate
Because the moving average can represent the average holding cost, once the stock price plummets below the moving average, its deviation rate is negative. The farther the stock price deviates from the moving average, the greater the negative value of the deviation rate, which means that the overall loss of the current small retailer is more serious.
In the same way, when the stock price rises above the moving average, the stock price deviates far from the moving average. The larger the deviation rate, it indicates that most retail investors are profitable at this time, and the idea of losing money is also stronger, which will cause a huge blow to the stock price. Pressure can easily cause stock prices to fall. This is the reason for the trading basis provided by the deviation rate.
The BIAS calculation formula is as follows:
Deviation rate = (closing price of the day-moving average price within N days)/moving average price within N days 100%
5-day deviation rate = (closing price of the day-5 days moving average price) / 5 days moving average price 100%
The N days in the formula are determined according to the number of days of the selected moving average, generally set as 5,10.
It can be seen from the calculation formula that when the stock price is above the moving average line, it is called the positive deviation rate, otherwise it is called the negative deviation rate; when the stock price coincides with the moving average line, the deviation rate is zero. In the process of stock price fluctuations, the deviation rate repeatedly changes on both sides of zero, and the magnitude of the value has a certain predictive function for the analysis of future stock price trends. When the positive deviation rate exceeds a certain value, it shows that the long profit is greater in the short-term, and the possibility of profit taking is also high, showing a sell signal; when the negative deviation rate exceeds a certain value, it indicates that the possibility of short covering is greater. A buy signal is presented.
Bias rate (BIAS) trading skills:
BIAS indicator buy pattern
1. Three curves of BIAS indicator are oversold at the same time
Introduction to the form:
When the three curves of BIAS reach their respective oversold ranges, it indicates that the market is already in a severely oversold state, and investors can buy stocks at this time.
Buying point: the three curves of BIAS are separated from the overbought zone
The three BIAS curves generally enter the oversold range one after another. When the three BIAS curves enter the oversold range respectively, investors can buy stocks in batches.
2. BIAS6 breaks through the 0 axis
Introduction to the form:
Once BIAS6 breaks through 0, it shows that the market has become stronger in the short term, and many parties begin to take the initiative. When BIAS12 breaks through BIAS6, it indicates that the upward trend has formed, and investors can buy stocks at this time.
First buy point: BIAS6 breaks through 0 o'clock
When the BIAS6 indicator breaks through 0, it shows that the stock price breaks above the 6-day moving average. At this time, there are signs of long positions, and some positions can be established first.
Second buying point: BIAS12 breaks through BIAS6
If BIAS12 breaks through BIAS6 in the short term, the stock price's 6-day moving average and 12-day moving average 6 have formed a long arrangement, and investors can increase their positions to buy stocks.
3. BIAS12 gets support on the 0 axis
Introduction to the form:
If BIAS12 fell to the 0-axis to get support and rebound, indicating that the position of the 0-axis has formed effective support for BIAS12. In the future, if BIAS12 falls back to near the 0 axis again, investors can buy stocks.
Buying point: When BIAS12 falls to the 0 axis again in the future, it may gain support and rebound. This is the buying point.
Combination of BIAS and KDJ
The deviation rate indicator is very suitable for use in combination with two technical indicators, one is the stochastic indicator KDJ, and the other is the Bollinger Bands indicator BOLL.
1. BIAS indicators and KDJ stochastic indicators are suitable for combining with stochastic indicators in the technical rebound market. KD indicators and BIAS indicators can make the operations in the rebound market timely and accurate. In the rebounding market, the function of the BIAS indicator is to confirm whether the stock price is oversold, and the function of the KD indicator is to show whether a stock has turning upwards. The combination of the two helps investors accurately determine the best time to grab a rebound.
2. The combined application of BIAS indicator and BOLL indicator deviation rate indicator and Bollinger Band indicator is suitable for buying in the oversold rebound market: For this kind of rebound market, investors should not use chasing gains, but should combine technical analysis methods. Combination analysis of BIAS and Bollinger Bands indicators to grasp the timing of individual stocks entering and exiting.