Forming the base of the technical analysis, technical indicators are mathematical calculations used by traders to forecast and confirm short-term price trends of a security. Ignoring fundamental factors typically used to evaluate assets such as revenue and profit, technical indicators solely use historical trading data such as price and volume to determine the likely direction of an asset’s price.
Types of technical indicators
These measure the direction of a market trend—up trend, down trend and sideways trend.
These measure the speed of a trend and help to identify trend reversals. They are used only as warning signals—just like the reducing speed of a car may not end up in it stopping altogether, all reductions in market momentum don’t end up in a trend reversal.
These indicate how uncertain a market is. Volatility is usually measured in terms of standard deviation.
Volume or traded value plays an important role in generating trading signals. Break out of trend lines or crossing the moving average aquires greater signifi cance signifi cant when accompanied with high volume
Technical indicators are used by traders to gain insight into the supply and demand of securities and market psychology. Together, these indicators form the basis of technical analysis. Metrics, such as trading volume, provide clues as to whether a price move will continue. In this way, indicators can be used to generate buy and sell signals. In this list, you'll learn about seven technical indicators to add to your trading toolkit. You don't need to use all of them, rather pick a few that you find help in making better trading decisions.
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