Introduction to Technical Indicators

Technical indicators are the basis of technical analysis. Technical indicators are used to show us when to enter or exit a trade. So, if you know when to enter and exit a trade, you can easily make profits. That is why choosing appropriate stock indicators are extremely important.

Some of stock indicators are more common and effective than others. So I try to introduce some top technical indicators.

Also most expert traders believe that you need a few of them to know when to enter or exit a trade not all off them. In other words they suggest that it is better to use a few technical indicators because decision process is more simple and effective.

There are dozens of technical indicators, how to choose top best stock indicators?

Technical indicators can be divided into four major categorizes:

1- Price Indicators, like Oscillators, Bollinger Bands
2- Trends Indicators
3- Number Theories Indicators, like Fibonacci numbers, Gann numbers
4- Waves Indicators, like Elliott’s wave theory

Oscillators and Bollinger Bands are two useful price indicators. Price Indicators are computed by prices data and tend to cycle or “oscillate” within a fixed or limited range.

Common oscillators are: Momentum and Rate of Change (ROC), Moving Average Convergence/Divergence (MACD), Relative Strength Index (RSI), and Stochastic Oscillator.

John Bollinger created Bollinger Bands in the 1960s; Bollinger Bands are used to determine support and resistance levels. This indicator consists of three lines; the middle line is an exponential moving average of price data and the two outside bands are equal to the moving average plus or minus standard deviation.

Fibonacci numbers, Gann numbers are two famous Number Theories indicators. R. N. Elliott developed his wave theory in 1934. It is a method for explaining stock market movements.

I introduced some top best technical indicators for stock trading in this post, but it is not complete.  I will update this page in future ….