Do you know how to use technical indicators in trading? If the answer is yes, that’s amazing. If the answer is no, don’t worry. In this blog, we will get an insight into how to trade on charts with the help of indicators and how to use these indicators effectively. However, first, let us know what technical indicators are.
Traders use technical indicators to get acuities into the supply and demand of securities and to understand the market psychology. You can use the tradingview chart to summarize the trading action for a specific period effectively and get an idea of when to enter or exit a trade.
Now that the base is clear, let’s dive into the world of trading indicators.
Trading on Charts Using Indicators
Using these eight technical indicators can help you significantly in making a well-planned decision. You can find these indicators on any share market app. Let us understand them one by one.
1. Moving Average
This indicator is used to determine the direction of the recent price trend, without any interference from short-term price spikes.
This indicator enables you to study and understand the support and resistance levels and check on the market’s history. Getting this data will help identify possible future trends.
2. Stochastic Oscillator
This indicator facilitates traders to compare a certain closing price of a security to a range of its price for a specific period. It means you can see momentum and trend strength on the tradingview chart using this indicator.
3. Bollinger Bands
This indicator shows the prices and volatility over a particular time of a financial instrument or commodity to identify the short-term price movements and potential entry and exit points. To reflect the recent volatility, the width of the band rises and drops accordingly.
The closer the bands, the lower the perceived volatility and the wider the bands, the more the perceived volatility.
4. Moving Average Convergence Divergence (MACD)
This indicator compares two moving averages to help traders see the trend direction and analyze the changes in the momentum of that trend.
With the help of MACD, traders get brief information about a range of trade signals. Moreover, they can identify lucrative buy and sell opportunities around support and resistance levels.
5. Relative Strength Index (RSI)
RSI is a figure that moves between 0 to 100. An asset near or below the 30 level is considered oversold and could rally. In contrast, the asset around or above 70 is categorized as overbought and could decline.
This indicator helps traders in identifying momentum, unprecedented market conditions, and price volatility.
6. Average Directional Index (ADX)
Using ADX, a trader can measure the strength and momentum of the trend.
The trend is considered weak when the ADX is below 20 (Downtrend). In contrast, when the ADX is above 40 (Uptrend), the trend is considered to have a lot of directional strength, which may vary depending on the direction of price movement.
7. On-Balance Volume
The on-Balance Volume (OBV) is a technical indicator of momentum that measures the volume and relates prices in the stock market over time.
On-Balance Volume is a perfect indicator for traders as it helps them determine where price action might be headed. This indicator produces clear signals facilitating traders looking to act on a trade.
8. Accumulation/Distribution Line
AD (Accumulation/Distribution) is a cumulative indicator, meaning one period value is subtracted from the last. It is primarily used to determine the cash flow in and out of a security and acts as one of the most powerful tools for tracking price movements.
We hope that this list of technical indicators helps you make a profitable trade on any share market app. By choosing the right indicators, you can do wonders with your trades and make better trading decisions with ease.