7 Technical Indicators to Improve Your Trading
Whether you’re day trading, following trends, or trading more long-term, you’re always looking for different methods and techniques to help improve your outcome. Technical indicators are some of those methods to utilize.
There are multiple varieties of technical indicators available for traders. Although your platform used for trading is an essential step to pay attention to (this list of top
forex ECN platforms is a useful starting point), that’s only the beginning.
We have a list of seven technical indicators to improve your trading.
Bollinger Bands
When trading, you’re often using the trend, volume, momentum and volatility to make your decisions. Using the
Bollinger Bands is a type of volatility indicator. It’s a technique that takes two trading bands and uses the moving average. The thickness of the band speaks about the market – a narrow band is a quiet market, while a wide band means a louder market.
Relative Strength Index (RSI)
The Relative Strength Index (RSI) is an indicator that is plotted on a separate scale. It’s used to measure the extent of a price change. Using this indicator helps determine if a stock is oversold or overbought and the stock’s price conditions.
On-Balance Volume (OBV)
If you want to measure the negative and positive flow of volume, you will use the on-balance volume (OBV) indicator. This indicator takes the total of the up volume minus the down volume. A higher OBV shows that buyers are pushing the price higher, while a falling OBV shows there is more selling, indicating lower prices.
Average Directional Index (ADX)
For a trend indicator, there is the option of the average directional index (ADX) indicator. When using this indicator, it’s a type of measurement of a particular trend’s strength and momentum. Using this indicator is another way to help determine the direction of the stock’s price.
Parabolic Stop and Reverse (SAR)
Next up is the parabolic stop and reverse (SAR) indicator, another type of trend indicator. You use this to help determine the price trend, and it’s direction of movement. When looking at a chart, the SAR indicator would be the darts above or below the price.
Stochastic
If you want to pinpoint the end of a price trend, you will use the stochastic indicator. This momentum indicator works similar to the RSI indicator, where it helps determine if a stock is oversold or overbought. Using this indicator can help you find an entry point before the upturn or downturn of a stock begins.
Moving Average Convergence Divergence (MACD)
A little more tricky but still an excellent technical indicator to use is the
moving average convergence divergence (MACD) indicator. It helps find the relationship between two moving averages of a stock’s price. It’s another way to determine the movement, strength, or weakness of a price.
The above seven technical indicators are worth taking the time to learn and understand. They can help up your trading skills to become more successful. Using them alongside a solid trading platform (consider using an
FBS broker), you can become a successful trader in no time.
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