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What Are Stock Chart Indicators?

Trading indicators are technical analysis tools that take price action and/or volume data, apply a mathematical formula, and transform it into visual information displayed on your charts.

The indicators can provide valuable information on the strength and direction of the trend, momentum, or volatility.

What Is the Importance of Indicators?

A trader's job is to interpret this information so that we can make the best possible decisions. That is why technical indicators are tools that will give you an idea of where the price of a financial asset may be heading. At the end of the day, this is exactly what we want and need to know as traders in order to be able to read the market properly so we can make money with the movements that occur in the market.

Different Types of Technical Analysis Indicators

There are thousands of different indicators available free or for purchase online, so we will group them according to their intended use, i.e. by the variables they measure. These indicators are organized into four groups: trend, momentum, volatility, and volume indicators.

It should be noted that beyond the classifications, the important thing is to understand how they work, since many of them may belong to several categories at the same time.

Trend Indicators

Trend indicators help to tell us determine which direction the market is moving. Some will show the shorter trend, while others the longer trend or even can indicate when the market is moving sideways.

In this group, we can include indicators like Moving Averages, Parabolic SAR, Ichimoku Cloud, and ADX.

Momentum Indicators

Momentum indicators give us information on how strong the trend is and can also indicate whether a change in the trend is likely to occur.

Some momentum indicators are the RSI or the Stochastic and the MACD.

Volatility Indicators

Volatility indicators help to analyze changes in market prices over a specific period of time.

The higher the volatility, the faster prices change. Conversely, the lower the volatility, the slower the change.

Some examples are the ATR, Keltner Channel, and Bollinger Bands.

Volume Indicators

Volume indicators provide us with information on the trading volume in a given market.

Basically, they tell us how much buying and selling of contracts, shares, or lots is taking place in that particular market.

Volume is very important because when the price moves, volume can give us clues as to how strong or weak that particular move is. For example, a bullish move with high volume is more likely to continue than one accompanied by low volume.

Volume indicators are the Volume Profile, On balance volume and the classic volume showing buys and sells.

It is almost impossible to know and apply all of the available indicators out there, however, it is advisable to select those that provide useful information according to your trading and master them in-depth to make the most of each trade you take!


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