Technical Indicators: Barchart.com Education (2024)

FAQs

What technical indicator is the most reliable? ›

1. Moving Average Indicator (MA) The moving average indicator is one of the most popular technical indicators and it's used to identify a price trend in the market. For example, if the short-term MA crosses over the long-term MA, this is an indication that there might be an upward trend coming up in the future.

Some technical indicators generate signals as stand-alone, while others supplement each other. As elements of technical analysis, they are used to evaluate a security's strength or weakness by focusing on trading signals, patterns or price movements, and other analytical charting tools.

Technical indicators are heuristic or mathematical calculations based on the price, volume, or open interest of a security or contract used by traders who follow technical analysis. Technical analysts or chartists look for technical indicators in historical asset price data to judge entry and exit points for trades.

The best indicators for intraday trading include Bollinger Bands, Relative Strength Index (RSI), Exponential Moving Average (EMA), Moving Average Convergence Divergence (MACD), and Volume. These indicators help traders identify trends, measure momentum, and gauge market volatility.

ATR vs Bollinger Bands

Both ATR and Bollinger Bands are used to view a market's current and past volatility, but the two indicators work in different ways. ATR is essentially a moving average of the market's true range, while Bollinger Bands plot lines two standard deviations from a price MA.

What indicator tells you when to buy and sell? ›

Stochastics are a favored technical indicator because they are easy to understand and have a relatively high degree of accuracy. It falls into the class of technical indicators known as oscillators. The indicator provides buy and sell signals for traders to enter or exit positions based on momentum.

The consensus is that about five trading indicators should be the right balance between enough information to make informed decisions and not too much so that you suffer from information overload, aka paralysis by analysis.

The stochastic indicator establishes a range with values indexed between 0 and 100. A reading of 80+ points to a security being overbought, and is a sell signal. Readings 20 or lower are considered oversold and indicate a buy.

By tracking the degree of volatility of an asset, volatility indicators help traders to determine when an underlying asset's price is about to become more sporadic or less sporadic. Other popular volatility indicators, other than the ATR, include Bollinger Bands and Keltner Channels.