Indicators

d, Indicators are a fundamental tool of Technical Analysis. How? 

They work as a good guide and support us in making the right decisions at the right time, which is essential for a good trade.

There is no harm in using indicators, but we should limit the number of indicators to two or three, to see the chart clearly and analyse it with confidence.

The different types of indicators are:

Trend Indicators

Trend indicators are technical analysis tools used to identify and confirm the direction of a market trend — whether it’s an uptrend, downtrend, or sideways. These indicators help traders and long-term investors make informed decisions about entry, exit, and position sizing.

E.g.: Super Trend, Bollinger Band, Moving Averages, ADX, Parabolic SAR

Momentum Indicators

These are technical tools that help traders measure the speed and strength of a price movement. They convey how strong the move is, whether it’s gaining or losing momentum.

E.g.: MACD, RSI, ADX, Stochastic Oscillator, ROC, Momentum

Volatility Indicators

Volatility indicators help traders measure how stable or unstable a stock is. In swing trading, volatility is crucial for position sizing, setting stop-losses, and choosing high-probability trades.

E.g., Average True Range, Relative Volatility Index, Twiggs Volatility Indicator

Volume Indicators

Volume indicators help traders estimate the strength behind a price move — whether a breakout is supported by real interest (volume) or is likely to fail. Volume is often considered the “fuel” of the market, and volume indicators are essential for validating price action.

E.g.: Money Flow Index, VWAP, On Balance Volume, Relative Volume

The most commonly used and adaptable indicators to any trading strategy are MA, RSI, MACD, ATR,  and Volume chart.

MA – Moving Average

This indicator averages the price of a stock over some time and then displays it as a line. It helps us to understand the trend. We can find the average of prices in various periods, like 5, 20, 50, and 200. If a stock is above the 200-day Moving Average, then we consider the stock bullish.

fig 1 – Moving Average

RSI – Relative Strength Index

This indicator shows the relative strength of the stock. If the stock price is moving above RSI 50, then we consider it bullish and if it is below RSI 50, as bearish. Some consider an RSI above 70 as overbought and below 30 as oversold. 

fig 2 – RSI

MACD

MACD means Moving Average Convergence Divergence. It’s used to understand trends as well as trend reversals. It uses 12-day and 26-day EMAs (Exponential Moving Average) to generate trading signals. This indicator helps us identify trends, trend reversals, momentum, and entry levels.

fig 3 – MACD

ATR

ATR means Average True Range. It indicates the volatility of the stock and the average price range of the stock within a given period. This indicator also helps us identify the best stop loss.

fig 4 – ATR

Volume

Volume indicates the amount of traffic on a specific stock over some time. It helps indicate market sentiment and potential price movements, while also showing how many shares are bought and sold. Volume is directly proportional to the number of shares traded.

fig 5 – Volume

Fibonacci levels/ series

Another major tool that a trader/investor or any technical analyst would find useful is the Fibonacci levels/ series.

The Fibonacci series is a numerical series of numbers in which each number is the sum of the two preceding numbers. In the Fibonacci series, the golden ratio is 1.618, and the golden zone is between 50% and 61.8% of the Fibonacci retracement levels. From this zone, the price trend may continue or reverse.

fig 6- Fibonaci Levels

Although there are many indicators available, to get the best Trade, chart analysis or reading the chart properly is the main factor, and indicators should act only as a guide to make the right decisions at the right time.