Pattern based signals provided by price, volume and open interest of a security or an asset that trades on markets.
Common Technical Indicators
- Relative Strength Index (RSI)
- Money Flow Index (MFI)
- Stochastics
- Moving average convergence divergence (MACD)
- Bollinger Bands
People also use support and resistance trendlines to draw conclusions regarding entry and exit points.
When used in charting, this comes under the umbrella of technical analysis.
Asset Classes
Indicators are used on any asset that has historical data.
Some examples are:
The indicators work better the more data that is available. Another factor is how heavily traded the asset is.
Types of Indicators
Indicators can fit into two categories:
- Overlays: use the same scale and are plotted over the top of the prices on a stock chart. Examples include moving averages and Bollinger Bands.
- Oscillators: indicators that oscillate between a local minimum and maximum are plotted above or below a price chart. Examples include the stochastic oscillator, MACD, or RSI.
Automated trading systems implement different indicators into them.