7 Types of Technical Indicators Every Online Trader Must Know

Technical indicators are essential for all traders to understand the technical chart setups and trend in the market based on mathematical calculations of change in price over a period of time along with volume. Trading without technical indicators makes it difficult for the traders to analyze the charts especially for beginners. There are several types of technical indicators in trading, and this article will teach you about the seven types of technical indicators that will assist you in developing a winning strategy.

7 types of technical indicators in the market

1. Relative Strength Index (RSI)

The Relative Strength Index is easier to understand. It is a scale ranging from 0 to 100 that measures the velocity and size of the price movement in the market. Scale reading above 70 shows that a specific article is being overbought which means its price will fall. While a reading below 30 indicates that the article is oversold which increases its price.

2. Moving Average Convergence Divergence (MACD)

MACD is a technical trend indicator. It assists traders in assessing market conditions by displaying the difference between the MACD line and the Signal line. The MACD line is obtained by subtracting the 26-day exponential moving average from the 12-day exponential moving average. In addition, the Signal line is a 9-day exponential moving average. The histogram of these two lines becomes wider when they diverge and disappears when they intersect.

3. Average Directional Indicator (ADX)

The Average Directional indicator shows the strength of the current trend in the market. ADX indicator shows the fluctuation between 0 to 100. ADX above 50 shows a strong trend whereas that below 20 on the ADX scale shows a weak trend. It is one of the best technical indicators that assist traders to mark their position in the trading market.

4. Momentum indicator (Ichimoku Cloud)

It is a bit complex indicator. It determines the trend direction and also guides future support and resistance. This indicator is so precise and helpful that some traders rely on it completely and they do not need any other indicator.

It includes a red line (Kijun Sen), a blue line (Tenkan Sen), a green line (Chikau span) and a cloud. These lines indicate the lowest low and highest high at specific intervals. Cloud levels are used to determine the support and resistance in trading.

5. On Balance Volume Indicator (OBV)

This is also a trend indicator in the market. It aids in predicting future prices by displaying market movement based on previous price volume. It demonstrates the market's buying and selling tension.

6. Average True Range (ATR)

It is the most widely used technical indicator for measuring market volatility. Every trader must understand the market's condition and volatility. It allows traders to profit greatly while also protecting them from unexpected and sudden losses caused by volatility.

7. Bollinger Band Indicator

This is one of the best technical indicators to analyze the charts. It also displays market assets that are overbought or oversold. The upper Bollinger band indicates a stock that is currently overbought, while the lower Bollinger band indicates a product that is currently oversold.

These are the most popular and helpful technical indicators in stock market.

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