Stock Market trading heavily involves analyzing different charts and making decisions based on patterns and indicators. Regardless of whether a trader is a novice or an experienced, indicators play a pivotal role in market analysis. The stock market is quite dynamic, current affairs and concurrent events also heavily influence the market situation. The indicators provide useful information about market trends and help you maximize your returns. Read this article to know more about the types of indicators and the significance of each indicator.
A useful intraday tip is to keep track of the market trend by following intraday indicators. Basically, intraday indicators are overlays on charts that provide crucial information through mathematical calculations. As the name suggests, the indicators indicate where the price will go next. Here is some information provided by intraday indicators:
The particular indicators indicate the trend of the market or the direction in which the market is moving. Typically, the trend indicators are oscillators, they tend to move between high and low values.
Momentum indicators indicate the strength of the trend and also signal whether there is any likelihood of reversal. Relative Strength Index (RSI) is one momentum indicator, it is used for indicating the price top and bottom.
Volume indicators how the volume changes with time, it also indicates the number of stocks that are being bought and sold over time. When the price changes, volume indicates how strong the move is. On-Balance Volume is one of the volume indicators.
Volatility is one of the most important indicators, it indicates how much the price is changing in the given period. Volatility gives an indication of how the price is changing. High volatility indicates big price moves, lower volatility indicates high big moves.
Moving averages is a frequently used intraday trading indicators. It provides information about the momentum of the market, trends in the market, the reversal of trends, and the stop loss and stop-loss points. Moving average allows the traders to find out the trading opportunities in the direction of the current market trend.
Bollinger bands indicate the volatility in the market. Bollinger bands are of 3 types: a middle bang which is a 20-day simple moving average, a +2 standard deviation upper bang and a -2 lower deviation lower band. The price of a stock moves between the upper and the lower band. When the market is moving and the volatility is greater, the band widen and when the volatility is less the gap decreases. Bollinger bands help traders to understand the price range of a particular stock.
Relative Strength Index (RSI) is a momentum indicator. It is a single line ranging from 0 to 100 which indicates when the stock is overbought or oversold in the market. If the reading is above 70, it indicates an overbought market and if the reading is below 30, it is an oversold market. RSI is also used to estimate the trend of the market, if RSI is above 50, the market is an uptrend and if the RSI is below 50, the market is a downtrend.
Commodity Channel Index identifies new trends in the market. It has values of 0, +100, and -100. If the value is positive, it indicates uptrend, if the CCI is negative, it indicates that the market is in the downtrend. CCI is coupled with RSI to obtain information about overbought and oversold stocks.
The stochastic oscillator is one of the momentum indicators. The oscillator compares the closing price of a stock to a range of prices over a period of time. The momentum of the stock b=changes before the price, hence, momentum is a useful indicator.