Master 80+ indicators from RSI and MACD to advanced tools. Learn which indicators work, how to combine them, and common mistakes to avoid.
Technical indicators are mathematical calculations based on historical price, volume, or open interest data. They help identify patterns, trends, momentum, and potential trading opportunities.
Think of indicators as tools that translate raw price data into actionable insights. Instead of staring at candlestick charts trying to spot patterns, indicators do the math for you and signal when specific conditions are met.
Indicators fall into 5 main categories. Use one from each category for a balanced strategy:
Identify market direction (uptrend, downtrend, sideways)
Popular Trend Indicators:
Measure speed and strength of price movements
Popular Momentum Indicators:
Measure price fluctuation intensity and risk
Popular Volatility Indicators:
Analyze trading volume to confirm price moves
Popular Volume Indicators:
Identify key price levels and potential reversals
Popular S/R Indicators:
What It Does:
Measures momentum on 0-100 scale. Shows overbought (>70) and oversold (<30) conditions.
Best Settings:
RSI(14) is standard. Use RSI(7) for faster signals, RSI(21) for smoother.
How to Use:
What They Do:
Average price over time period. SMA = simple average, EMA = weighted toward recent prices.
Best Settings:
EMA(20), EMA(50), SMA(200). Golden Cross = EMA(50) > SMA(200).
How to Use:
What It Does:
Shows relationship between two EMAs (12, 26). Has signal line (9 EMA) and histogram.
Best Settings:
MACD(12,26,9) is standard. Don't change unless testing thoroughly.
How to Use:
What It Does:
Three lines: middle (SMA), upper and lower bands (2 standard deviations). Shows volatility.
Best Settings:
BB(20,2) standard. Bands expand in volatility, contract in calm periods.
How to Use:
What It Does:
Compares closing price to price range over period. Scale 0-100. Two lines: %K and %D.
Best Settings:
Stochastic(14,3,3) or (5,3,3) for faster signals.
How to Use:
Other Top Indicators (6-10):
| Strategy Type | Recommended Indicators | Why |
|---|---|---|
| Trend Following | Moving Averages, MACD, Supertrend | Identify and ride strong trends |
| Mean Reversion | RSI, Stochastic, Bollinger Bands | Find overbought/oversold extremes |
| Breakout Trading | Bollinger Bands, ATR, Volume | Detect volatility expansion |
| Scalping | EMA, VWAP, ATR | Fast signals, institutional levels |
| Swing Trading | RSI, MACD, Moving Averages | Multi-day trend and momentum |
Don't use multiple indicators from the same category. Combine trend + momentum + volatility for comprehensive analysis. Example: EMA (trend) + RSI (momentum) + ATR (volatility).
Begin with 1-2 indicators. Only add more if it clearly improves results. Most successful traders use 2-3 indicators maximum.
Shorter timeframes need faster indicators (RSI 7, EMA 9). Longer timeframes use slower settings (RSI 14, SMA 200). Don't use daily settings on 5-minute charts.
Indicators:
Entry Rule:
Buy when: RSI < 30 AND price > EMA(20) AND EMA(20) > EMA(50)
Why it works: RSI finds oversold conditions while MAs confirm trend. Only buys dips in uptrends.
Indicators:
Entry Rule:
Buy when: Price touches lower BB AND MACD crosses above signal line
Why it works: BB identifies extreme prices, MACD confirms momentum shift. Double confirmation reduces false signals.
Indicators:
Entry Rule:
Buy when: Supertrend flips green AND RSI > 50 AND volume > 20-day average
Why it works: Supertrend identifies trend change, RSI confirms bullish momentum, volume validates the move. Triple confirmation for high-probability trades.
More isn't better. Using 10+ indicators causes analysis paralysis and conflicting signals. Stick to 2-5 complementary indicators. If you can't explain why each indicator is essential, remove it.
RSI + Stochastic + CCI all measure momentum - they'll give same signals. Choose one momentum indicator, not three. Same goes for using SMA(20), EMA(20), and DEMA(20) together - they're redundant.
Tweaking RSI from 14 to 13 to 15 daily is curve-fitting. Standard settings (RSI 14, MACD 12-26-9, BB 20-2) exist for a reason - they're tested across decades. Only change if you have statistical evidence it improves your specific strategy.
Oscillators (RSI, Stochastic) work in ranging markets but fail in strong trends - they'll show "overbought" during entire uptrends. Trend indicators (MAs) work in trending markets but whipsaw sideways. Know which indicators match current conditions.
Technical indicators are mathematical calculations based on price, volume, or open interest data. They help traders identify trends, momentum, volatility, and potential entry/exit points. Examples include RSI, MACD, Moving Averages, and Bollinger Bands.
There is no single "best" indicator. The most effective approach is combining 2-3 indicators from different categories: one for trend (like Moving Averages), one for momentum (like RSI), and optionally one for volatility (like Bollinger Bands). Popular combinations include RSI + Moving Averages, MACD + RSI, or Bollinger Bands + RSI.
Use 2-5 indicators maximum. More indicators create conflicting signals and analysis paralysis. Choose indicators from different categories that complement each other. For example: EMA (trend) + RSI (momentum) + ATR (volatility) is a good three-indicator combination.
RSI (Relative Strength Index) measures momentum on a scale of 0-100. RSI above 70 indicates overbought conditions (potential reversal down), while RSI below 30 indicates oversold conditions (potential reversal up). RSI 14-period is the standard setting. Use RSI divergence for stronger signals.
MACD (Moving Average Convergence Divergence) shows the relationship between two moving averages (12-period and 26-period EMAs). When the MACD line crosses above the signal line, it generates a bullish signal. When it crosses below, it generates a bearish signal. The histogram shows the strength of the trend.
Both. Leading indicators (RSI, Stochastic) predict potential reversals but have more false signals. Lagging indicators (Moving Averages, MACD) confirm trends but react slower. Use one leading + one lagging for balance: leading spots opportunities, lagging confirms them.
No. Indicators are tools, not crystal balls. They show probabilities, not certainties. Even the best indicator combinations produce losing trades. Success comes from combining indicators with proper risk management, position sizing, and disciplined execution. Always backtest before trading live.
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