What are technical Indicators?
Indicators, such as moving averages and Bollinger Bands®, are mathematically-based technical analysis tools that traders and investors use to analyze the
past and predict future price trends and patterns.
The goal in using indicators
is to identify trading opportunities. For example, a moving average crossover often predicts a trend change.In this instance, applying
the moving average indicator to a price chart allows traders to identify areas
where the trend may change.
A growing number of technical indicators are available for traders to study, including those in
the public domain, such as a moving average or the stochastic oscillator, as well as commercially available proprietary indicators.
In addition, many traders develop their own unique indicators, sometimes with the assistance of a qualified programmer.
Most indicators have
user-defined variables that allow traders to adapt key inputs such as the
"look back period" (how much historical data will be used to form the
calculations) to suit their needs.
There are different types of indicators including trend, Volume, volatility and momentum indicators.
Where fundamentalists may
track economic reports and annual reports, technical traders rely on indicators to help interpret the
market.
