Top 5 Trading Chart Indicators
Trading charts is indeed a massive advantage to any trader, regardless of whether they trade stocks, bonds, or cryptocurrencies.
By using chart indicators, traders are able to reveal the technicalities embedded in the analysis of trading. Without chart indicators for proper analysis, most professional traders wouldn't engage in any trading activity.
What are chart indicators?
Trading indicators are mathematical calculations, which are plotted as lines on a price chart and can help traders identify certain signals and trends within the market. There are different types of trading indicators, including leading indicators and lagging indicators. A leading indicator is a forecast signal that predicts future price movements, while a lagging indicator looks at past trends and indicates momentum.
While the leading indicator tries to predict price in a shorter time frame by leading the price movement, the lagging indicator gives a signal after the trend has started. These indicators have been tested over time to generate the required predictions and signals required by traders to comprehend whatever kind of market they would like to trade and it works perfectly well.
In no particular order, we would like to review five of the most popular chart indicators.
Moving Average:
The MA or Simple moving average (SMA) is an indicator used to identify the direction of a current price trend, without the interference of shorter-term price spikes. The MA indicator combines price points of a financial instrument over a specified time frame and divides it by the number of data points to present a single trend line. The data used depends on the length of the MA. For example, a 200-day MA requires 200 days of data. Other strategic average-based charts are the Weighted Moving Average (WMA) and Exponential Moving Average (EMA).
Stochastic Oscillator:
The stochastic oscillator is an indicator that compares a specific closing price of an asset to a range of its prices over time, thereby showing momentum and trend strength. It uses a scale of 0 to 100. A reading below 20 generally represents an oversold market and a reading above 80 an overbought market. However, if a strong trend is present, a correction or rally will not necessarily ensue.
Moving average convergence divergence (MACD):
MACD is an indicator that detects changes in momentum by comparing two moving averages. It can help traders identify possible buy and sell opportunities around support and resistance levels. Where convergence means that two moving averages are coming together, while divergence means that they’re moving away from each other. If moving averages are converging, it means momentum is decreasing, whereas if the moving averages are diverging, momentum is increasing.
Bollinger Bands:
A Bollinger band is an indicator that provides a range within which the price of an asset typically trades. The width of the band increases and decreases to reflect recent volatility. The closer the bands are to each other or the ‘narrower’ they are, the lower the perceived volatility of the financial instrument. The wider the bands, the higher the perceived volatility. Bollinger bands are useful for recognizing when an asset is trading outside of its usual levels, and are used mostly as a method to predict long-term price movements. When a price continually moves outside the upper parameters of the band, it could be overbought, and when it moves below the lower band, it could be oversold.
Relative Strength Index:
RSI is mostly used to help traders identify momentum, market conditions, and warning signals for dangerous price movements. RSI is expressed as a figure between 0 and 100. An asset around the 70 levels is often considered overbought, while an asset at or near 30 is often considered oversold. An overbought signal suggests that short-term gains may be reaching a point of maturity and assets may be in for a price correction. In contrast, an oversold signal could mean that short-term declines are reaching maturity and assets may be in for a rally.
These chart indicators or trading tools as referred to by professionals are a wonder to behold as they tend to work wonders in the hands of the users who have taken their time to master the art of trading which requires continuous practice and diligence.
These tools are all available on the Klever Exchange as a result of the excellent partnership with the TradingView platform which enables our users to have access to quality tools at their fingertips for a profitable trading experience.
It is a no-brainer to use the Klever Exchange for trading.
James Enajite
Klever Writer
Follow me on Twitter
https://twitter.com/jenajite
Download Klever App
