Technical Indicator
A technical indicator is a mathematical calculation based on a security’s price, volume, or open interest that aims to forecast financial market direction. Technical indicators are used by traders to make decisions about when to buy and sell a security. Technical indicators are used by traders to identify trends, determine support and resistance levels, and time entries and exits in the market.
History of Technical Indicators
Technical indicators have been used by traders for centuries. The earliest known use of technical indicators dates back to the 18th century, when Japanese rice traders used candlestick charts to identify patterns in the price of rice. Since then, traders have developed a variety of technical indicators to help them make decisions about when to buy and sell securities. Technical indicators are used by traders in all markets, including stocks, commodities, currencies, and derivatives.
Comparison of Technical Indicators
| Indicator | Description |
|---|---|
| Moving Average | A moving average is a technical indicator that takes the average of a security’s price over a specified period of time. |
| Relative Strength Index (RSI) | The Relative Strength Index (RSI) is a momentum indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a security. |
| Bollinger Bands | Bollinger Bands are a technical indicator that consists of three lines. The middle line is a simple moving average, and the upper and lower lines are two standard deviations away from the middle line. |
| Stochastic Oscillator | The Stochastic Oscillator is a momentum indicator that measures the level of the closing price relative to the high and low of a specified period of time. |
Summary
Technical indicators are mathematical calculations based on a security’s price, volume, or open interest that aim to forecast financial market direction. Technical indicators have been used by traders for centuries, and are used by traders in all markets. Popular technical indicators include the Moving Average, Relative Strength Index (RSI), Bollinger Bands, and Stochastic Oscillator. For more information about technical indicators, visit Investopedia, The Balance, and Investing.com.
See Also
- Price Action
- Chart Patterns
- Momentum Indicators
- Volume Indicators
- Oscillators
- Support and Resistance
- Trendlines
- Fibonacci Retracements
- Price Channels
- Gaps
