Indicators are technical analysis tools that help traders:
Determine the trend and its strength.
Identify flat (sideways) markets and price ranges.
Spot overbought and oversold zones.
Find entry and exit points.
Types of Indicators
By location on the chart:
On the price chart — Moving Averages, Bollinger Bands.
Below the chart — MACD, Stochastic Oscillator, etc.
By signal type:
Leading (predictive): give signals before the price moves.
Examples: Stochastic, RSI.
Lagging (confirming): confirm an already started movement.
Examples: MACD, Moving Averages.
Categories of Indicators
Trend Indicators (lagging)
Used in trending markets.
Show the direction and strength of a trend.
Help find entry and exit points.
Examples: MACD, ADX, Moving Averages.
Oscillators (leading)
Used in ranging markets.
Fluctuate between upper and lower boundaries.
Indicate overbought (ready to fall) or oversold (ready to rise) conditions.
Examples: RSI, Stochastic, CCI.
When to Use Them
Range-bound markets → use oscillators.
Trending markets → use trend indicators.
Combination:
It’s best to combine an oscillator + a trend indicator to filter false signals and adapt to different market phases.
Important to Remember
Don’t overload your chart. Using multiple similar oscillators doesn’t make a signal more reliable — it only duplicates information.
Indicators don’t predict the future — they help interpret the current state of the market.
Conclusion:
Proper use of indicators allows traders to better understand market conditions and make more informed trading decisions.