Key Trading Indicators Guide
Moving Averages (MA)
MA types: Simple (SMA), Exponential (EMA), Weighted (WMA)
Common Settings:
- Fast MA: 5-10 periods - Medium MA: 20-50 periods - Slow MA: 100-200 periods| Signal | Interpretation |
|---|---|
| Price crosses above MA | Bullish signal, potential uptrend start |
| Price crosses below MA | Bearish signal, potential downtrend start |
| Multiple MA crossover | Strong trend confirmation |
Average Directional Index (ADX)
Key Levels:
- Below 20: Weak trend - 20-40: Developing trend - Above 40: Strong trend| ADX Value | Trend Strength | Trading Strategy |
|---|---|---|
| 0-25 | Absent/Weak | Range trading strategies |
| 25-50 | Strong | Trend following strategies |
| 50-75 | Very Strong | Strong trend following |
| 75-100 | Extremely Strong | Caution - potential reversal |
Volume Indicators
| Volume Pattern | Price Action | Signal |
|---|---|---|
| Rising volume | Rising price | Strong uptrend confirmation |
| Rising volume | Falling price | Strong downtrend confirmation |
| Falling volume | Rising/Falling price | Trend weakness |
Stochastic Oscillator
Settings:
- Fast Stochastic: 5,3,3 - Slow Stochastic: 14,3,3 - Overbought: 80 - Oversold: 20| Signal | Formation | Reliability |
|---|---|---|
| Bullish | Crossover below 20 | High in range markets |
| Bearish | Crossover above 80 | High in range markets |
| Divergence | Price/Stochastic mismatch | Strong reversal signal |
Moving Averages (MA)
Types: Simple (SMA), Exponential (EMA), Weighted (WMA)
Common Settings
- Fast MA: 5-10 periods
- Medium MA: 20-50 periods
- Slow MA: 100-200 periods
| Signal | Interpretation |
|---|---|
| Price crosses above MA | Bullish signal, potential uptrend start |
| Price crosses below MA | Bearish signal, potential downtrend start |
| Multiple MA crossover | Strong trend confirmation |
Relative Strength Index (RSI)
Standard Settings
- Period: 14
- Overbought: 70
- Oversold: 30
| Level | Signal |
|---|---|
| Above 70 | Overbought - potential sell |
| Below 30 | Oversold - potential buy |
MACD (Moving Average Convergence Divergence)
Standard Settings
- Fast EMA: 12
- Slow EMA: 26
- Signal Line: 9
| Signal | Trading Action |
|---|---|
| MACD crosses above signal line | Bullish signal |
| MACD crosses below signal line | Bearish signal |
Stochastic Oscillator
Standard Settings
- %K Period: 14
- %D Period: 3
- Overbought: 80
- Oversold: 20
| Signal | Action |
|---|---|
| %K crosses above %D below 20 | Buy signal |
| %K crosses below %D above 80 | Sell signal |
Bollinger Bands
Standard Settings
- Period: 20
- Standard Deviation: 2
- Base: Simple Moving Average
| Pattern | Signal |
|---|---|
| Price touches lower band | Potential buy zone |
| Price touches upper band | Potential sell zone |
| Bands squeeze | Potential breakout incoming |
Average True Range (ATR)
Standard Settings
- Period: 14
- Used for: Volatility measurement
- Stop loss calculation: 2-3 × ATR
| Reading | Interpretation |
|---|---|
| High ATR | High volatility, wider stops needed |
| Low ATR | Low volatility, tighter stops possible |
Ichimoku Cloud
Components
- Tenkan-sen (9 periods)
- Kijun-sen (26 periods)
- Senkou Span A and B
- Chikou Span (26 periods)
| Signal | Interpretation |
|---|---|
| Price above cloud | Bullish trend |
| Price below cloud | Bearish trend |
| Cloud twist | Potential trend change |
On-Balance Volume (OBV)
Key Points
- No specific period setting
- Cumulative indicator
- Volume-based momentum tool
| Pattern | Signal |
|---|---|
| OBV rising with price | Strong uptrend confirmation |
| OBV falling with price | Strong downtrend confirmation |
| OBV divergence | Potential trend reversal |
Integrating Technical Indicators
Technical indicators serve as essential tools for market analysis, but their true power lies in complementary usage. No single indicator provides a complete market picture. Successful traders typically combine trend indicators (Moving Averages, MACD) with momentum indicators (RSI, Stochastic) and volume analysis (OBV, ATR) to validate trading decisions.
Key Implementation Points:
- Use multiple timeframe analysis to confirm signals
- Avoid indicator redundancy - combine different types
- Consider market context and current volatility
- Prioritize risk management over indicator signals
Remember that indicators are lagging by nature, based on historical data. They should support, not replace, fundamental analysis and sound trading principles. Start with mastering 2-3 indicators that align with your trading style before expanding your technical toolkit.