In intraday trading we often get confused which indicator to use to get the right results. Today we will learn how many types of indicators are available and how to use them effectively.
1) Trend indicators
These technical indicators measure the direction and strength of a trend by comparing prices to an established baseline.
Moving Averages:
Used to identify trends and reversals, as well as to set up support and resistance levels.
Parabolic Stop and Reverse (Parabolic SAR):
Used to find potential reversals in the market price direction.
Moving Average Convergence Divergence (MACD):
Used to reveal changes in the strength, direction, momentum, and duration of a trend in a stock’s price.
2) Momentum indicators
These technical indicators may identify the speed of price movement by comparing the current closing price to previous closes.
Stochastic Oscillator:
Used to predict price turning points by comparing the closing price to its price range.
Commodity Channel Index (CCI):
An oscillator that helps identify price reversals, price extremes, and trend strength.
Relative Strength Index (RSI):
Measures recent trading strength, velocity of change in the trend, and magnitude of the move.
3) Volatility Indicators
These technical indicators measure the rate of price movement, regardless of direction.
Bollinger bands:
Measures the “highness” or “lowness” of price, relative to previous trades.
Average True Range:
Shows the degree of price volatility.
Standard Deviation:
Used to measure expected risk and to determine the significance of certain price movements.
4) Volume Indicators
These technical indicators measure the strength of a trend based on volume of shares traded.
Chaikin Oscillator:
Monitors the flow of money in and out of the market, which can help determine tops and bottoms.
On-Balance Volume (OBV):
Attempts to measure level of accumulation or distribution, by comparing volume to price.
Volume Rate of Change:
Highlights increases in volume. These normally happen mostly at market tops, bottoms, or breakouts.
Chart patterns are part of price action.
Combining price action with indicators can give you a higher success probability
A double bottom or inverse head and shoulder is a bullish pattern
if it formed when RSI >50 we get more confident that momentum on buying side is high now.
Similarly if you are shorting make sure RSI is less than 50 and combine it with any price action pattern like head and shoulders pattern for higher success.
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What are your top rules of Intraday trading
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