Technical Analysis Indicators
The purpose technical analysis indicators, is to offer a different perspective from which to analyze price action. They filter price action using mathematical formulas.
Technical indicators can be used to:
- Confirm other technical signals, such as a stock breakout.
- On the other side of the coin, they can be used to raise a "red flag" that the breakout was a false one. This is known as a negative divergence.
- They also spot price extremes; either to overbought and the price is getting ready to fall, or oversold and the price is getting ready to rise.
Although it may be obvious when technical chart indicators generate sell and buy signals, the signals should be taken into context with other technical analysis tools.
And as always in technical analysis, learning how to read technical analysis indicators is more of an art than a science.
When choosing a stock chart indicator, choose carefully and moderately. It is best to focus on two or three chart indicators and learn their intricacies inside and out. The key is to choose indicators that compliment each other, instead of those that move in unison and generate the same signals.
For example, it would be redundant to use two indicators that are good for showing overbought and oversold levels.
There are hundreds of indicators to use, however the stock chart indicators that are consistently the most efficient, are those that have been around the longest time and that have stood the test of time.
For further in-depth information, this resource from Online Traders Academy, contains critical information to help you learn to use stock technical analysis in a clear, simple and concise manner to improve your stock trading success.
These indicators will be discussed in detail for you:
Recommended Technical Analysis Tools and Resources
Recommended Technical Stock Trading Software
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