In technical analysis, an indicator is a tool that collects and processes price data and then displays this information on or below a price chart to help make trading decisions. Their basic function is to “indicate” the market sentiment, or whether an asset is overbought or oversold.

Indicators ultimately provide a clearer picture of what is happening in the markets and help to discern the likely future price action.

There are a large variety of indicatorsIndicators In technical analysis, an indicator is a tool th... More and different ones have different functions. The choice as to which indicators are used is ultimately down to the traderWhat is a trader? A trader is a person who buys and sells... More and the systems being traded.

- Advertisement -

Read an introduction to indicators:

Click on the bar below to see a list of indicators:

List of indicators

Leading indicators

A leading indicator provides a signal before a certain event or price actionWhat is price action in trading? Price action describes the ... More occurs.

It is able to provide signals ahead of time because it measures the rate at which the priceWhat are value stocks? A value company is a company that app... More change is happening. If the momentum of the priceWhat is price? The price is the measure of the value of good... More change is measured and it can be deduced that the rate of price change is perhaps slowing, then the indication is that a change in price direction may occur.

Most leading indicators come in the form of oscillators. An oscillator indicates whether an asset is overbought (showing a likelihood that the price will reverse to the downside), or oversold (showing a likelihood that the price will reverse to the upside) when the price is ranging.

Lagging indicators

A lagging indicator is used to confirm the price action. For example, if a trader is looking at a price chartWhat is a price chart in trading? A price chart is a graph... More, a lagging indicator will be able to confirm the trendWhat is a market trend in trading? A market trend is the ten... More direction and how strong it is. Lagging indicators will also help confirm a reversalWhat is a trend reversal? A trend reversal is when the mark... More in price direction.

Lagging indicators usually come in the form of trending indicators.

Learn more about technical analysisWhat are the principles of technical analysis? Technical ana... More: