Technical analysis relies on studying historical data of prices and trading volumes to predict future market movements. Here are some basic indicators that are commonly used in technical analysis:
1. Moving Averages:
- Simple Moving Average (SMA): Measures the average price for a specified period of time.
- Exponential Moving Average (EMA): Gives more weight to recent prices, making it more responsive to rapid changes.
2. Relative Strength Index (RSI):
- Measures the strength of trends by comparing highs and lows. If the reading is above 70, the stock is considered to be in the "overbought" zone, and if it is below 30, it is in the "oversold" zone.
3. Bollinger Bands Indicator:
- It consists of three lines: a moving average in the middle and two bands around it. It is used to measure market volatility. When prices approach the outer limits, the market is considered to be in a state of high volatility.
4. MACD Indicator:
- The difference between the exponential moving averages (EMA) of different periods is used to determine the market trend. When the MACD line crosses the signal line, it may indicate a change in trend.
5. Volume:
- It is used to confirm trends. For example, if prices are rising and trading volume is high, this indicates the strength of the uptrend.
6. Fibonacci Retracement:
- It relies on Fibonacci ratios to identify potential support and resistance levels during price bounces.
7. Stochastic Oscillator:
- The closing price is compared to the price range for a given period to determine "overbought" or "oversold" conditions.
These indicators are often used together to analyze markets more comprehensively, identify trends and anticipate potential entry and exit points.