Not only are these technical analysis tools incredibly beneficial, but they have also become a standard part of investment strategies.
Let’s talk about what the 7 of the best stock indicators are and how you can use them now!
Moving Average (MA)
Let’s start off with the simplest and most popular trading indicator, the Moving Average.
The Moving Average commonly teaches the levels of support and resistance to security. It is also widely used along with other best stock indicators for an increased accuracy rate.
Its main role is to determine the direction of the current price trends your investments have been following. With the use of daily price points and a specified time frame, the Moving Average may also present possible future patterns.
The most common length for the Moving Average is 200 days. This length may be adjusted (shortened/lengthened) depending on a trader’s need. But it would affect the outcome’s accuracy.
This indicator was named the “Moving” Average due to its appearance on the candlestick chart. When plotted bar-by-bar, it forms a moving line as the investments’ values change over time.
Exponential Moving Average (EMA)
Out of the many Moving Average indicators in stock market, the Exponential Moving Average is the most effective.
This is because it places a greater weight on the recent price points. Which makes it more responsive and sensitive to changes. Doing so also allows it to alleviate the negative impact of lags on your investments.
And just like the Moving Average, the EMA may also be used along with the other best stock indicators. Doing so helps in confirmation and gauging legitimacy.
The most popular variants of the EMA are the 12, 26, 50, and 200-day EMAs. This indicator is widely flexible. It can be adjusted depending on whether you have short or long term investment plans.
We highly recommend the Exponential Moving Average for trending markets. Especially in uptrend ones. It produces buy and sell signals that come from the crossovers and divergences of the historical averages. Our Special EMA Cloud Indicator is a must have trading tool for all traders. Check it out HERE
Moving Average Convergence Divergence (MACD)
In this list of the top trading indicators, the Moving Average Convergence Divergence is the easiest yet most useful one.
As you may have guessed, it focuses on the formed convergences and divergences on the candlestick chart.
But what exactly does it do for you?
Generally, it reveals the trend directions and the momentum that the said trends are following. But, the MACD can also provide various trade signals.
When it comes to calculating the MACD, you’ll need to subtract the 26-day EMA from the 12-day EMA. In the candlestick chart, the MACD will provide two lines. These are the MACD line and the signal line.
Diving deeper, these signals are in accordance with the MACD line. If the MACD line is above the signal line, the price is following an upward phase. And oppositely, when below, the price is soon to plummet.
Our xBrat Roller Coaster uses the Stochastic/MACD Cross to give traders a great trading strategy, simply represented on the chart with entry, stop and trailing stop positions. Check it Out HERE.
Relative Strength Index (RSI)
The best indicator for long term investment is the Relative Strength Index.
This trading indicators software requires you to plot both the recent price gains and recent price losses over a certain period of days.
The RSI moves along 0 to 100. When it rises above 70, it indicates that the investment is overbought and is soon to plummet. On the other hand, when it drops below 30, it is indicating that the investment is oversold and can potentially skyrocket.
However, when the RSI moves in a different direction than the price of your security, it is an indication of the trend weakening and soon to reverse possibly.
And, the RSI may also help you in learning the support and resistance levels of an asset. This is observable when securities hold levels and reach them during trends.
Stochastic Oscillator
The main purpose of this indicator is to measure the current price in accordance with the price range over a selected period of time.
Just like the Relative Strength Index, the Stochastic Oscillator is also between 0 and 100. It follows two lines, the first line reflecting the value of the oscillator, and the second reflecting the 2-day Moving Average.
An intersection between both lines is an indication that a reversal is soon to follow in the market.
Continual highs will keep the Stochastic near 100, while continual lows will keep it near 0. This allows it to signal overbought and oversold levels as well. Values above 80 are overbought and those below 20 are oversold.
The Stochastic Oscillator tracks when the current market trends are up or down. When the market follows new upward trends, the security’s price should be following new highs, and vice versa.
Our Fasle Breakout Stochastic Indicator is a really helpfull tool, check it out HERE
Bollinger Bands
The name Bollinger Bands indicates the existence of multiple bands, which are the upper and lower band, and the middle band (Moving Average). These bands are the ones that act as the best stock indicators of your investment’s conditions.
This indicator reacts to an asset’s volatility by either making the width of its bands increase or decrease. This means that the closer the bands are or the narrower the space in between them, the less volatile your investment is. And the wider they become, the more volatile the asset is.
The Bollinger Bands stock indicators explained is basically providing a price range where security usually trades. Allowing you to choose a profitable yet realistic trading price for your assets.
This also allows you to quickly acknowledge when the security is trading outside its usual levels.
Bollinger bands also indicate overbought and oversold levels when the price moves above or below the band. Above means overbought, while below means oversold.
Fibonacci Retracement
So, which technical indicator is the most accurate?
Although it may depend on a trader’s needs and plans of investment, the Fibonacci Retracement is the most accurate of all due to its statistical alignment.
Each level comes with a percentage. And these percentages indicate how much the price has retraced. The following are the retracement levels in this indicator: 23.6%, 38.2%, 50% (preferential), 61.8%, and 78.6%.
The Fibonacci Retracement is every trader’s go-to indicator whenever they get the sign that the market is about to change trend directions. And that’s because this indicator pinpoints the degree to which the market will move.
It also identifies levels of support and resistance, indicating both upward and downward trends. This allows you to determine when to open and close trades.
