FAQ: Technical Indicators

A technical indicator is a mathematical calculation based on market data, usually:

• price
• volume
• time

The result is displayed on the chart as:

• lines
• oscillators
• bands
• histograms
• channels or levels

Indicators help traders analyze:

• trend direction
• momentum
• volatility
• market strength
• possible support and resistance zones.

Indicators are often categorized this way:

Lagging indicators

Confirm trends that already exist.

Examples:

• Moving Averages
• MACD

Leading indicators

Attempt to anticipate turning points or market exhaustion.

Examples:

• RSI
• Stochastic Oscillator

Leading indicators react faster but tend to produce more false signals.

Indicators are best grouped by their purpose:

Trend indicators

Help identify the direction of the market.

Examples:

• Moving Averages
• Supertrend
• Ichimoku
• ADX

Momentum oscillators

Measure the strength and speed of price movement.

Examples:

• RSI
• Stochastic
• CCI
• MACD

Volatility indicators

Measure how actively the price moves.

Examples:

• Bollinger Bands
• ATR
• Keltner Channels

Volume indicators

Measure market participation and buying/selling pressure.

Examples:

• Volume
• OBV
• MFI
• VWAP

Support and resistance indicators Highlight important price zones.

Examples:

• Pivot Points
• Donchian Channels
• Fibonacci tools.

Some indicators are drawn directly on the price chart.

Examples:

• Moving Average
• Bollinger Bands
• VWAP
• Supertrend

These are called overlay indicators.

Other indicators appear in a separate panel below the chart.

Examples:

• RSI
• MACD
• Volume

Results vary due to:

• timeframe differences (M5 vs H1 vs D1)
• parameter settings
• data source (Close, HL2, OHLC4)
• market conditions (trend vs range)
• interpretation rules.

Indicators themselves are neutral tools — how they are used determines the outcome.

A repainting indicator changes historical signals when new price data appears.

This can make signals look perfect on past charts but unreliable in real-time.

Best practice:

Evaluate indicator signals only after the candle closes.

Typical workflow:

1. Open the Indicators menu.
2. Search by name or category.
3. Select the indicator.
4. It will appear either on the chart or in a separate panel.

Open the indicator settings panel, usually through a gear icon or menu.

Common parameters include:

• Length / Period — number of candles used in calculations
• Source — price data used (Close, HL2, etc.)
• Style — colors and visibility
• Levels — reference values like RSI 30 / 70.

The period determines how many candles are included in the calculation.

Shorter period:

• faster signals
• more noise

Longer period:

• smoother signals
• slower reaction.

Common defaults:

• RSI: 14
• ATR: 14
• Bollinger Bands: 20
• Moving averages: 20, 50, 200.

Indicators can use different price inputs:

• Close
• Open
• HL2 (High + Low / 2)
• OHLC4 (Open + High + Low + Close / 4)

Most indicators use Close by default.

Usually 2–4 indicators are enough:

Typical combination:

• one trend indicator
• one momentum oscillator
• one volatility indicator
• optionally a volume indicator.

Using too many indicators often creates conflicting signals.

Moving averages smooth price data and help identify trends.

Common uses:

• identifying trend direction
• finding dynamic support or resistance
• filtering trades in the trend direction.

SMA (Simple Moving Average)

Each candle has equal weight.

EMA (Exponential Moving Average)

Recent candles have greater influence.

EMA reacts faster to price changes.

Typical interpretation:

• fast MA crossing above slow MA → bullish momentum
• fast MA crossing below slow MA → bearish momentum.

However, crossovers often lag behind price.

The 200 MA is widely used as a long-term trend reference.

General interpretation:

• price above 200 MA → bullish environment
• price below 200 MA → bearish environment.

ADX measures trend strength, not direction.

• low ADX → weak or ranging market
• high ADX → strong trend.

Direction is usually interpreted with price or +DI / −DI lines.

Ichimoku is a multi-component system that shows:

• trend direction
• support and resistance
• momentum
• future cloud projection.

Basic idea:

• price above the cloud → bullish bias
• price below the cloud → bearish bias.

Parabolic SAR plots dots above or below price.

Uses:

• trailing stop guidance
• trend direction visualization.

Weakness: many false signals in sideways markets.

Supertrend is a volatility-based trend indicator often built using ATR.

It provides:

• trend direction
• dynamic stop levels.

Works best in trending markets.

RSI measures the speed and magnitude of price movements.

The scale ranges from 0 to 100.

Common interpretation:

• above 70 → overbought
• below 30 → oversold.

Not necessarily.

In strong trends, RSI can remain overbought or oversold for long periods.

Better interpretation:

• in trends → look for pullbacks
• in ranges → look for reversals.

Divergence occurs when:

• price makes a new high
• RSI does not confirm it.

This may indicate weakening momentum.

However, divergence alone does not guarantee reversal.

Stochastic compares the closing price with the recent price range.

Typical zones:

• above 80 → overbought
• below 20 → oversold.

Works well in range markets.

MACD measures the difference between two exponential moving averages.

It helps identify:

• momentum changes
• trend shifts
• acceleration or slowing movement.

The MACD histogram shows momentum strength.

They are alternative momentum oscillators.

CCI measures deviation from average price.

Williams %R is similar to Stochastic but inverted.

Most traders prefer using one main oscillator rather than several.

Bollinger Bands consist of:

• a moving average
• an upper band
• a lower band.

The bands expand and contract depending on volatility.

Key ideas:

• narrow bands → low volatility
• expanding bands → increasing volatility.

Not necessarily.

Price can “ride the band” during strong trends.

More useful signals come from:

• volatility contraction
• breakouts after squeezes.

Donchian Channels plot the highest high and lowest low over a period.

They are often used in breakout strategies.

ATR (Average True Range) measures volatility.

It shows how much price typically moves during a period.

ATR is often used for:

• stop placement
• volatility filtering.

Volume shows market participation.

Price movement supported by high volume is often considered stronger.

It displays the number of trades or ticks within each candle.

Traders often watch for:

• unusually high volume
• volume spikes near key levels.

On-Balance Volume accumulates volume based on price direction.

It helps detect accumulation or distribution trends.

VWAP (Volume Weighted Average Price) represents the average price weighted by volume.

It is commonly used as:

• a reference price
• an intraday support or resistance level.

Pivot Points are calculated price levels used to estimate potential support and resistance.

They are widely used in intraday trading.

Fibonacci retracement levels highlight potential pullback zones in trends.

They are most useful when combined with:

• support/resistance
• trend analysis
• price structure.

Useful tools include:

• Moving Averages
• Supertrend
• Ichimoku
• ADX.

Good choices include:

• RSI
• MACD
• Stochastic.

Common indicators:

• Bollinger Bands
• ATR
• Keltner Channels.

Useful indicators:

• Volume
• VWAP
• OBV
• MFI.

Too many signals create confusion.

Focus on a small set that complement each other.

Changing indicator settings to perfectly fit past data often leads to poor future performance.

Indicators should be used together with:

• support and resistance
• price structure
• market context.

Many indicators change during candle formation.

Signals are usually more reliable after candle close.