Day trading indicators include price oscillators, price patterns, support and resistance levels, moving averages, trend lines and channels, Elliot Wave Count, and Japanese candlesticks. These indicators work together to help traders determine market trends and make informed decisions.
There are a number of day trading indicators. All work in tandem to produce the best possible results for the trader. Common indicators include price oscillators, price patterns, support and resistance levels, and other analytical strategies.
Price Oscillators are arithmetic manipulations of price that are intended to help the trader determine whether the trend is strong, weak or about to change. They are called oscillators because their output oscillates between high and low. Often these indicators are “normalized”, meaning that they are rewritten to have values between 0 and 100.
Heads and shoulders, triangles, flags, pennants and wedges are day trading indicators of the price pattern. According to the theory, price patterns show how traders as a group perceive the market. Many of them carry estimates of the minimum price that will be reached.
Support and resistance levels are used to decide where to buy or sell. Support is a point or area where prices stop falling, which happens when enough buyers have entered the market to prevent sellers from pushing prices lower. Prices falling through support would be seen as a sell signal and a bounce off support would signal a buy. Resistance is the mirror image of support and occurs when rising prices are met with enough selling to end the upward movement. If prices move through resistance easily, that would be a signal to buy.
Moving averages and moving linear regression lines are common indicators of day trading. If prices above the moving average or moving linear regression line imply that the market is headed up, while prices below imply that it is headed down. Moving averages provide the baseline for a volatility assessment known as the Bollinger Bands, the price point that is two standard deviations above and below the moving average. Some traders use the Bollinger Bands as an indicator that the market has gone too far and may be ripe for a reversal, while others use them to indicate strength in the direction of travel.
Trend lines and channels are common day trading indicators. A trendline is the line drawn between two lows and extended upwards in a rising market. An ascending channel is created by copying the trend line to the next highest high. In a falling market, the line is drawn between two highs and extended downwards. A downtrend channel uses the downtrend line in a falling market.
More often than not, prices that break out of a rising channel show strength. Price breaking down of a declining channel implies that the end of the trend is probably very close. When prices break below the uptrend channel line, it is time to exit long positions, while prices rising above a downtrend channel line is a signal to exit short positions.
The Elliot Wave Count is a lesser known day trading indicator. The basic idea is that markets rise in series of three waves, but fall in series of two. A side idea is that the market will provide minor waves within major waves, and those minor waves will also proceed in a three waves up, two waves down pattern.
Japanese candlesticks are a day trading indicator that can be used in conjunction with all of the above techniques. The candlesticks are a method of drawing each price bar so that what has been happening inside that bar is easy to see. There is also a theory of how clusters of candles tend to predict short-term market movement.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
