Technical Indicators are a series of values that are derived from price and sometimes volume and then subsequently plotted on a price chart. When using price in the formula it can be either the opening, closing, high or low price. Even a combination of these prices can be found in some formulas.
Technical Indicators are used to either smoothen out price action and give a different perspective of price or for entry signals themselves. The Technical Indicator also quantifies the price/volume which then makes it possible to automate trading based on these fixed rules.
Technical Indicators, as the name applies, only looks at technicals. It does not factor in Fundamentals such as earnings or revenue. Chart Technicians believe that everything is already priced into the charts. Technical Indicators sort of predict where price might be based on historical price action however short they period may be.
Technical indicators are often used for very short term or short term trading because for the longer term investor they provide very little or no value. The exception to that though is if the long term investor wants to use a technical indicator to pick their entry/exit.
Technical Indicators are always lagging as they look at past price and use that data for the calculation of the indicator though indicators are all lagging they are actually divided up in 3 categories where one of them is called leading indicators. The other two are lagging indicators and confirming indicators.
In our next lesson we will look at the 3 different categories; Lagging, Leading and Confirming Technical Indicators
Technical Indicators, as the name applies, only looks at technicals. It does not factor in Fundamentals such as earnings or revenue. Chart Technicians believe that everything is already priced into the charts. Technical Indicators sort of predict where price might be based on historical price action however short they period may be.
Technical indicators are often used for very short term or short term trading because for the longer term investor they provide very little or no value. The exception to that though is if the long term investor wants to use a technical indicator to pick their entry/exit.
Technical Indicators are always lagging as they look at past price and use that data for the calculation of the indicator though indicators are all lagging they are actually divided up in 3 categories where one of them is called leading indicators. The other two are lagging indicators and confirming indicators.
In our next lesson we will look at the 3 different categories; Lagging, Leading and Confirming Technical Indicators