📊 Major Technical Analysis Indicators

Technical analysis indicators help traders identify trends and generate trading signals through crossovers and divergences.

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🛈 What is a Technical Analysis Indicator?

A Technical Analysis (TA) Indicator is a tool that uses historical price and volume data to help traders identify the current market trend and predict future price movements.

• Technical indicators can show trend direction, market momentum, and measure volatility

• Technical indicators may help traders in their decision-making

• Oscillators are indicators that move within a fixed range, and most of them range between 0 and 100.

 

Here is some key information about MACD, RSI, and other widely used technical indicators.

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(1) MACD (Moving Average Convergence Divergence)

□ Type: Momentum Oscillator & Trade Signal Tool

□ Asset Classes: All

□ Chart: M30 and higher

MACD is one of the most widely used tools for analyzing different financial assets (Forex, Stocks, Indices, Commodities, Cryptocurrencies, etc.). It is a trend-following momentum oscillator that converts two moving averages into a single indicator by subtracting the longer moving average from the shorter one.

👉 Tips for trading with MACD:

(i) Use the standard settings (12,26,9)

(ii) Divergences between the price chart and the MACD histogram can signal possible price reversals

(iii) Signals are more reliable on higher timeframes (H1 and above)

🧮 Breakdown of the MACD Formula:

• 12-period EMA: 12-period Exponential Moving Average of closing prices.

• 26-period EMA: 26-period Exponential Moving Average of closing prices.

• MACD Line: 12-period EMA – 26-period EMA

• Signal Line: 9-period EMA of the MACD line.

• MACD Histogram: MACD Line – Signal Line

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(2) RSI (Relative Strength Index)

□ Type: Momentum Oscillator

□ Asset Classes: All

□ Chart: H4 and D1

The Relative Strength Index (RSI) is a momentum oscillator that measures the strength of a price trend. Like MACD, it can be used in all major financial markets (Forex, Equities, Commodities, Cryptocurrencies, etc.). RSI values range from 0 to 100.

• If RSI is above 70, the asset is considered overbought (80 is more reliable).
• If RSI is below 30, the asset is considered oversold (20 is more reliable).

👉 Tips for trading with RSI:

(i) Use RSI(21) instead of the standard 14-period setting

(ii) Divergences between price and RSI can signal strong reversals

(iii) For identifying reversals or continuation, use RSI(21) on H4 and D1 charts

(iv) For short-term overbought/oversold levels, use RSI(21) on the 5-minute chart

(v) For better trade timing, wait for RSI(21) to turn after reaching an overbought/oversold level (20/80)

🧮 Formula:

RSI(t) ​= 100 − {(1+RS(t))/​100​}

Where, RS(t)​ = Avg Gain(t​)​ / Avg Loss(t​)

Avg Gain(t​) = {(Avg Gain(t)−1​⋅(n−1))+Gain(t)​​}/n

Avg Loss(t) = {(Avg Loss(t)−1​⋅(n−1))+Loss(t​)​}/n

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RSI Precision

RSI Precision is an alternative to the classic Relative Strength Index (RSI). The indicator aims to enhance the classic RSI and make it more accurate on longer timeframes. Additionally, the 3rd version of the indicator (v3) works as an advanced signaling machine, offering five categories of leading trading signals: RSI, MACD, StochRSI, SMA, and Golden/Death Crosses.

■ Trading Signals: RSI cross | MACD signal line cross | StochRSI cross | SMA cross | Golden/Death cross

🔗 More about RSI Precision 3: » RSI Precision v.3 (Multisignal Indicator)

🔗 Add RSI Precision on TradingView: » https://www.tradingview.com/script/cTEWnHdU-RSI-PRECISION-v-3

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(3) Simple & Exponential Moving Averages (SMAs & EMAs)

□ Type: Identifying Trend & Trade Signals (Crossovers)

□ Asset Classes: All

□ Chart: All timeframes

Moving averages help define the main trend and can also signal reversals. A simple moving average (SMA) is the average price of an asset over a set period. An exponential moving average (EMA) gives more weight to recent prices.

👉 Tips for trading with MAs:

(i) For reversal signals, watch crossovers between price and EMA(50), EMA(100), EMA(200)

(ii) You can use Fibonacci numbers as moving average periods (8, 13, 21, 34, 55, 89, 144, 233)

(iii) Moving averages alone are not enough for forecasting. Combine them with other technical tools

🧮 Simple Moving Average (SMA) Formula

SMA(n) = { P1 + P2 + ..P(n) } / n​​

Where:

P​ = price

n = number of periods

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(4) Bollinger Bands (BB)

□ Type: Measuring Volatility & Trend Strength

□ Asset Classes: All

Created by John Bollinger, Bollinger Bands consist of three bands that show how price moves within a range. When price reaches the upper band, it signals strength. When it reaches the lower band, it signals weakness.

🧮 Calculating the Three Bands:

a. Upper band = 20-day moving average + 2 standard deviations

b. Lower band = 20-day moving average – 2 standard deviations

c. Middle band = 20-day moving average

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(5) Stochastic Oscillator

□ Type: Momentum Oscillator

□ Asset Classes: All

The Stochastic Oscillator measures momentum and shows overbought and oversold conditions. It compares the closing price to the high-low range over a set number of periods.

🧮 Formula:

%K = 100 × ((C – L14) / (H14 – L14))

Where:

%K: the current market price

C: the most recent closing price

L14: the lowest price over 14 trading days

H14: the highest price over 14 trading days

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(6) ADX (Average Directional Index)

□ Type: Trend Strength Indicator

□ Asset Classes: All

The Average Directional Index (ADX) measures the strength of a price trend. High readings indicate a strong trend, while low readings suggest a weak or changing trend. ADX ranges from 1 to 100, with a standard setting of 14 periods.

• If ADX is above 30, it signals a strong trend.
• If ADX is below 20, it suggests a potential trend change.

🧮 Formula:

DX = ( | +DI - -DI | / | +DI + -DI | ) * 100

Where:

+DM (Positive Directional Movement) = Current High – Previous High

-DM (Negative Directional Movement) = Previous Low – Current Low

If both +DM and -DM are positive, then only the larger value matters, and the smaller one is set to 0.

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(7) Williams %R

□ Type: Momentum Indicator

□ Asset Classes: All

Williams %R measures overbought and oversold conditions by comparing the current price to the highest high and lowest low over a set period.

🧮 Formula:

Williams %R = { ( Highest High – Close ) / ( Highest High – Lowest Low ) } × ( –100 )

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(8) Accumulation/Distribution

□ Type: Volume-Based Indicator {Stocks & Indices}

□ Asset Classes: Equities

Accumulation/Distribution evaluates supply and demand by showing whether investors are buying (accumulation) or selling (distribution).

🧮 Formula:

Accumulation/Distribution = { ( Close – Low) – ( High – Close ) } / { ( High – Low ) × Volume }

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(9) Volume-Weighted Average Price (VWAP)

□ Type: Volume-Based Indicator {Stocks & Indices}

□ Asset Classes: Equities

The Volume-Weighted Average Price (VWAP) is calculated by dividing the total value of all trades during the day by the total trading volume. It shows the average price weighted by volume.

🧮 Breakdown of the Formula:

VWAP = ∑ ( Price × Volume ) / ∑Volume

Where:

∑ ( Price × Volume ) : the sum of the product of price and volume for each trade

∑Volume: the total volume traded over the period

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(10) OBV (On-Balance Volume)

□ Type: Volume-Based Indicator {Stocks & Indices}

□ Asset Classes: Equities

On-Balance Volume (OBV) tracks cumulative volume to show buying and selling pressure. The OBV line rises when volume is added on up days and falls when volume is subtracted on down days.

🧮 Calculations:

• If today’s close is higher than yesterday’s close: OBV = Previous OBV + Today’s Volume

• If today’s close is lower than yesterday’s close: OBV = Previous OBV – Today’s Volume

• If today’s close is equal to yesterday’s close: OBV = Previous OBV

 

■ Major Technical Analysis Indicators

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