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Technical Analysis Indicators

Technical Analysis Indicators

I have already written a lot about different aspects of technical analysis. Still, I would like to come back to this one of the most popular topics among traders and discuss other types of analysis traders are relying upon.

When it comes to the making a trading decision whether to buy or sell something many traders are relying on results from the various technical studies. When it comes to technical analysis, all indicators could be divided into two big categories: a) the indicators that are calculated from the price, volume, advance/decline and other quotes, and b) the indicators that you draw on the charts by yourself based on what you see on the charts.

The fist category of indicators (that are derived from the calculations based on the quotes) is quite wide and by itself could be divided into various categories such as price studies, volume, studies, advance / decline or Breadth studies, volatility studies, and etc. One of the most important elements of the majority of these studies is moving averages. The moving averages are widely used and many technical indicators are based on the moving averages (MACD, Percentage Volume Oscillator, and etc). The other studies are using moving average to smooth fluctuation and volatility of choppy lines and filter frequent signals.

The second category is more visual and does not involve a lot of calculation but rather visual analysis of the price, volume and other indicators patterns. One of the basic and most used drawing tools in technical analysis is trend lines. Trend lines are often used to mark trends and patters, price movement channels, monitor, price break out from the patters. The other elements of drawings are based on the series of vertical and horizontal lines, fans, arks, and etc. The big attention in charts analytical drawing is given to the row of Fibonacci drawings. Fibonacci lines, arks and fans are quite popular in technical analysis and many traders are using them in Elliot Wave technical analysis and other types of analysis to highlight important price levels a time periods when price trend is predisposed to change its direction.

It is difficult to compare these two categories of indicators as each of them serves the different purpose. While second category is more limited it allows a trader to catch and highlight trend pattern which is very important in technical analysis. So far, even in our age of computerized calculation human visual analysis of price patterns is still unbeatable.

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