Technical analysts are done with the help of many tools. Some of them are easy, and the other ones are difficult to understand.
One can choose from the various charting tools to understand the behaviors of price moves and the volume traded.
Indicators help find the buy and sell points in a trade.
Several tool kits reside with the technical chartist or an analyst to generate signals.
These charting tools may be specified for price tools, the volume of trading, and momentum indicators. An analyst can use each of them separately or in combination.
Below, we will list the top 7 indicator trading tools for technical analysis.
There are mainly two types of indicating tools used in technical analysis, and the rest are the subparts of those.
Overlays tools are those which coincide with the price and volume charts. Examples are moving averages, Bollinger bands, or Fibonacci lines.
These charting tools oscillate to the maximum and minimum price charts.
So, down below, we have given brief descriptions of them.
On balance volume
This is a kind of price volume indicator. This shows the negative and positive flow of the volume of an asset over some time.
Here we take into consideration the up volume and the down volume. The up volume is the volume of the security bought when the prices are high. And down volume is the amount of security traded when the price falls.
When the prices of the OBV start to move up, it is considered that traders are willing to buy the securities. And when the trend of the OBV moves down, it shows that the traders are selling the entity.
And on the contrast side, when the trend is not in line with the trader’s sentiments, i.e., the indicator is moving in one direction. If the price is moving in another direction, or the cost of the security rise in contrast with OBV’s falling trend, then we can say that buyers can turn their state into sellers.
Accumulation or distribution line
This is also a money flow indicator. It is similar to the OBV indicator except for its works on trading range from maximum to minimum rather than only closing price like OBV.
When the line moves upwards from the halfway, it is assumed that buyers are interested in buying as the trends are closing to their maximum and above midways.
And conversely, when the trend of A/D moves down from halfway, it shows the buyer’s reluctance.
Average Directional Index
This is also a trending momentum indicator. An ADX is a black line drawn horizontally on the trend graph.
Now, when the ADX is marked below 20, it is considered a downtrend, and when it is above 40, it is meant to be an uptrend.
Two more directional indicators are drawn along with ADX, which are DI+ and DI-. These are color, red and green respectively.
Aroon indicator can be considered a trendsetting indicator. Therefore, one can use it to find the new maximum and minimum of a trend.
Aroon indicates two lines: Aroon up the line, and another is Aroon down the line. These are used to find new trends like the new maximum and the new minimum.
The moving average convergence and divergence type indicator is the indicator that generates trade signals. I.e., a trader can easily find the entrance and exit positions, and likewise, he can switch his stand between selling shorts and holding long by just watching the momentum.
The indicator comprises two lines. When the MACD line crosses above the signal line, and the indicator is above zero, the trend is bullish and vice-versa.
This indicator gives the idea of overbought and oversold. When the indicator moves above 70 points, it is considered overbought, bullish the market. When the indicator moves below 30, the situation for securities is under brought, and the market is regarded as a bearish market.
Now, when the market is overbought and in oversold situations, the trader should stop and wait for a trend shift as it conventionally shifts between when these states are reached.
This oscillator compares the current trending prices with the past one. It is also a type of trendsetting oscillator. When the prices reach new highs near 100, then it is called an uptrend. And when the prices are getting near zero, it is called a downtrend.
It is now clear that these indicators are useful in finding the current state and speculating the future state of trading patterns. But one should take expert advice before entering into such a risky business.
There are some Brokers who also provide these trading tools and technical analysis while trading. These brokers are PrimeFin, InvestFW, Capitalix, InvestLite, and Brokereo.