Indicators
Indicators are mathematical calculations plotted on charts. They help identify trends, momentum, volatility, and potential reversals.
But indicators lag price. They describe what’s happened, not what’s coming.
Indicator Categories
Trend Indicators
Identify direction of market movement.
| Indicator | Best For |
|---|---|
| SMA/EMA | Trend direction |
| Ichimoku | Multi-factor view |
| Parabolic SAR | Trend reversal |
| ADX | Trend strength |
Momentum Indicators
Measure speed of price movement.
| Indicator | Best For |
|---|---|
| RSI | Overbought/oversold |
| MACD | Trend momentum |
| Stochastic | Crossovers |
| ROC | Rate of change |
Volatility Indicators
Measure rate of price movement.
| Indicator | Best For |
|---|---|
| ATR | How much price moves |
| Bollinger Bands | Range/contraction |
| Keltner Channel | Volatility bands |
| Standard Deviation | Variance |
Volume Indicators
Measure trade activity.
| Indicator | Best For |
|---|---|
| Volume | Raw activity |
| OBV | Cumulative flow |
| VWAP | Fair value |
| MFI | Money flow |
When to Use Each
Trend Indicators
Use when:
- Market is trending (not ranging)
- You need directional bias
- You’re trend following
Don’t use when:
- Market is ranging
- No clear direction
- Choppy conditions
Momentum Indicators
Use when:
- You want overbought/oversold levels
- Looking for divergences
- Trading reversals
Don’t use when:
- Strong trending move (RSI stays overbought)
- Choppy markets (false signals)
Volatility Indicators
Use when:
- Sizing stops
- Planning target distance
- Identifying breakout potential
Don’t use when:
- Need directional signals
- Using in isolation
Volume Indicators
Use when:
- Confirming breakouts
- Identifying accumulation/distribution
- Checking sustainability
Don’t use when:
- Low-volume markets
- Alone for entries
Common Mistakes
1. Using Without Context
Problem: RSI shows overbought but price keeps rising.
Why: Strong trends stay overbought.
Fix: Use in context of market structure.
2. Too Many Indicators
Problem: 10 indicators, no clarity.
Fix: 2-3 maximum. Each serves one purpose.
3. Chasing Signals
Problem: Entry on signal, no context.
Fix: Confirm with structure first, then signal.
Indicator Setup Template
Trend: 50 SMA, 200 SMA
Momentum: RSI (14)
Context: Daily chart for structure
Key Takeaways
- Indicators lag — They describe past, not future
- Use 2-3 max — More = confusion
- Match to strategy — Trend strategy = trend indicators
- Confirm with structure — Don’t enter on indicator alone
- Adjust to conditions — Different tools for different markets
Related Indicators
rsi.md >>>
macd.md >>>
pivot-points.md >>>
Picked 2-3 indicators. Master them. Use them.