Technical trading indicator definition
Trading indicators are calculations which help traders identify stock market trends
Trading indicators are used to plot the impact of trends, including financial and economic trends on traded assets.
They appear as a line chart (graph). There are many different types of trading indicators which are used to track different trends.
Technical trading indicator explained
There are various types of technical trading indicators, such as standard deviation or stochastic modelling.
The meaning of trading indicator
Technical indicators are used by technical traders. Analysts might use economic data or annual reports to assess the profitability of traded assets. Instead, technical traders will rely on charts and technical indicators to help them predict price moves.
Example of a trading indicator
There are hundreds of different technical trading indicators.
One example is called a Crossover.
The Crossover is a trading indicator which will track when a security's price and a technical indicator line cross over (or intersect). A security is a share price or a government bond yield.
A Crossover indicator could also mean when two other types of indicators themselves cross, rather than a security.
Crossovers estimate the performance of a financial instrument. They also rate changes in trend, such as a reversal - when the price goes up or down - or breakouts which indicate that a price is likely to start trending higher.
Crossover indicators also include the golden cross and the death cross. These describe how the chart appears - the graph being at different angles depending on what is likely to happen to the price.
A golden cross indicates a positive trend. It is when a line representing a short-term moving average crosses over a line representing a rising long-term moving average, prompting analysts and traders to predict an upward turn in a market. The short-term average trends up faster than the long-term average, until they cross. This creates the golden cross pattern
The death cross indicates a possible sell-off, and appears on a chart when a stock’s short-term moving average goes below its long-term moving average.