Technical Indicator

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DEFINITION of 'Technical Indicator'

Any class of metrics whose value is derived from generic price activity in a stock or asset. Technical indicators look to predict the future price levels, or simply the general price direction, of a security by looking at past patterns. Examples of common technical indicators include Relative Strength Index, Money Flow Index, Stochastics, MACD and Bollinger Bands®.

BREAKING DOWN 'Technical Indicator'

Technical indicators, collectively called "technicals", are distinguished by the fact that they do not analyze any part of the fundamental business, like earnings, revenue and profit margins. Technical indicators are used most extensively by active traders in the market, as they are designed primarily for analyzing short-term price movements. To a long-term investor, most technical indicators are of little value, as they do nothing to shed light on the underlying business. The most effective uses of technicals for a long-term investor are to help identify good entry and exit points for the stock by analyzing the long-term trend.

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RELATED FAQS
  1. What are the most common market indicators experienced traders follow?

    The types of characteristics that make a good market indicator – such as ease of use, compatibility with other tools of technical ... Read Full Answer >>
  2. What are the best technical indicators to complement the Zig Zag Indicator?

    The zig zag indicator is a technical indicator used by investors to predict when a security's momentum is experiencing a ... Read Full Answer >>
  3. What are the best technical indicators to complement the Volatility Ratio?

    Volume indicators are the best technical indicators to complement the volatility ratio. The volatility ratio identifies a ... Read Full Answer >>
  4. Why is the Zig Zag indicator important for traders and analysts?

    Investors use technical indicators to help them predict with confidence what is going to happen with a security price. These ... Read Full Answer >>
  5. Is technical analysis used only to analyze stocks?

    The simple answer to this question is definitely not. This form of analysis can be applied in more situations than you may ... Read Full Answer >>
  6. Can technical analysis be called a self-fulfilling prophecy?

    This has been a topic of much controversy since the invention of technical analysis, and it remains a very heated debate. ... Read Full Answer >>

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