Technical Indicator

What is a '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.

RELATED TERMS
  1. Indicator

    Indicators are statistics used to measure current conditions ...
  2. Unique Indicator

    A technical indicator that can be developed using only core elements ...
  3. Market Indicators

    A series of technical indicators used by traders to predict the ...
  4. Confirmation On A Chart

    An indicator or chart pattern that provides evidence that the ...
  5. Bollinger Band®

    A band plotted two standard deviations away from a simple moving ...
  6. Ease Of Movement

    A technical momentum indicator that is used to illustrate the ...
Related Articles
  1. Technical Indicators

    The Top Technical Indicators For Commodities Investing

    Traders can use "the usual suspects" (standard indicators for trend trading) when it comes to choosing indicators for investing in commodities. Here's how.
  2. Forex

    Bollinger Bands®

    The use of bollinger bands in technical analysis
  3. Forex Education

    How To Build A Trading Indicator

    Wondering how people like Elliott and Gann built their famous trading tools? Learn the basics of constructing an indicator.
  4. Forex

    Technical Analysis

    An introduction to technical analysis and how to read charts and patterns.
  5. Forex Education

    Introduction to Types of Trading: Technical Traders

    Learn about the different traders and explore in detail the broader approach that looks to the past to predict the future.
  6. Insurance

    Exploring Oscillators and Indicators: Conclusion

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com The goal of every short-term trader is to determine the direction of a given asset's momentum and to attempt to profit from ...
  7. Trading Strategies

    Technical Analysis: The Basic Assumptions

    By Cory Janssen, Chad Langager and Casey MurphyWhat Is Technical Analysis? Technical analysis is a method of evaluating securities by analyzing the statistics generated by market activity, such ...
  8. Insurance

    Exploring Oscillators and Indicators: Leading And Lagging Indicators

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com Indicators can be separated into two main types - leading and lagging - both differing in what they show users. Leading ...
  9. Forex Education

    Using Bollinger Band® "Bands" To Gauge Trends

    Find out how this smart tool can help you achieve superior analysis.
  10. Forex Education

    Forex Tutorial: Technical Analysis & TechnicaI Indicators

    One of the underlying tenets of technical analysis is that historical price action predicts future price action. Since the forex is a 24-hour market, there tends to be a large amount of data ...
RELATED FAQS
  1. How do I start using technical analysis?

    Technical analysis is a method of analyzing securities by evaluating current and historical price and/or volume activity. ... Read Answer >>
  2. How do I create a trading strategy with Bollinger Bands® and the MACD?

    Learn how to establish profitable trading strategies using technical trader favorites such as Bollinger Bands and the moving ... Read Answer >>
  3. How do I create a trading strategy with Bollinger Bands® and the Stochastic Oscillator?

    Learn how to create a trading strategy by combining two different technical indicators, Bollinger Bands and the stochastic ... Read Answer >>
  4. What are the best technical indicators to complement the Moving Average Convergence ...

    Learn the best technical indicators to use as part of a trading strategy in conjunction with the moving average convergence ... Read Answer >>
  5. Would a slow stochastic be effective in day trading?

    Given the hundreds of indicators that are available to traders, finding the appropriate technical tools to use in day trading ... Read Answer >>
  6. Are Bollinger Bands® used for investing or trading?

    Find out how investors or traders would use Bollinger Bands and why they are more useful for technical traders than long-term ... Read Answer >>
Hot Definitions
  1. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  2. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  3. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center