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.

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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 >>
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    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?

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  4. What are the best technical indicators to complement the Moving Average Convergence ...

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  5. Are Bollinger Bands® used for investing or trading?

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