Technical Indicator


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.

  1. Indicator

    Indicators are statistics used to measure current conditions ...
  2. Trade Signal

    A sign, usually based on technical indicators, that it is a good ...
  3. Bollinger Band®

    A band plotted two standard deviations away from a simple moving ...
  4. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator ...
  5. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following ...
Related Articles
  1. Active Trading Fundamentals

    Support And Resistance Basics

    Understanding the concept of Support and Resistance in trading can drastically improve your short-term investing strategy.
  2. Active Trading

    Finding Success Where Indicators Fail

    Trade what you see: Follow the charts, buy breakouts and honor stops. We'll look at a case study to show you how.
  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 Education

    4 Types Of Indicators FX Traders Must Know

    By learning a variety of indicators, you can determine the right time and the right strategy to trade any given currency pair.
  5. Retirement

    Turnover Ratios Weak Indicator Of Fund Quality

    This indicator is not as important as some investors might think.
  6. Trading Strategies

    Basics Of Technical Analysis

    Learn how chartists analyze the price movements of the market. We'll introduce you to the most important concepts in this approach.
  7. Insurance

    Exploring Oscillators and Indicators

    Find out how to use these technical analysis building blocks.
  8. Chart Advisor

    These Oil & Gas Stocks Have Reversed

    It's been a long downtrend for oil stock owners, but there's hope. These four oil and gas stocks have reversed and may keep trending to the upside.
  9. Chart Advisor

    4 European Stocks to Consider Buying

    European companies, listed on US exchanges, that are providing buying opportunities right now.
  10. Chart Advisor

    ChartAdvisor for October 2 2015

    Weekly technical summary of the major U.S. indexes.
  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 >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!