Most Common Technical Indicators and How to Use Them

Trading indicators are tools used in technical analysis to evaluate price data, identify trends, and predict potential market movements. They help traders by offering valuable insights into momentum, trend strength, and volatility. 

The most commonly used indicators include:

• Relative Strength Index (RSI)
• Moving Average Convergence Divergence (MACD)
• Moving Averages (EMA/SMA)
• Bollinger Bands

Learn how to identify and use these indicators, and you’ll improve your decision-making process and optimize trade entries and exits.

RSI Indicator Explained: How to Spot Buy & Sell Signals

The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements on a scale from 0 to 100.

The RSI helps traders spot:

• Overbought zone: RSI above 70 indicates a potential sell opportunity.
• Oversold zone: RSI below 30 suggests a potential buy opportunity.
• Divergences: If the RSI moves in the opposite direction of price, it could signal a trend reversal.

Using RSI effectively helps traders identify strong entry and exit points, reducing risk and maximizing returns.

MACD Strategy: When to Enter & Exit Trades

The Moving Average Convergence Divergence (MACD) is a trend-following indicator that highlights momentum shifts. It consists of:

• MACD Line (fast-moving average)
• Signal Line (slow-moving average)
• Histogram (difference between the two lines)

Key Trading Signals:

1. Bullish crossover: When the MACD Line crosses above the Signal Line, it suggests a buy signal.
2. Bearish crossover: When the MACD Line crosses below the Signal Line, it indicates a sell signal.
3. Divergences: If the MACD differs from price movement, it can hint at a trend reversal.

Moving Averages: Identifying Trends & Market Direction

Moving Averages (MAs) smooth out price data to help traders spot trends more easily. The most commonly used types are Exponential Moving Average (EMA) and Simple Moving Average (SMA).

Popular Moving Averages:

• 20 EMA: Short-term trend indicator for swing trading.
• 50 EMA: Medium-term trend used to confirm price movements.
• 200 EMA: Long-term trend indicator to identify major market direction.

A common strategy is the Golden Cross and Death Cross:

• Golden Cross (Bullish Signal): When the 50 EMA crosses above the 200 EMA.
• Death Cross (Bearish Signal): When the 50 EMA crosses below the 200 EMA.

Using moving averages correctly helps traders filter out market noise and stay aligned with the trend.

Bollinger Bands Strategy: Catching Breakouts

Bollinger Bands are volatility indicators that consist of a middle moving average and two standard deviation bands (upper and lower). These bands expand and contract based on market volatility.

How to Use Bollinger Bands:

• Breakout Trading: when the price moves outside the bands, it signals potential trend continuation or reversal.
• Mean Reversion: price often returns to the middle band after reaching an extreme.
• Squeeze Strategy: when the bands tighten, a breakout is imminent.

Bollinger Bands help traders capitalize on momentum shifts and price breakouts.

Find more details on using technical indicators in this webinar:

Common Trading Indicator Mistakes to Avoid

Even the best indicators can lead to losses if misused. Here are common mistakes traders make:

• Over-reliance on a single indicator – no single indicator works 100% of the time. Use multiple indicators for confirmation.
• Ignoring market context – indicators should be used in conjunction with market trends, news, and fundamental analysis.
• Over-trading based on false signals – avoid choppy markets where indicators give mixed signals.
• Not adjusting indicators for different assets – different markets require different indicator settings for accuracy.

Using the Quick Scanner for Fast Trade Setups

Time is crucial in trading, and scanning the market manually can be time-consuming. Altrady's Quick Scanner automates this process by:

• Identifying high-probability setups in real-time.
• Filtering signals based on customized indicator settings.
• Providing alerts for entry and exit points.
• Using automated scanners ensures you never miss a great trading opportunity.

Managing Trades on Mobile with Altrady

In today’s fast-moving markets, managing trades on the go is essential. Altrady offers a powerful mobile trading platform that allows you to:

• Track live positions
• Set stop-loss and take-profit orders
• Receive real-time alerts
• Adjust strategies instantly

This tool enables traders to stay connected and in control of their trades no matter where they are.

Conclusion

Mastering trading indicators like RSI, MACD, Moving Averages, and Bollinger Bands can significantly improve your trading strategy. However, avoiding common mistakes and leveraging automation tools can further enhance your success.