In our previous article, we detailed the function of candlesticks and how different candlestick patterns represent a shift in trend. Apart from using candlesticks for technical analysis, various indicators also provide substantial assistance in technical analysis. A good set of technical indicators can greatly increase the success rate of trades, and comparing different indicators can make trading more seamless. Here, we will share several sets of technical indicators that traders commonly use.

4 technical indicators that traders commonly use:

1. Moving Average (MA)
2. Moving Average Convergence Divergence (MACD)
3. Relative Strength Index (RSI)
4. On-Balance Volume (OBV)

Moving Average (MA)

Moving Average (MA) is a statistical analysis method that calculates the average price over a certain period of time and connects the averages at different times to form a line. The moving average is one of the technical indicators used to observe price trends and can help investors confirm existing price trends, predict potential future price movements, and identify signals of an upcoming price reversal. Therefore, it is widely favored by traders.

Moving Average Convergence Divergence (MACD)

MACD stands for Moving Average Convergence Divergence. It is derived from the dual-moving average system and is calculated by subtracting the slow-moving average from the fast-moving average. The MACD has a similar meaning to the dual moving average system but it is easier to read. Because of its simplicity, it is one of the first indicators that traders learn. When the MACD crosses above the zero line, it is a buy signal. When the MACD crosses below the zero line, it is a sell signal. A large angle change in the MACD indicates that the difference between the fast and slow-moving averages is rapidly expanding, which represents a major trend reversal in the market.

Relative Strength Index (RSI)

The Relative Strength Index (RSI) is a technical indicator used to analyze the market's buying and selling intentions and strength by comparing the average number of up and down closes over a period of time, in order to speculate on the future direction of price movements. The RSI is classified as an oscillating indicator used to measure the speed and amplitude of directional price movements. The RSI value ranges from 0 to 100, with the 50 median lines serving as a watershed. A value above 50 suggests a strong market, while a value below 50 suggests a weak market. Additionally, the RSI can also be used to identify whether the market is in an "overbought" or "oversold" state. An RSI value between 70 and 100 indicates overbought conditions, suggesting that prices may reverse downward, while a value between 30 and 0 indicates oversold conditions, suggesting a possible rebound.

On-Balance Volume (OBV)

The On-Balance Volume (OBV) indicator is a momentum indicator that accumulates or subtracts trading volume based on the market's upward or downward movements. It is also known as a sentiment indicator. The OBV indicator is used to track changes in market momentum and is presented as a continuous line chart, making it easier to analyze than a series of individual volume bars.

According to the creator of the OBV, Joseph Granville, market momentum is reflected in changes in trading volume, while the price is merely an external manifestation. Volume is a leading indicator of price, with volume preceding price changes. The volume of trading reflects the activity of market participants and the ebb and flow of market sentiment.

The OBV indicator is relatively simple in terms of its algorithm. Daily trading volume values are accumulated based on the market's upward or downward movements. Specifically, the volume on up days is considered positive and added to the cumulative total, while the volume on down days is considered negative and subtracted from the total. This process helps to track changes in market momentum for both bullish and bearish trends.

There are lots of technical indicators to choose from. But here's the thing - there's no one "best" indicator! It all depends on the situation. Smart traders are always trying out different combinations and adjusting them until they find the perfect fit. Before they start using their new strategy in real trading, they test it out using a Demo Account. That way, they know they're making good choices and will only start trading for real when they're sure they're going to make some money!

If you want to try using different technical indicators to develop a trading strategy, you will definitely need a Demo Account for testing. Start your Demo Account now to find out the strategies that suit your trading style before you start real trading!