Technical Indicators Used by Stock Traders


Whether you dabble in the stock market yourself or are simply just interested in what drives the thinking of market participants, technical indicators are essential components to consider in your quest for learning. Technical indicators are of great assistance regarding the timing of trades or to give an alert on trends. Since there are several different types of indicators all with unique purposes and benefits understanding them means that as a member of the trade community, your understanding and implementation of them provides you with an extra layer of conviction with both new and existing trades.

Relative Volume

What is relative volume? The short answer is, a technical indicator, but as an investor you should be more interested in the long answer. Used to tell traders how the current trading volume is compared to past trending volume over a given period, relative volume will highlight for you how in play a specific stock is. Knowing what other traders are watching is a key strategy and good example of a way to use relative volume from this site here to predict home run trades. Many indicators work best when they are hinged on other as opposed to being relied on exclusively. Having a checks and balances process in place will help you to understand the risks and rewards of investing better and can also help you to compare the strengths of the individual entities that you are analyzing.

Trading Psychology

An often-overlooked detail of trading in general is the emotional aspect. It is implied and commonplace that traders have an emotional involvement with the market and reactionary responses that vary with the volatility of the market, however what is less common is open discussion about the part that these emotions play in the success or failure of trading securities. Volume is a great way to identify and understand the psychology of the market. High volume can be indicative of an investors poorly timed decision making while low volume may represent a steadier environment since wise investments typically do not elicit a significant emotional response.

Low emotions are typically associated with long-lasting trends because the leveled-out approach of the trader is related to the roller coaster of the overall market. Beyond understanding your individual emotions, you must also acknowledge the relationship between crowd behavior and how that will circle back to the fundamentals of technical indicators. The psychology of the market can be hard to predict but indicators like momentum and rate of change are related and demonstrate sentiment and the likelihood that tops of bottoms of markets will form.

Charting Techniques

Being able to view an indicator and the trends associated with it on a chart can really help clear up confusion and act as a tangible teaching technique. Bar charts and candlestick charts are two of the most common tools that traders use as indicators of trends and to help make and support their individual decisions. Charts are great for learning about trends that exist during a specific snapshot in time and although the movements can appear random, upon proper analysis the patterns become more obvious.

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