Price indicators that traders need to monitor during trading

For those who are truly involved in trading, finding confident entry and exit points is not easy because it requires analyzing a lot of data and using appropriate tools. The trading markets, whether commodities, stocks, crypto, or forex, are highly volatile 24 hours a day. To manage risk and increase profit opportunities, most traders look for indicators that can help confirm trends or trading signals accurately.

5 Important Types of Indicators Used by Experts

Moving Average – Price Trend Tracking Tool

Moving Average (MA) is a fundamental indicator known to almost everyone in trading. It works by calculating the average of past prices over a specified period, making the trend direction of the price clear.

Application Principles:

• Price above MA = Uptrend, look for buying opportunities
• Price below MA = Downtrend, focus on selling

In practice, traders often prefer Exponential Moving Average (EMA) over Simple Moving Average (SMA) because EMA gives more weight to recent data, responding faster to price changes.

Using MAs over different periods:

• Short-term: MA 5 days (about 1 week)
• Medium-term: MA 35 days (about 2 months)
• Long-term: MA 200 days (about 1 year)

When short-term MA > medium-term MA > long-term MA, it confirms a strong uptrend. Conversely, the opposite indicates a downtrend.

Advantages: Easy to use, understandable for beginners, and also acts as a dynamic support/resistance zone.

Limitations: It is a lagging indicator (Lagging), meaning signals often come after the price has already moved. It can generate false signals during sideways markets.

RSI – Momentum Oscillator

Relative Strength Index (RSI) measures the strength of momentum, ranging from 0-100. Its purpose is to observe whether the price is overbought (Overbought) or oversold (Oversold).

Standard interpretation:

• RSI < 30 = Oversold, buy signal
• RSI > 70 = Overbought, sell signal

RSI is also useful for identifying potential reversals. When the price is in an uptrend but RSI drops below 70, it may indicate a beginning of a correction.

Calculation method: RSI = 100 - (100/(1+ (Average Gain)/(Average Loss))) using 14 periods (candles) by default.

Advantages: Provides clear signals for short-term trading and is good for divergence detection.

Limitations: In strong trends, RSI can stay overbought (Overbought) or oversold (Oversold) for extended periods, leading traders to close positions too early or miss long-term profit opportunities.

MACD – Combined Trend and Momentum Indicator

MACD (Moving Average Convergence Divergence) is derived from moving averages by subtracting the 26-day EMA from the 12-day EMA. The result is called the MACD line.

The Signal Line is the 9-day EMA of the MACD line. This indicator helps observe both trend direction and strength simultaneously.

Usage rules:

• MACD crossing above Signal Line = Bullish, consider buying
• MACD crossing below Signal Line = Bearish, consider selling

Advantages: Provides a comprehensive view of trend and momentum, aiding decision-making.

Limitations: More complex calculation than MA, and being a lagging indicator (Lagging), signals often come after significant price movements.

Volume – Confirming Power of Price Changes

Trading volume (Volume) shows how much interest there is in an asset. Traders like volume because it indicates the strength behind price movements.

Relationship between price and volume:

When price rises:

• Rising price with high volume = genuine upward move, likely to continue
• Rising price with low volume = weak move, may reverse

When price falls:

• Falling price with high volume = genuine downward move
• Falling price with low volume = possible final correction

Advantages: Confirms breakouts of resistance levels. A high-volume break above resistance confirms strong buying interest.

Limitations: Cannot indicate direction alone. In forex, volume data may be less accurate since it often only reflects broker data.

Visible Range – Market Cost Indicator

Visible Range or Volume Profile is a relatively modern indicator that visualizes the average cost basis of most market participants. The highest volume point indicates the main cost level, which can serve as key support/resistance zones.

Usage principles:

• Price above Visible Range = Uptrend
• Price below Visible Range = Downtrend

Advantages: Helps identify support/resistance zones based on actual data rather than just drawing lines, revealing true market costs.

Limitations: The chart can look cluttered for beginners. Some platforms may charge extra for this feature.

Summary and Usage Recommendations

All five indicators have their strengths and limitations. No single indicator is the best on its own. Successful trading depends on combining multiple indicators appropriately.

Before applying indicators in real trading, backtest them with historical price data to verify their suitability for the asset and timeframe of interest. Additionally, always have a clear money management plan, set profit targets (TP), and stop-loss levels (SL).