Ever wondered what the investment market is like? Although traders can buy and sell shares and commodities, they also trade currencies and commodities. However, they base their trades on several factors such as charts, candlestick patterns and trend indicators. These tools allow traders to analyse market movements and assess the risk of investing. These indicators are useful for traders, but there are some that stand out.
The Top 5 Most Popular Trend Indicators
These indicators are considered to be the most reliable indicators of trend:
1. Bollinger Band Indicator
The Bollinger band is a popular trend indicator, especially among retail traders. These indicators were created by John Bollinger, an American Financial analyst. They help traders gauge market volatility and show them the trends. The Bollinger Band indicator consists of three bands that closely follow an asset's price. The middle band serves as a moving average (ex. Exponential Moving Average). The indicator's edges follow the asset's volatility while the middle band follows its price. As the bands get closer to each other, the volatility decreases making it more likely that there will be a breakout.
2. Moving Average Convergence Divergence Indiator
One of the most popular trend indicators is the Moving Average Convergence Divergence Indicator. Also known as the MACD indicator , it is also called the MACD Indicator . This oscillating indicator fluctuates between zero and one and measures both momentum and trend. The MACD indicator uses the moving average to calculate, but it also includes additional features that allow you to analyse the most recent moving averages in comparison with older ones. Instead of using the MACD indicator as a trend trading indicator, it is better to use it in conjunction with other technical indicators.
3. Relative Strength Index Indicator
Another oscillating indicator is the Relative strength index indicator. This helps to measure excessive market sentiments in stocks that are trending. The RSI indicator indicates that assets are either overbought or oversold in the stock market. This causes a trend to develop. If the indicator is reading 70 out of 100 it indicates that an asset is overbought and a correction in the market is likely. If the indicator is below 30, it means that the asset has been overbought.
4. The Average Directional Index Indiator
Trend trading indicators such as the Average Directional Index can be used to analyse momentum and trends. This indicator measures the strength and price strength of a particular trend. Both positive and negative direction are used for estimation. The ADX indicator is a line that fluctuates between zero to 100. It can indicate a strong trend if it is between 25 and 100. If the asset's value falls below 25, it is considered a weak trend.
5. The On-Balance Volume Indicator
Another popular tool for measuring the volume trend of a security is the On Balance Volume indicator. Also known as OBV trend indicator. Volume can be used to confirm price trends. It determines if there are high or low volumes of trades. A supporting signal for a particular trend is typically a high volume or low trade volume.