Indicators

Indicators help traders identify and confirm the market’s direction, strength, and volatility. They are especially useful in trending markets because they allow traders to ride the trend rather than predict reversals.

• How Indicators Are Used:
  • Used for trend confirmation, avoiding false breakouts.
  • Helps identify entry & exit points based on trend strength.
  • Commonly used in trend-following strategies.
  • Can be lagging (reacting after price movement) or leading (predicting moves).

• Examples of Indicators in Action:
  • A trader sees the 50-day EMA trending above the 200-day EMA (Golden Cross) → a strong bullish trend confirmation.
  • The Bollinger Bands widen, indicating increased volatility → traders adjust stop losses accordingly.

• Limitations:
  • Lagging nature – most indicators confirm trends after they’ve started.
  • Not very effective in sideways/range-bound markets.