Technical analysis is broken into two main categories, chart patterns and indicators. Indicators are essentially calculations based on the price and the volume of a security and measures factors such as money flow, trends, volatility and momentum.
Why use indicators?
Within technical analysis, indicators are used as a measure to gain further insight into to the supply and demand of securities. Indicators, such as volume, are used to confirm price movement and the probability that the given move will continue. Along with using indicators as secondary confirmation tools, they can also be used as a basis for trading as they can form buy-and-sell signals. In this tutorial, we’ll take you through the second building block of technical analysis and explore oscillators and indicators in depth.
If you don’t know the basics yet of technical analysis, try this Technical Analysis Tutorial instead. Or, if you want to read about the other building block to technical analysis, check out this tutorial, Analyzing Chart Patterns.