Know everything about Intraday Indicators or Technical Indicators here. These indicators helps in technical analysis & determining the performance of stocks on daily basis.
These are some of the most used tools of any technical analyst or day traders.
About Intraday Indicators or Technical Indicators
Intraday Indicators or Technical indicators are the measures that help the trader to evaluate the movement of the price of a security and can be observed as lines across the stock chart.
Indicators came into perspective on the preset logic by successful traders for aiding them in their technical study and finally reaching a trading decision.
We make these decisions in various situations of buying, selling, confirming, or predicting trends.
Best Intraday Indicators or Top Technical Indicators
There are two basic types of indicators, leading and lagging. As the name suggests, the leading indicator leads to the price suggesting the possibility of a reversal or a new trend before it occurs.
It is to be noted that some of these indicators might not be accurate. Thus, one should be careful while using them.
Many of the leading indicators are what we refer to as oscillators as they differ and move within a bounded range of two extreme values. The understanding of the trading can vary with the oscillator’s reading.
At the same time, a lagging indicator lags the price and suggests the possibility of a reversal or a new trend after the occurrence.
Here are most used Intraday Indicators by Research Analysts –
|SI No.||Indicator Tools|
|2||Relative Strength Index (RSI)|
|3||Moving Average Convergence and Divergence (MACD)|
|9||Commodity Channel Index (CCI)|
|11||Advance/Decline Line (A/D Line)|
|12||Average Directional Index (ADX)|
|13||On-Balance Volume (OBV)|
|14||Volume Price Trend (VPT)|
|16||Central Pivotal Range|
Moving averages is one of the most popular lagging indicators. It is used within indicators like RSI, MACD, Stochastic, etc.
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Momentum – Best Technical Indicator
Momentum is a key term that we have to understand in this context. Oy refers to the rate of change in the trading price.
Consider an example where the stock price is Rs. 100 on one day, changes to Rs. 105 the next day and to Rs. 115 on the day after that. In this case, it can be said that the momentum is high.
This is because the stock price has had a change of 15% in just 3 days.
At the same time, this change was found to be happening over 3 months, for example, the evaluation would be that the momentum is low.
Hence, we can conclude that rapid changes in the prices are directly proportional to the momentum.
Relative Strength Index (RSI) – Best Intraday Indicator
The RSI is one of the popular indicators created by J. Welles Wilder. RSI is used for measuring momentum and identifying trend reversal.
It changes between 0 and 100. The expectations and the decisions on the market are made by the latest indicator reading.
RSI helps to detect the internal strength of the security. We can calculate the same by using the following formula:
RSI = 100 – (100/1+RS), where RS is the average gain / average loss.
This can be illustrated with an example. Consider that the stock is trading at 99 on day 0. A set of data points can be calculated with this.
A total of 15 data points will give a look back period with respect to days.
For calculating RS or the RSI factor, we use the formula, the ratio of average points received to the average point lost. Thus, the average points received = 29/15 =1.93 and Average points on loss = 10/15 =0.666666667
This gives RS = 1.93 /0.666666667 = 2.89500. Using this in the RSI formula,
RSI = 100 –[ 100 / (1+2.89500)]
Further, RSI = 100 – [100/3.89500]
Then, RSI = 100 – 25.6739409
Finally, RSI = 74.3260591
The main aim of using the RSI measure is to help traders to detect oversold and over purchase price area.
Cases on RSI as Top Day Trading Tools
We can use two different cases to study more on this.
- Case 1 – if a particular stock has been in a continuous uptrend, the RSI will stay stuck in the over purchased region for a considerable long period as the RSI is upper bound to 100 and cannot go above it. The trader will definitely look for shorting opportunities. However the stock would be in a different orbit.
- Case 2 – It happens when there is a continuous downward movement of a stock then the RSI would be present in the region that has more sale considering the lower limit is 0. The trader should expect buying more opportunities but this talk will be taking a downward spiral.
These cases will help the user in gaining an understanding of how to evaluate RSI and it is in the region that we purchase for a longer period than buying opportunity would be a smart choice to do.
The RSI will keep continuing within the period considering the excessive positive oscillation.
If it stands fixed in the oversold region for a longer period than selling opportunities then buying should be a wise choice.
If the RSI is navigating away from the value after that particular period, then the trader can start buying opportunities.
Now, if it is moving away from the over purchased region after a particular period, then the contrary has to be done.
The traders should note that the parameters for analyzing RSI should not be treated with rigidity. Traders should analyze what could work best for them.
Look through more parameters to emerge as a successful trader.
Moving Average Convergence and Divergence (MACD)
This is another important Intraday Indicator tool for any Pro Trader.
This method has come to existence after the thoughts of Gerald Appel and the traders usually call it the Grand Old Daddy of indicator.
Even though this was introduced way back, the traders still prefer it as a reliable indicator given its efficiency. The convergence and divergence of the two averages is what will be focused here.
Convergence is referred to as the case when two moving averages work towards each other, while divergence is characterized by two moving averages moving away from each other.
This can be converted into a graph referred to as the MACD Line which oscillates above and below the central line.
The sign that comes along the MACD suggests the direction of movement of the stock. For example, consider that the 12 day EMA is 6380 and the 26 day EMA is 6220.
Then, the MACD value would be +160.
Stock Trend as Top Technical Indicator
The stock price should be trending upwards for a shorter-term average to be higher than the longer-term average.
Another thing to note is that the shorter-term average would be more reactive to the current price than the long term average.
Thus, a positive sign before the MACD value would signify that the stock possesses a positive momentum and that the stock is moving upwards.
The measure of the momentum suggests the magnitude of this upward movement. For example, +160 will indicate a positive trend stronger than +120.
In the case of negative magnitude, the 12 day EMA will be 3 lower than the 26 day EMA. Here the momentum would also be negative.
With a higher magnitude if the MACD, there would be more strength in the downward trend. MACD spread is the difference of magnitudes between the two moving averages.
As the momentum mellows down, the spread decreases, while with an increase in momentum, it increases.
Bollinger Bands – Best Intraday Trading Tools or Indicators
Another important tool for Intraday Indicators or Technical Indicators is Bollinger Bands.
The Bollinger bands are great indicators to be of use in technical analysis. It mainly comprises three components.
A middle line signifies the 20-day moving averages of the closing prices. An upper band stands as the +2 SD of the middle line.
The third one is a lower band which is the -2 SD of the middle line.
Standard deviation helps to evaluate the variance of a specific variable from its average. Here, it would stand for the volatility of the stock.
In BB, the SD is applicable on the 29 days SMA. Consider that the 20 days SMA is 7800 and the SD is 75. The +2 SD would be 7800 + (75×2) = 7950. Similarly, we would get the – 2 deviation as of 7650.
In this condition, one can expect the current market price to be around 7800. But if it is around 7969, it would be an expensive one.
Thus, it would be better to look at shorting opportunities by expecting that the price would move back to average.
Similarly, if the current price is 7650, we would be considering it to be a cheap one. In this condition, one can choose to buy opportunities with the expectation of prices moving back to average.
BB gives a good result in the case of the sideways market but can fail in the trending market.
There are various other indicators. However, one needs to know all of these for being a successful trader. Just having basic knowledge about the prime indicators would help traders to be successful.
Super Trend as Intraday Indicator or Tool
The trader should have an understanding of the ATR (Average True Range) before jumping onto the technical indicators which is a “super trend”.
This will be employing the ATR values in order to evaluate the indicator value. This particular indicator comes over the price chart of the stock and the Indicator line will have a change of color.
The colors could either be Red or Green based on the movement of price in the stock. Super Trend does not have the capability to predict the direction.
However, once we establish the direction then initiating a position becomes easier. The trader can easily find out if he has to stay in the position until the trend stays.
Buy Signal as Intraday Signals
Another important tool for Intraday Indicators is Buy Signal.
This particular indicator will be appearing in an alternating color choice and the line will be continuous.
There will be a buy signal when the index price becomes greater than the value we have on the indicator. The indicator color is green and the crossover of the price can also be seen as it is a graph.
After the establishment of the long position, the trader should hold the position until the closing of the price below the green line.
The line is what helps the trader in working on the stop loss for a long position.
Sell Signal as Technical Indicator
Now, the sell signal happens when the stock price is less than the value we have in the indicator.
As already discussed, it would turn red and the crossover of the price over the indicator will be clear. The traders will have to understand this particular signal to initiate any short or exit long.
The trader should be using his discretion here and after the establishment of the short position, the trader should hold the position till the price closes below the green line. The line is what helps the trader in working on the stop loss for a short position.
The traders use this particular trend to find out whatever is applicable in the trending market and it helps the trader in comparing the regular moving average apart from the traditional system.
The traditional systems might generate a few false signals which is why traders cripple super trend indicators over the moving average system.
When the trader select super trend indicator then he will have two inputs to work with which are period and multiplier.
Period is the ATR number of days and the trader can note down any number that is feasible. Now, the multiplier is a value with which you will be multiplying the ATR with.
The default value on some portals could be three and if the ATR value is 7, then the result would be 21.
Technical Indicators or Intraday Indicators – Conclusion
Online Trading is one of the most effective ways of making money and thus is immensely popular. Online trading means buying or selling investments after studying the market conditions.
This buying and selling take place on online platforms which are owned by proprietary firms.
These platforms also provide proper guidance to the investors in how to increase their money and which time is right to invest and which time is not.
It is of utmost importance to know and understand volatility spread options as it allows the evaluation of options that are either cheap or expensive.
We basically do it by comparing implied volatility to historical volatility. Traders who have just begun their journey should have a thorough knowledge or research base for volatility-based training.
Volatility based trading happens by implementing volatility spread options and a handful of strategies to survive the competitive market.
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