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Online Investing Hacks by Bonnie Biafore

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Hack #51. How to Use Indicators and Oscillators

Indicators and oscillators are mathematical constructions based on price and volume that predict price movements.

Indicators and oscillators are additional technical tools that you can use to predict future price movements. Some indicators predict where the overall market is headed, while others prognosticate the direction of individual stocks or other investments. In general, technical analysts don’t trust signals from a single indicator; they prefer to obtain confirmation from several. However, because many indicators are based on price and tend to agree with other price indicators, traders prefer volume-based indicators for confirmation of price-based signals. This hack reviews some of the more popular indicators and oscillators used in technical analysis.

An Introduction to Indicators

Many indicators, such as moving averages or the Relative Strength Index, evaluate the price and volume for an individual stock or other investment to predict the movement of price in the future. In addition to investment indicators, market indicators provide insight into the entire market. Unless you’ve been living with a family of wolves for the past few decades, you’re probably familiar with some monetary market indicators: the inflation rate and interest rates, such as the Fed rate. Because monetary policy affects the appeal of different investments, monetary indicators can indicate what different types of investments might do as a whole. For example, ...

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