Which technical indicators are most used in the stock market?

The stock exchange trading, just like the other forms of speculation requires certain knowledge in term of analysis of the markets. For the technical analysis of the stock market, there are indeed very popular indicators. To help you set up your future trading strategies here are the main technical indicators used in the stock market and Forex.  

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Which technical indicators are most used in the stock market?

The RSI or Relative Strength Index :

This technical indicator is undoubtedly one of the most widely used on all financial markets. Its objective is to define as accurately as possible the strength of a trend using trading volumes. Thanks to this indicator, you will be able to know if a trend has just started or if it is coming to an end.

Most brokers and trading platforms provide this indicator free of charge and it is noted below the stock charts.

The interpretation of this indicator is quite simple. The higher the RSI (RelativeStrengthIndex), the more the asset is traded and the smaller it is, the lower the trading volumes.


The MACD or Moving Average Convergence/Divergence indicator:

More complex but also more efficient and accurate than the RSI, this MACD indicator uses moving averages and their deviations in order to determine buy or sell signals on a given asset. The advantage of this indicator is that it can be visualized on a chart and therefore allows a good understanding of the trend at a glance.

Remember that moving averages are calculated from past prices of the asset and can therefore be represented graphically by means of a curve on the real-time chart of the asset in question. We can then easily see where the real price of the asset is in relation to these moving averages and therefore know if it is overbought or oversold.


Supports and resistances :

Among the quickest stock market technical indicators to use are the support and resistance lines. These two complementary indicators are represented graphically by horizontal lines.

The support line gives the lowest levels reached by the price of an asset over a given period. Most often, this line sends a strong buy signal to investors and can therefore be a good time to enter the market with an upward bet.

Conversely, the resistance line gives the highest levels reached by an asset's price over a given period. When the price of the asset approaches this level, traders tend to play it safe and sell their positions, causing the price to fall. This is a strong sell signal.


The Bollinger Bands indicator:

This is another stock market technical indicator that uses moving averages as a starting point. By studying these moving averages, the Bollinger Bands can be used to determine and graphically visualize bullish and bearish channels.

When the price of an asset moves into one of these channels, it is then possible to take advantage of the full extent of the movement by quickly taking an upward or downward position.

There are of course other technical indicators applicable to the stock market and Forex, but this time they require a very good mastery of the markets and a lot of time and experience to carry out these analyses oneself. On the other hand, the technical indicators we have just presented should never be used alone but in correlation with a complete financial and economic analysis in order to be correctly interpreted according to the market conditions.


Moving averages

To date, moving averages are the indicator of choice for traders speculating in Forex. They allow you to quickly spot trading opportunities as they indicate the right time to buy or sell a position.

Visually, the moving average is represented by a line that measures the average price of a currency cross over a given period of time. It therefore indicates the general direction of the trend.


Where and how to find good indicators?

As we have just seen together, there are several types of indicators that you can use to speculate online on Forex or CFDs. But to use them, you must be able to read stock market charts correctly and identify possible patterns to exploit and interpret them consistently.

Fortunately, if you are not a technical analysis specialist, you should know that these indicators can be communicated to you directly by your broker. The vast majority of online trading platforms include in their charts the main technical indicators used by investors. All you have to do is click on the icon or name of the indicator you wish to use and it will be displayed directly on your chart. You don't have to do any calculations, as the trading software does the work for you. You can even customize your charts to display multiple indicators simultaneously.

Of course, you will still need to be able to read these technical indicators correctly and use them to take winning positions. Here again, brokers have thought of everything by creating color codes that allow you to spot a trend more easily (green for an up signal and red for a down signal).


How to easily learn technical analysis in the stock market?

If the interpretation of the technical stock market indicators scares you, you should know that you can very easily learn to become an excellent analyst thanks to several solutions proposed by the online brokers. Here are the possibilities available to you:

  • Take online training: Some trading platforms offer their users courses in various forms to better understand the use of technical indicators as well as free or paid personalized training.
  • Charts: Most charts available on trading platforms directly integrate most of the technical indicators useful for a good analysis. All you have to do is interpret them.

Frequently Asked Questions

What is a stock chart?

The line chart is the most common type of chart used in technical analysis. The reading of a line chart includes the price level at the close of the session on the vertical axis. This type of chart is usually displayed as a continuous line that oscillates from day to day, indicating an upward or downward trend in the price of a given asset over a predetermined period. Of course, there are other types of display possible.

How to read a Japanese candlestick in technical analysis?

Some technical indicators use the Japanese candle display. Here the color of the candle is important for its interpretation. If the color of the candle's body is white, it shows an increase over the period. If it is black, it means that the period shows a decline. For colored charts, the body of the candle shows a light color to indicate an increase and a dark color to indicate a decrease, most often green and red.

How to analyze a stock chart?

As part of your technical and charting analysis, you should observe the price movement of the asset in question. The price can go up, down or stagnate. The aim here is to identify one of these three trends and to assess its strength and duration by spotting another signal in advance that may indicate a change in the situation.

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