What are market indicators?

What are market indicators?

Market indicators are quantitative tools for the analysis of market information, which may hint or confirm that a trend or reversal is about to happen (leading indicator) or has begun (lagging indicator).

Indicators are technical analysis algorithms which give investors signals that may be used as the guidelines for trading. Indicators might be called oscillators or have various other proper names, since some of them are quite well-known, but there are general conventions or instructions for how to use an indicator, how it can be tweaked to suit the scope of your analysis, and what is considered a trade signal.

Some indicators might have two lines that cross over each other or diverge to indicate that a trend is reversing or has already done so. Oscillators tend to be lines depicting second- or third-level derivatives of price or volume information that fluctuate around a medium range and are considered to be signaling changes if they go above or below the median line, or perhaps if they go past a certain range toward the extremes of the graph.

Technical Indicators might include information about market breadth for advancing and declining issues, trading volume, volatility, price momentum, and other factors. Technical analysis of this kind can be traced back to Charles Dow around 1900, with what is known as Dow Theory, but it has really taken off as computer processing speed and information networks have become faster.

Some indicators are said to be leading, meaning they signal a possible change in the market before it happens, and some are said to be lagging, meaning they will give confirmation that a trend has started. These trends and reversals can have time frames as short as 10 minutes or as long as 50 years, depending on the data being analyzed.

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