Technical Indicators in Stock Market:
Data points plotted on a chart helps to look at the direction of stock prices, but deeper analysis requires more data crunching. Trends can be visually tracked with indicators like moving averages, which are dynamic lines that connect each period’s closing (last) price. Charting or trading platforms enable users to manually draw in their own trend lines directly onto their charts. Different traders may have different trend lines based on the time frame of the chart as well as the starting point.
Indicators that measure the momentum of a stock including overbought and oversold conditions are momentum indicators. Basic momentum indicators come pre-programmed in most charting or trading platforms. These indicators help traders to better time their entries and exits. When properly used, traders are able to avoid pursuing prices when momentum indicators show overbought conditions like a stochastic peaking and falling back. While price is important, understanding how the price level is achieved can be just as significant. Stochastic Index, Relative Strength Index (RSI) and Commodity Channel Index (CCI) are three widely used momentum indicators.