11 October 2023
There are few industries in the world that can compare with the financial sector regarding innovation and a forward-thinking approach. As an online trader, you will undoubtedly have encountered several technical indicators that may help you with your investment decisions.
A handful of leading technical indicators dominate this investment area, but there are many more alternatives you may have yet to hear of.
The TRIN indicator should be of interest to any online trader, an indicator which compares the number of advancing stocks against declining stocks and volume on both sides. This indicates a change in market sentiment and the strength of the momentum using the net volume of trades. It's an exciting start!
The McClellan oscillator is similar to the TRIN indicator, although it does not consider trading volume. However, it can measure momentum in global markets, countries or even individual sectors. A very basic but handy indicator for the modern-day online trader!
We can hear the cries, not another moving average, but this is slightly different. This graph uses two clusters of moving averages. The first is relatively tight, three, five, eight, 10, 12 and 15 periods. The second cluster is flattened due to the enhanced duration, 30, 35, 40, 45, 50 and 60 periods. The graph looks "very busy", but to an online trader, it certainly has potential.
To appreciate the strength of the 52-week high/low indicator, you need to understand the concept of a stock market, in effect, an information exchange. Price movements are based on public information and inside information. Consequently, a stock unexpectedly hitting a 52-week high or 52-week low could be a strong indicator that things are happening behind the scenes.
This is another indicator based on stocks advancing and declining, but the focus is on volumes. The graph comprises the net position of the volume between advancing and declining stocks, giving an interesting indicator of market sentiment. As an online trader, market sentiment is critical in any movement.
This is often used by US day traders - online traders - with a very small time frame. This measures the number of up ticks and down ticks throughout the day. So if there are 2000 stocks on an index, 1500 go up, and 500 go down, say in 60 seconds, the graph point would be +1000. This is an interesting means of identifying oversold and overbought markets intraday.
This reasonably unique index compares trading volumes on the NYSE American exchange and the New York Stock Exchange. As the NYSE American exchange tends to focus on small caps, as opposed to larger companies on the New York Stock Exchange, this can indicate enhanced speculation if the NYSE American exchange has higher volumes. Investors are growing in confidence!
The truth is that some technical indicators will suit a particular investment style, so it is a matter of finding the right indicators for your situation. Using one indicator in isolation is potentially dangerous; therefore, using several indicators may help identify momentum changes and avoid false flags.
One word of warning, however tempting, don’t pick and choose the indicators to fit with your predetermined actions. Trying to find justification for your investment decisions never works well!
As we touched on above, there are a relatively small group of headline technical indicators which the modern online trader will use regularly. However, some of these alternative technical indicators offer a different view of the market, sentiment and potential flags for short to medium-term trend changes. Interesting?
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