TradingView is the most used charting platform that is known for its extensive Technical Analysis. It is used by most traders for the tools it provides. The most used tool for any type of technical analysis is the technical indicator.
In this article, we have chosen some of the best TradingView indicators for technical analysis that you should use on your TradingView chart to get a better understanding of the market and take more profitable calls.
Table of Contents
Moving Averages Indicator
Moving Averages are the most commonly used indicator on TradingView & other chart screeners. As the name suggests, it is the average of all the price points for a certain period of time. It is important because it gives an average idea of where the price is moving. Generally, on a candlestick chart, there are many fluctuations and this makes it difficult to determine in which direction the price is moving for a longer period of time. This is where moving averages come in as it equalize all the minor fluctuations and shows the average change in price between a specified period of time.
Moving averages have multiple uses like determining the direction of the trend, finding support and resistance levels, and sometimes crossing moving averages also provide openings for entry.
There are various types of moving averages like:
- Simple Moving Average (SMA or MA)
- Exponential Moving Average (EMA)
- Double Exponential Moving Average (DEMA)
These moving averages are used either in combinations with each other or in a combination of the same moving averages with different values.
Simple moving average, which is denoted as SMA or MA, is the most common of all and the simplest of them all. It takes all the closing price points in a specific time period and divides their addition by the number of candlesticks. This creates a simple but lagging line over/under the price movement thus making a smoother line beside the price movement. It is used to mainly check the long-term or short-term trend of the market.
The simple moving average is considered inefficient for recent price change as the SMA line is always behind the price line. Therefore, short-term traders and intraday traders generally use Exponential Moving Averages as it is much closer to the price line than SMA. This is because the formula of EMA focuses more on the latest value of the price. But still, there is a very little lag in the EMA line and the price.
Double Exponential Moving average or DEMA was created just for the purpose of eliminating lag from moving averages so that the DEMA line can follow the price movement as closely as possible. In simple words, DEMA means (Day Exponential Moving Average), In which the timeframe of Exponential Moving average is selected to Day. Simple Moving Average is not at all made for intraday traders who enter and exit a trade within a few hours. But the Exponential moving average is closer to what a day trader wants. That’s why it was further developed to remove the lag by removing the smoothening from EMA.
Moving Averages are calculated in small periods of candlesticks. The most common inputs for moving averages are – 10, 20, 50, 100, and 200. Sometimes traders increase the number of periods by one, like 21 or 51, to get a better idea of the price movement.
Relative Strength Index Indicator
Relative Strength Index or RSI is an indicator that is used to determine the strength of a cryptocurrency, forex, stock’s &, etc. price. It is a momentum indicator that generally ranges between the values of 0 and 100.
RSI tells the strength of a price and therefore it can tell the strength of the trend too. It shows if the market is overbought or oversold and depending on that a trader can determine if the trend is strong or not. If it is, it may continue going in the trend and it will be safe to bet towards the trend. But, if the RSI is showing an overbought or oversold market, it means that the trend is weak and it might, in some time, reverse. In this case, traders must wait until there is a clear signal for trend reversal and then they must bet against the trend.
Even though RSI is pretty accurate and is used by several traders around the world, it is still not suggested to rely on RSI alone. No indicator is perfect and it might generate false calls too.
RSI is generally calculated in 14-period intervals and it has a moving average alongside that also tells the average movement of RSI. If the value of RSI crosses 70, it means that the market is getting overbought and there might be a pullback. And if the RSI goes below 20, it means that the stock is being oversold and there might be a breakout. This is a simple trader mindset, When most people are selling a stock or Cryptocurrency, professional traders hop in as they know that the market is going to reverse, or vice-versa.
Volume Indicator on TradingView
Volume is the most important indicator of all as most indicators depend on volume to determine the strength of a trend or the volatility of the market. As the anime suggests, the volume just shows the volume of trades on a stock in a particular time period.
Volume indicator tells a lot about the market sentiment as it shows how much the stock is being traded in the market. This shows how many people are interested in the market. When the stock or cryptocurrency prices go up and the volume is high, it means that most people in the market are interested in the price going up.
Similarly, if the price is going down and the volume is increasing, it means more and more people are interested in selling because of that the price goes down. But if the price is going up and the volume is getting lower, then it means that the market is not interested in the price going up and this may either result in a trend reversal or a sideways movement. The same is true for the price going downwards.
Volume is the most important indicator on any chart after the price chart as it is the basic representation of everything that is happening in the market.
TradingView MACD Indicator
MACD or Moving Average Convergence Divergence is also one of the most popular indicators on TradingView. It is a trend-following indicator that shows the relationship between two moving averages of a specific price. It is a very detailed indicator that reflects the movement of the price through two moving averages and a histogram. The moving averages generally used are of 26 and 12-period Exponential Moving Average. The Histogram shows the strength of the trend.
When the histogram is dark green, it means that the uptrend is strong and it might go higher, if it is of lighter green, it means that the upward momentum is weakening and the market might either reverse or move sideways. Similarly, if the histogram bars are dark red, the market is going to move in a downtrend and if it is a lighter red, it predicts a trend reversal.
The crossovers of the two moving averages act as entry and exit signals. MACD is one of the most used indicators for buy and sells signals.
Make sure to verify other price actions because any indicator will not show 100% entry or exit.
VWAP TradingView Indicator
VWAP stands for Volume Weighted Average Price, It is just like a moving average. The only difference is that it integrates volume in the formula. VWAP is generally used by traders to understand the trend and the value of a cryptocurrency, stock, forex or etc.
It uses both volume and price to give the average value of the price in the specified period. This is what separates it from the moving averages as they don’t use volume in their formulas. It is generally used by large institutional traders who want to profit with as little market change as possible.
It can be used only on short time frames and not on day time frames as VWAP values get distorted when used on the daily timeframe. Therefore it can be used only by day traders and not swing traders or long-term investors.
Fibonacci Retracement Indicator
A Fibonacci retracement is a tool that is to be drawn on particular candlesticks or charts to calculate its retracement levels. These are horizontal lines that show the retracement levels in form of percentages. The most commonly used percentage levels are: 23.6%, 38.2%, 61.8%, and 78.6%.
A Fibonacci Retracement tool is to determine support and resistance levels and also sometimes to identify candlestick patterns that determine trend reversals or predict uptrend and downtrend.
The Fibonacci retracement tool is used using the Fibonacci numbers, which is a list of numbers that is a sum of the numbers coming before it. These numbers appear unexpectedly in both mathematics and even in nature. It is also used in the Python programming language.
The Fibonacci retracement levels show, where to hop into an uptrend/downtrend and where to put a stop loss. This tool is generally used by advanced traders to jump in between uptrends instead of waiting for a trend reversal.
On Balance Volume Indicator
OBV or On Balance Volume is another momentum indicator that is used to predict changes in Cryptocurrency, forex, stock price. Unlike Moving Averages, OBV uses only Volume to calculate the momentum of the stock. Just like volume shows the market sentiment in histograms, OBV uses a clear metric and a simple formula to show the market sentiment in a simple line graph. Most traders use OBV to understand what the market’s intentions are and whether there is a chance for a trend reversal or the market is going to continue in the same trend.
The On Balance Volume also tells if there is a difference between the intentions of the institutional traders and the small retail investors. This can be seen when the price of a stock is stable, yet the OBV slope is growing.
Conclusion On Best Indicators On TradingView
All the above indicators are very popular & used by many professional traders. Make sure to not rely only on indicators because it never shows the 100% correct entry/exit. We recommend you to read the chart history, find price actions, chart patterns, apply indicators that are working on a specific timeframe, specific (Cryptocurrency, stock, forex, etc.), You may earn a good profit but you may lose more than that if you don’t follow the risk management. Make sure your strategies are 5-star & invest a small capital to test or back-test the strategies.
Note: Any Market are subjected to risk & this guide is for information purpose, we never recommend anyone to buy or sell your cryptocurrency, stocks, or invest in any trade.