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10should
trading indicators
know every trader
Using trading indicators is pa t of any technical trader’s strategy.
Paired with the right risk management tools, it could help you gain
more insight into price trends. Let’s explore 10 of the best trading
indicators.

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business by the Bermuda Monetary Authority and is registered in
Bermuda under No. 54814.
 | Writer,

Trading indicators explained

Whether you’re interested in forex trading, commodities trading or share
trading, it can be helpful to use technical analysis as pa t of your strategy –
and this includes studying various trading indicators. Trading indicators are
mathematical calculations, which are plotted as lines on a price cha t and
can help traders identify ce tain signals and trends within the market.
There are different types of trading indicator, including leading indicators
and lagging indicators. A leading indicator is a forecast signal that predicts
future price movements, while a lagging indicator looks at past trends and
indicates momentum.
Best trading indicators
1 Moving average (MA)
2 Exponential moving average (EMA)
3 Stochastic oscillator
4 Moving average convergence divergence (MACD)
5 Bollinger bands
6 Relative strength index (RSI)
7 Fibonacci retracement
8 Ichimoku
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which of these trading indicators best suit your strategy. Note that the
indicators listed here are not ranked, but they are some of the most
popular choices for retail traders.
1 Moving average (MA)
The MA – or ‘simple moving average’ (SMA) – is an indicator used to identify
the direction of a current price trend, without the interference of sho ter-
term price spikes. The MA indicator combines price points of a financial
instrument over a specified time frame and divides it by the number of
data points to present a single trend line.
The data used depends on the length of the MA. For example, a 200-day
MA requires 200 days of data. By using the MA indicator, you can study
levels of suppo t and resistance and see previous price action (the history
of the market). This means you can also determine possible future
patterns.
Read more about moving averages here

The risks of loss from investing in CFDs can be substantial and the value of
your investments may fluctuate. CFDs are complex instruments and come
with a high risk of losing money rapidly due to leverage. You should
consider whether you understand how this product works, and whether
you can afford to take the high risk of losing your money. IG International
Limited is licensed to conduct investment business and digital asset
business by the Bermuda Monetary Authority and is registered in
Bermuda under No. 54814.
 Source: IG cha ts
2 Exponential moving average (EMA)
EMA is another form of moving average. Unlike the SMA, it places a greater
weight on recent data points, making data more responsive to new
information. When used with other indicators, EMAs can help traders
confirm significant market moves and gauge their legitimacy.
The most popular exponential moving averages are 12- and 26-day EMAs
for sho t-term averages, whereas the 50- and 200-day EMAs are used as
long-term trend indicators.
Read more about exponential moving averages here

Source: IG cha ts
3 Stochastic oscillator
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4 Moving average convergence divergence (MACD)
MACD is an indicator that detects changes in momentum by comparing
two moving averages. It can help traders identify possible buy and sell
oppo tunities around suppo t and resistance levels.
‘Convergence’ means that two moving averages are coming together,
while ‘divergence’ means that they’re moving away from each other. If
moving averages are converging, it means momentum is decreasing,
whereas if the moving averages are diverging, momentum is increasing.
Read more about moving average convergence divergence here
The risks of loss from investing in CFDs can be substantial and the value of
your investments may fluctuate. CFDs are complex instruments and come
with a high risk of losing money rapidly due to leverage. You should
consider whether you understand how this product works, and whether
you can afford to take the high risk of losing your money. IG International
Limited is licensed to conduct investment business and digital asset
business by the Bermuda Monetary Authority and is registered in
Bermuda under No. 54814.
 Source: IG cha ts
5 Bollinger bands
A Bollinger band is an indicator that provides a range within which the
price of an asset typically trades. The width of the band increases and
decreases to reflect recent volatility. The closer the bands are to each
other – or the ‘narrower’ they are – the lower the perceived volatility of the
financial instrument. The wider the bands, the higher the perceived
volatility.
Bollinger bands are useful for recognising when an asset is trading outside
of its usual levels, and are used mostly as a method to predict long-term
price movements. When
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Limited is licensed to conduct investment business and digital asset
business by the Bermuda Monetary Authority and is registered in
Read more about BollingerBermuda bands here
under No. 54814.
 Source: IG cha ts
6 Relative strength index (RSI)
RSI is mostly used to help traders identify momentum, market conditions
and warning signals for dangerous price movements. RSI is expressed as a
figure between 0 and 100. An asset around the 70 level is often considered
overbought, while an asset at or near 30 is often considered oversold.
An overbought signal suggests that sho t-term gains may be reaching a
point of maturity and assets may be in for a price correction. In contrast,
an oversold signal could mean that sho t-term declines are reaching
maturity and assets may be in for a rally.
Read more about the relative strength index here
The risks of loss from investing in CFDs can be substantial and the value of
your investments may fluctuate. CFDs are complex instruments and come
with a high risk of losing money rapidly due to leverage. You should
consider whether you understand how this product works, and whether
you can afford to take the high risk of losing your money. IG International
Limited is licensed to conduct investment business and digital asset
business by the Bermuda Monetary Authority and is registered in
Bermuda under No. 54814.
 Source: IG cha ts
7 Fibonacci retracement
Fibonacci retracement is an indicator that can pinpoint the degree to
which a market will move against its current trend. A retracement is when
the market experiences a temporary dip – it is also known as a pullback.
Traders who think the market is about to make a move often use Fibonacci
retracement to confirm this. This is because it helps to identify possible
levels of suppo t and resistance, which could indicate an upward or
downward trend. Because traders can identify levels of suppo t and
resistance with this indicator, it can help them decide where to apply stops
and limits, or when to open and close their positions.
Read more about Fibonacci retracement here

The risks of loss from investing in CFDs can be substantial and the value of
your investments may fluctuate. CFDs are complex instruments and come
with a high risk of losing money rapidly due to leverage. You should
consider whether you understand how this product works, and whether
you can afford to take the high risk of losing your money. IG International
Limited is licensed to conduct investment business and digital asset
business by the Bermuda Monetary Authority and is registered in
Bermuda under No. 54814.
 Source: IG cha ts
8 Ichimoku cloud
The Ichimoku Cloud, like many other technical indicators, identifies
suppo t and resistance levels. However, it also estimates price momentum
and provides traders with signals to help them with their decision-making.
The translation of ‘Ichimoku’ is ‘one-look equilibrium cha t’ – which is
exactly why this indicator is used by traders who need a lot of information
from one cha t.
In a nutshell, it identifies market trends, showing current suppo t and
resistance levels, and also forecasting future levels.
Read more about the Ichimoku cloud here

The risks of loss from investing in CFDs can be substantial and the value of
your investments may fluctuate. CFDs are complex instruments and come
with a high risk of losing money rapidly due to leverage. You should
consider whether you understand how this product works, and whether
you can afford to take the high risk of losing your money. IG International
Limited is licensed to conduct investment business and digital asset
business by the Bermuda Monetary Authority and is registered in
Bermuda under No. 54814.
 Source: IG cha ts
9 Standard deviation
Standard deviation is an indicator that helps traders measure the size of
price moves. Consequently, they can identify how likely volatility is to
affect the price in the future. It cannot predict whether the price will go up
or down, only that it will be affected by volatility.
Standard deviation compares current price movements to historical price
movements. Many traders believe that big price moves follow small price
moves, and small price moves follow big price moves.
Read more about standard deviation here

The risks of loss from investing in CFDs can be substantial and the value of
your investments may fluctuate. CFDs are complex instruments and come
with a high risk of losing money rapidly due to leverage. You should
consider whether you understand how this product works, and whether
you can afford to take the high risk of losing your money. IG International
Limited is licensed to conduct investment business and digital asset
business by the Bermuda Monetary Authority and is registered in
Bermuda under No. 54814.
 Source: IG cha ts
10 Average directional index (ADX)
The ADX illustrates the strength of a price trend. It works on a scale of 0 to
100, where a reading of more than 25 is considered a strong trend, and a
number below 25 is considered a drift. Traders can use this information to
gather whether an upward or downward trend is likely to continue.
ADX is normally based on a moving average of the price range over 14
days, depending on the frequency that traders prefer. Note that ADX never
shows how a price trend might develop, it simply indicates the strength of
the trend. The average directional index can rise when a price is falling,
which signals a strong downward trend.
Read more about average directional index here

The risks of loss from investing in CFDs can be substantial and the value of
your investments may fluctuate. CFDs are complex instruments and come
with a high risk of losing money rapidly due to leverage. You should
consider whether you understand how this product works, and whether
you can afford to take the high risk of losing your money. IG International
Limited is licensed to conduct investment business and digital asset
business by the Bermuda Monetary Authority and is registered in
Bermuda under No. 54814.
 Source: IG cha ts
What you need to know before using trading indicators
The first rule of using trading indicators is that you should never use an
indicator in isolation or use too many indicators at once. Focus on a few
that you think are best suited to what you’re trying to achieve. You should
also use technical indicators alongside your own assessment of the
movements of an asset’s price over time (the ‘price action’).
It’s impo tant to remember that you have to confirm a signal in some way.
If you’re getting a ‘buy’ signal from an indicator and a ‘sell’ signal from the
price action, you need to use different indicators, or different time frames
until your signals are confirmed.
Another thing to keep in mind is that you must never lose sight of your
trading plan. Your rules for trading should always be implemented when
using indicators.
To practise using trading indicators, try IG’s demo account.
Or, if you’re ready to sta t trading, open a live account.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the
disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of,
or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that
may be made Theofrisks
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The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should
consider whether you understand how this product works, and whether you can afford to take the high risk of
losing your money.
CFD Accounts provided by IG International Limited. IG International Limited is licensed to conduct investment
business and digital asset business by the Bermuda Monetary Authority and is registered in Bermuda under
No. 54814.
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The risks of loss from investing in CFDs can be substantial and the value of
your investments may fluctuate. CFDs are complex instruments and come
with a high risk of losing money rapidly due to leverage. You should
consider whether you understand how this product works, and whether
you can afford to take the high risk of losing your money. IG International
Limited is licensed to conduct investment business and digital asset
business by the Bermuda Monetary Authority and is registered in
Bermuda under No. 54814.