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Which indicators are good indicators for trading

Here we discuss which indicators are best for trading

You need to understand 3 things. 1. Indicators are mathematical calculations on price, mostly to make it smoother. 2. You need to understand the math behind the indicator to use it properly. 3. Which indicator you use will depend on time frame of investment you have in mind. I have explained some popular indicators below, and details can be read in the "MunafaSutra stock market training material" here: https://MunafaSutra.com/page/ebook Stochastics for example is a short term indicator. It measures the distance of PRICE from its recent HIGHS and LOWS. Recent will depend on what setting you use, default is 14 days. Basic idea is, if a stock is trading near its HIGHS then its overbought and can fall, and if its trading near its LOWS then its oversold and can show recovery.... ADX measures buying and selling momentum both. This is a very good indicator, and can be used for both short term and for longer time frames. Both buying line and selling lines are plotted separately, plus a momentum line is plotted which reflects the momentum of the line which is higher. Suppose stock is in uptrend, and buying line is above selling line, and momentum line is also moving up, then its a confirmed BUY call. Suppose momentum line is coming down in same trend, that also means small positions can be taken. This is reflecting profit booking, and when trend resumes then momentum will shoot up. Suppose stock is sideways, and buying line is above sell line, but momentum line is slowly coming down, then its a confirmed SELL call. Reason, again same. After reaching a certain top range, the stock will start falling, and momentum line is also showing that buying is slowing down. RSI is doing the same thing which ADX does, but it only plots one line, so it gets very difficult to figure out "momentum" This is only showing buying pressure and selling pressure. I do not like this indicator at all... MACD is merely measuring the distance between 2 moving averages, nothing else. This can also be used for both short time frame, and for longer time frames, depending on its settings you use. With MACD, the stronger the setting, the better signals it can give. However, even MACD can fail to give correct signal sometimes. Suppose a stock is running fast, then MACD will give very good signals. However, if stock is moving slow, lets say upwards, even then MACD will show near zero no signal, meaning no trend. But in reality, stock is moving upwards slowly... Reason is that both moving averages are also moving up slowly, almost together, so MACD is showing no difference in distance between the 2 averages, near zero and hence no signal... Which indicator is best for trading then? Truly speaking, all indicators are good indicators, and if an indicator is not working for you, then its you who is missing the very first step of technical analysis, that is Price action analysis. Let me show you an example below. Looking at charts of company XYZ you determined that the stock is in uptrend. An uptrending stock will keep making higher HIGHS, isn't it? That is what defines uptrend, isn't it? In a stock like this, what values will Stochastics and RSI show? They both will keep showing values above 80-90, meaning overbought. But still stock will keep moving up. You might conclude that the indicator is not working. Its a bad indicator. But wait, is it really bad? Look at the same indicators, but on a different stock. Stock of company ABC is moving sideways, inside a range. Stocks inside a range will fall after reaching a certain HIGH point, and will show buying after a LOW point is reached. This is why they are range bound, right? Suppose the stock reached its HIGH point in the range. Both Stochastics and RSI will show 80-90 values, and stock will also turn downwards once it hits those values. You will conclude that the indicator is working! Same indicator, same calculation, worked on one stock, and did not worked on another, why? Because you forgot the very first step of technical analysis, that is Trend analysis based on "price" You are driving a car, and the car ahead is blinking its "left" indicator. You would assume that its about to take a left turn, right? But look at the "road" first. There is NO left turn there. Where will the car turn? Same is the case with stock market indicators. You have to and have to look at the "price" first. That is the "road". Once you have understood what price is doing, then you can look at the indicator and determine if the signal is false or correct. Indicators like ADX and MACD are comparitively better indicators because both these indicators are designed to show momentum and trend both. But even with these, you cannot use an indicator blindly. You need to understand what the price is doing, and this should be your first step. Other than this, you cannot just depend on indicators without knowing what the indicator itself is measuring. You should understand the math behind the indicator calculation. After all indicator is just math calculation on price, either to make price smoother, or to determine momentum and trend. If you do not know what the indicator is measuring, then you cannot use that indicator properly. The book I recommended, its explaining all these things in great details. Give it a read.