Best Indicators for Day Trading
Day trading indicators help traders make more money. And, more specifically, for accurate predictions. Because if you have bad information on a stock you want to trade? You’re sunk. You’re in the red before you even get started. Learning to wield a few of these indicators could impact your trades in a big way. Let’s take a look at a few of the best indicators for day trading.
Best Day Trading Indicator Types
There are many different categories that day trading indicators can be placed into. There’s lagging and leading. And these two tell where the stock is giving signals for a rise or decline in price. Leading and lagging are categories to put indicators in. And this helps describe each one, too.
A lagging indicator is one that has given its signal after the stock has begun to move. So, first the stock begins to go up or down. Then, the indicator comes in and predicts whether it will keep going in that direction. A leading indicator predicts where the stock will go. And it does that before it begins its journey in either direction.
There are also trend, momentum, volatility and volume indicators. And they help describe and sort various types of day trading indicators. Plus, each of these measures and predicts how price will move. And it does so by using either trend, momentum, volatility, or volume.
Overlays and oscillators are two more types of day trading indicators. Overlays use the line plot system. And they’re placed over the current chart to show how price is expected to go vs. how it’s going now. Oscillators are different. They show the same thing, but the prediction chart goes above the current charted price.
Whichever of the best indicators for day trading you use, your odds are better than if you guess.
Some of The Best Indicators For Day Trading
Squeeze Pro Indicator
The “squeeze” part of this day trading indicator means a burst in price. It shows you that there is compression building. And, the pressure must be released sometime. There are three intensities of compression- low, mid, and high. The Squeeze Pro came from an original indicator called the squeeze. The pro version is better for catching more detail. Thus, you’re more likely to have better success with one of the best indicators for day trading.
This day trading indicator uses volume to predict the momentum of a stock. Basically, it says that if there is a drop in volume, the stock price will follow. And, if there is a jump in volume, the stock price will also act accordingly. So, find a stock with high volume compared to usual volume. And, you can make a good return on your trade.
Average Directional Movement Index
Trends are a part of life. So, why not take advantage of them? Some trends last much longer than others. And some trends are much stronger than others. This day trading indicator uses direction and other various factors. And it produces a strength indicator for the trend.
This is very useful. Because often, trends come and go. So, being able to tell the strength on a numbered scale can mean money gained or lost. The Average Directional Movement Index also tells whether the trend will be positive (+DI) or negative (-DI).
Keep reading for more info on the best indicators for day trading.
Bollinger Bands are used to understand if a stock is a good value or a poor value. It uses three lines, positive and negative, that go above and below the simple moving average. The upper and lower bands expand and contract as price and volatility moves. And, usually when there’s a pinch point, it means the volatility will follow with expansion. This day trading indicator is great for monitoring and predicting volatility.
Relative Strength Index
This is another one of the best indicators for day trading. It has a variable number from 0 to 100. And, it “swims” back and forth between these two. What does this do? It gives the trader a good idea of whether the stock or investment is being overbought or oversold. A score below 30 shows that the investment is oversold. And as such, presents a good buy opportunity.
Moving Average Convergence Divergence
The Moving Average Convergence Divergence is referred to and abbreviated as MACD. It takes two averages, puts them together, and plots them on the chart. And this line shows where there may be buy or sell signals. Also, it can be used to determine if a stock is overbought or oversold. It also is helpful for determining whether the price is in a bear or a bull.
Exponential Moving Average
This day trading indicator uses the average of specific time sets. And then it’s used to help traders predict what price will do next. It shows the strength of a stock. And, it presents possible buy and sell triggers, making it one of the best indicators for day trading.
The exponential moving average moves faster than the simple moving average. By that, I mean, it is more precise and shows more detail in the plotted line. Both the Simple Moving Average and Exponential Moving Average are lagging indicators. Because they follow the stock and show what it has done already.
An Italian mathematician gave this day trading indicator its name. And in trading, they are used as percentages of a drop or rise in stock price. And, the “Fibonacci numbers” are found all throughout nature. Not only that, but they were originally created in Ancient Indian culture.
These percentages include 23.6%, 38.2%, 61.8%, and 78.6%. And apparently, they are not so reliable that they should be depended on. But, sometimes when stocks reach one of these ratios? It indicates a possible reversal or hold in price.
The Stochastic Oscillator is much like the Relative Strength Index. This is because it fluctuates between 0 and 100. And anything above 80, is overbought. Plus, anything below 20, is oversold. It helps traders decide whether to buy or sell, creating signals with these numbers.
Also, this reflects the 80/20 rule. It’s a rule found throughout society, nature, and all areas of life. And, it says that 80% of results come from 20% of cause.
This day trading indicator is unique. It calculates supply and demand. Then, it takes that figure and multiplies it by volume. And what you end up with is a prediction about a trend. Basically, it tells the trader whether a trend is likely to continue up or down, which makes it a great addition to this list of best indicators for day trading.