Technical Indicators Definition. Technical Indicators are a set of analytical tools that technical analysts use to detect short-term pricing trends in the market and to gain insights in and the ability to predict future price movements. Analysts often refer to the results obtained from these indicators as the Technicals or the Technicalities. Indicators have been designed to use price and volume data and produce a graphical representation of valuable insights related to the data at hand. Indicators can be as simple as price Candlesticks to more complex modeling programs that predict support and resistance lines and pivot points. Indicators are either “leading”, in that they have predictive value regarding price behavior, or “lagging”, in that they confirm a trend after it has formed. Oscillators are a specific type of indicator that evolved to provide signals related to overbought and oversold conditions in the market, thereby maximizing the potential for choosing profitable entry and exit points for trades. The familiar types here are Stochastics, MACD, momentum, and RSI. Occasionally, it is prudent to use two indicators in combination to offset the shortcomings of each to yield a more consistent result and prevent false signals. However, more does not always mean better. A forex trader must learn to focus on effective information and not get bogged down in too much analysis. Interpreting technical indicators is an art that does improve with experience and usage.
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