Top 5 Technical Indicators That Every Trader Must Know

Technical analysis of the stock is incomplete without the application of technical indicators and oscillators. Indicators are the most important part of technical analysis. In technical terms, a technical indicator is sequence of data points, which are obtained by implementing certain formulae to the previous price data of any stock or security. The term price data is further broken into simple words as any combination of open, high, low or close over certain period. Every trader must know the importance of the technical indicator, if they want to generate accurate intraday cash tips. Here are some of the best technical indicators embraced in this article that every technical analysts and traders must know.

Top 5 Technical Indicators That Every Trader Must Know

  1. Absolute Breadth Index

One of the most commonly used technical indicator implemented by technical analysts to generate accurate intraday trading tips is Absolute Breadth Index. The Absolute Breadth Index is not a standard volatility measurement tool but still the technical analysts frequently implement this technical indicator. This indicator was invented by Norman G. Fosback, which is used to measure the volatility levels in market. This is a momentum indicator and is calculated by subtracting the absolute values of declining issues from advancing issues.

  1. ABX index

Till date, various technical indicators developed by technical analysts to generate the accurate tips in trading. In order to get absolute privilege investors rely mostly on advisory firms. Markit developed a technical indicator, which measures the total value of contracts made by the borrowers with small or weak credit. When the ABX index, gets increased the risk involved in the trading gets lower. Those investors who are interested in the subprime mortgages find this technical indicator very useful. The subprime mortgages refer to those mortgages, which are given to the customers at weak or less credit. The full form of the ABX index is Asset-backed securities.

  1. Relative Vigor index

Relative vigor index is implemented to measure the assurance of the current price action as well as the similar price actions, which will continue. The technical analysts use RVI as the abbreviation for relative vigor index.  Relative Vigor index also helps the traders and technical analysts in abstracting accurate price by comparing the position of closing price of stock to its price range. The result obtained by comparison is further smoothed by finding out the exponential moving average of the given values. The technical analysts use formula to calculate RVI, which is shown below.

                                           RVI=   close-openhigh-low

The calculation of the RVI indicator is almost similar to that of stochastic oscillator but the only difference between the two is that the vigor index matches the closing price to the open rather than comparing or matching it to the low price of the stock. Traders wait eagerly for the RVI value to rise up as the bullish trend expands momentum.

  1. Elder-ray Index

The renowned technical analysts named Alexander Elder invented the technical tool in order to measure the amount of buying and selling pressure of the stock in the market. The technical indicator was named after the inventor as Elder-ray index. This technical indicator is further divided into two segments, which are bull power and bear power. Bear power and bull power are themselves an indicator, which permits the traders to predict the position of the price related to exponential moving average. Technical analysts use this technical indicator to find the accurate tips, so that they can offer these tips to their clients.

  1. Force Index

Several oscillators are present that are used to generate accurate intraday trading tips. Force index is one of the most commonly used indicators that combine the movement and the volume in order to evaluate the strength behind of the price movements. You can implement this technical indicator to spot potential of the change in trend. Generally, the technical analysts believe that the force index is an oscillator as it oscillates above and below zero. Alexander Elder has invented many powerful tools including force index. Force Index is flexible for all periods. You can generate accurate stock cash tips with the help of this indicator.

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