Stock trading involves analyzing price charts and making trading decisions based on technical indicators and the patterns of these price charts. Whether you’re an experienced or a novice trader, technical indicators will greatly help you analyze the stock market. For instance, they will help you identify how concurrent events and current affairs affect the stock market. They will also help you know more about market trends. All this information will help you maximize your returns. Below are more details on technical indicators for day trading. 


What Are Indicators for Day Trading?

Trading indicators should be part of your day trading strategy. These indicators are visual representations of mathematical calculations. They are usually placed on stock charts. 

As a trader, you need to use these indicators to predict future price movements. These indicators can also help you know the price trends in the past. You should use certain technical indicators on fast time frames and other indicators on slow time frames.

If you’re a day trader who trades on lower time frames, you need to carefully select the indicators you will use. For instance, you need to choose indicators that will help you identify price behaviors. Such indicators will help you quickly capitalize on market changes as they occur. 


Why Do Day Traders Use Technical Indicators?

As a day trader, you’re likely to trade on lower time frames. During such time frames, you are less likely to make money if you only use fundamental data. Therefore, if you’re a day trader and not a swing trader, you need to use technical indicators. These indicators will help you analyze price movements and know more about market data. Such data and analysis will help you gain a lot of profit when trading.


Best Indicators to Use

There are around 4,000 technical indicators that traders can use to analyze the stock market. However, there are only a few of them which are powerful and useful. You should use such indicators when trading during the day. Some of these indicators include:



Volume is the most used technical indicator. It’s a familiar technical indicator that even new investors and traders can use. This technical indicator will help you know the number of financial assets that have been traded in a certain period. For futures and options, volume is measured based on the number of contracts that have been traded. For stocks, volume is measured based on the number of traded shares. 

This technical indicator will help you identify the weakness and strength of a move. As a trader, you should join strong moves and ignore weak moves. It will also help you make the best trading decisions. Below are more details on how you can use this technical indicator. 

  • You can use this indicator to confirm different trends since a rise in volume signifies that the market is rising. On the other hand, an increase in price and a decrease in volume signify that the market is dropping.
  • You can use this indicator to identify exhaustion moves. Exhaustion moves are sharp price movements that are accompanied by a volume increase. These moves indicate the end of a certain market trend. After such moves occur, you’re likely to notice a decrease in volume.
  • This technical indicator can help you identify bullish signs. These signs indicate that market prices are likely to go high.
  • This indicator will help you know when market prices will change directions. For instance, if the market price has been greatly changing and then suddenly starts moving slowly and the market volume increases, you should expect the prices to change direction.
  • Trading volume will also help you identify real and false breakouts.


Moving Average

The Moving Average indicator is another indicator that you can use if you’re a daytime trader. This indicator will help you determine the direction of a market trend. The indicator sums up the price points of financial security over a specified period and divides them by the number of data points. When calculating this average, you need to use the latest price data. 

This technical indicator will help you examine the resistance and support of an asset by analyzing how the asset’s price is moving. It will indicate the past financial security movements, which will help you determine how an asset price is likely to move. 

There are two forms of Moving Averages: Simple Moving Average and Exponential Moving Average. You can obtain the Single Moving Average by adding up data points in a certain set and dividing the answer by the number of time periods. The indicator will help you know when to exit and enter a market. 

Exponential Moving Average, on the other hand, gives more weight to recent price changes. When calculating this average, you need to calculate the simple moving average for the given time. After this, you should calculate the multiplier for this average. Together with the Exponential Moving Average of the previous time, these two answers will help you calculate the current Exponential Moving Average. 


Stochastic Oscillator

The Stochastic Oscillator will help you identify oversold and overbought conditions. It usually ranges between 0 and 100. The readings over 80 are in the overbought range, and the readings under 20 are in the oversold range. 

Stochastic Oscillator charts contain two lines. One of these lines reflects the Stochastic Oscillator’s actual value, and the other line represents the Stochastic Oscillator’s three-day simple average. The intersection of these two lines indicates a shift in momentum. 


Bollinger Bands

Bollinger Bands can also help you when it comes to technical analysis of the stock market. This technical indicator will help you learn more about the price ranges of different stocks. For instance, it will help you determine oversold and overbought levels and monitor breakouts. 

Bollinger Bands are composed of three bands: the upper, lower, and middle bands. Market analyzers calculate the middle band using a 20-day simple moving average. To calculate the middle band, they multiply the daily standard deviation by two and add this amount to the 20-day simple moving average. 

To identify oversold and overbought market conditions using Bollinger Bands, you need to use the concept of mean revision of stock prices. According to this concept, any price deviation from the average or mean price indicates that the price will go back to the mean price. If the price breaks above the upper band of the Bollinger Bands, the market levels are overbought. If the price breaks below the lower band, the market levels are perhaps oversold. 

When using this indicator, you need to look at the overall price movements and take trade signals that align you with the market trend. For example, if the market trend is down and the upper band has tags, take short positions. If you take a long position, you’re going to go against the market trend. 


Relative Strength Index

Another technical indicator that’s perfect for day trading is the Relative Strength Index. This technical indicator is a momentum indicator ranging from 0-100. Since it’s a momentum indicator, it measures the magnitude and velocity of price movements. It charts the historical and current weakness or strength of a market stock using the closing prices of a past trading period. 

You can use this indicator to identify when market stocks are oversold and overbought. A reading above 70 indicates that a market stock is overbought, and a reading below 30 indicates that a stock is oversold. 

You can also use this indicator to determine the market trend. A reading above 50 indicates a market trend is going up. On the other hand, a reading below 50 indicates that the market trend is going down. 


Commodity Channel Index

The Commodity Channel Index is a technical indicator that will help you identify new market trends. It’s a momentum-based oscillator that Donald Lambert developed. This technical indicator assesses price strength and direction, so traders know what to do. For instance, when using it, you will be able to determine when to refrain, exit, or enter a trade. Below are other things that this Commodity Channel Index indicator will tell you.

  • Oversold and overbought levels
  • Weaknesses in market trends

The Commodity Channel Index has values of -100, 0, and +100. A positive value indicates that the market trends are going up, while a negative value indicates that the market trends are going down. If this indicator’s value moves from zero to above 100, the high chances are that there will be a new market uptrend. 

Whether you’re an experienced or novice stock trader, you need to analyze stock markets before trading. Technical indicators can help you when it comes to this kind of analysis. However, you should ensure that you use powerful technical indicators. Commodity Channel Index, Relative Strength Index, and Bollinger Bands are some of the technical indicators that you can use when day trading. You can also use stock volume and moving averages to carry out your analysis.

Want to take the power of algorithmic trading into your own hands? Start your one week trial of Targets Trading Pro today!