Three Trusted And Profitable Technical Indicators for Stock Trading

When a stock trader is scanning for a trade to enter there are several methods they use to determine the probability of the trade. These methods are technical indicators. Stock traders depend on technical indicators to help them identify a high probability trade for greater profit potential. What are the best technical indicators to use? It depends on your style of trading. A stock trader may try out a few technical indicators, then decide it is not exactly what they were looking for, and try other technical indicators, until they find several that work for their trading strategy. Following are three technical indicators to consider:

• Support and resistance

• Stochastics
• Moving averages

Support and resistance is a guide for entry and exit areas in a stock. The trader is looking at the closest area of support or closest area of resistance to determine if it is a good stock to trade short or long. This is based on the area between the current price and the area of strength or resistance based on whether you are looking at entering the trade short or long. If the difference between the current area of strength or resistance is great enough, then it proves there is enough profit potential to consider entering at that point. If the difference is not great enough then it is a good idea to move on. Before you move on to look for other trades, you will want to set an alert to let you know when the stock moves to a certain area where it would provide a good profit potential upon a reversal.

Stochastics is a technical indicator that compares the stock’s price to its price range or a certain period. The thought process behind stochastics is in an upward-trending market the stock’s price usually closes at or near the high. During a downward trending market, the stock’s price usually closes at or near the low. When using the stochastic indicator it is important to notice if the stock is overbought or oversold. If the stochastic indicator is around the 80% area, it means the stock is overbought and you should be looking to enter as a short. If the stochastic indicator is around the 20% area it means the stock is oversold and you should be looking to enter the trade as a long.

Moving averages helps the stock trader notice a change in the current trend of the stock. Moving averages measure buying and selling pressure making a clearer picture for the stock trader to decide if it is a high probability trade. There are benefits using moving averages for short term trading. When the short-term moving average moves above the long term moving average it is a sign to enter a trade long. When the short-term moving average moves below the long term, moving it is a sign to enter a trade short.

While there are many technical indicators to use to better your winning percentages of stock trades, it is important to understand that whichever technical indicators you decide to use, they are an advantage to present high probability stock trades. This allows the stock trader to achieve his or her goals of making profits.


Source: Three Technical Indicators for Stock Trading 
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