Classification Of Trading Indicators
TRADING INDICATOR CLASIFICATION
There are three major classification which are: Leading and Lagging, judgement based and math based indicators, then lastly according to what they measure like Momentum, volatility etc
Use calculations to predict reversal before they occur. Examples are Stochastic, MACD and RSI. However they can provide multiple wrong trade signals
Give a signal after the trend or reversal has started confirmation the strength of the trend. Thus they follow the price. Use them to determine a trend. Examples are Moving average, Bollinger bands
Lagging indicators are indicators that follow the price and they usually provide signals after the price changes occurred. The indicators can be used to confirm the alerts and signals from other indicators.
Judgement based indicators
These are visual pattern-recognition methods that identify pattern analysis, candlesticks etc.
These express chart events in mathematical terms. This group include moving averages, regression, momentum etc.
Measure the direction and strength of t trend, is the trend weakening strengthening using some averaging to establish the baseline. Price move above average is considered a bullish trend and falling below average is considered bearish
Momentum indicators measure the speed of price movement over a specific period by comparing current closing price to closing prices. For example the RSI measures the strength of the price changes.
Measure the amount of market activity or rate of price movement in a market. volatility is high when buyers or sellers are strong and low when there is low trading. For example the average true range measures the degree of price movements to establish high or low volatility levels.
Measure the level of interest traders have in a market based on bull and bear activity also helping in showing trend strength. The accumulation distribution oscillator indicates the power behind buying and selling activity. For example the money flow indicator follows how much money is flowing into or out of an asset based on buying and selling activity. low volume periods are usually avoided by traders because they usually indicate ranging markets. Examples are volume oscillator and the OBV.