There are hundreds of indicators and oscillators used within technical analysis. They all strive to show price action in a way that give an edge to the trader.
It is not possible to predict the market consistently by adopting a single indicator, or even multiple indicators. A trader must adapt to market conditions and utilise a diverse set of indicators and oscillators. In addition, a trader must adhere to strict risk management and position sizing.
The majority of indicators and oscillators can be broken down into 2 categories. The first category includes indicators and oscillators that work best in trending markets. The second category work best in range bound markets.
Some indicators and oscillators are more versatile and can be utilised in both types of market conditions.
A trend following trader aims to identify and then profit from trends. To do this a trader must identify whether a trend is in progress, or when a new trend is about to start. The following indicators and oscillators have been proven to work in trending markets.
- Awesome Oscillator
- Exponential Moving Average (EMA)
- Moving Average Convergence Divergence (MACD)
- Simple Moving Average (SMA)
- On Balance Volume
- Relative Strength Index
A range bound trader aims to identify when prices are moving within a range. To do this a trader must identify when these conditions are in place. The following indicators and oscillators have been proven to work in range bound markets.
- Bollinger Bands
- Chaikin Volatility
- Commodity Channel Index
- Donchian Channel
- Ease Of Movement
- Fibonacci Extension
- Fibonacci Retracement
- Parabolic Sar
- Pivot Points
- Williams %R
Other Indicators and Oscillators
There are some indicators and oscillators that can be utilised in both trending and range bound markets. The following have been proven to work in both types of market conditions:
- Average True Range (ATR)
The choice of indicators and oscillators on this page is quite varied. To assist with your decision making we have added a few comparisons between some of the key types.
- EMA vs SMA
- Fibonacci Retracement vs Extension
- RSI vs Stochastic
- RSI vs MACD
- Williams %R vs RSI
The indicators and oscillators listed above are those used by Trading AtoZ. We recommend that all traders become familiar with these, even if they do not intend to use them. Market conditions will always change and evolve.
You may also find some of these indicators and oscillators have benefits in both trending and range bound markets. This is perfectly fine as long as you understand their strengths and weaknesses.
All of these indicators and oscillators use historical price data and therefore give a view of what has already happened within the market. It is down to you as a trader to determine whether they give you a sufficient edge to trade consistently and profitably. When you build your trading system you will know whether you have an edge.