A technical indicator is a calculated metric derived from price, volume, or time data that helps traders systematically analyze market conditions.
Indicators can be broadly categorized into trend-following indicators (e.g., moving averages, MACD), momentum indicators (e.g., RSI, stochastic oscillator), volatility indicators (e.g., Bollinger Bands, ATR), and volume indicators.
They are used in technical analysis to identify trends, detect overextended market conditions, generate entry and exit signals, or assess the strength of price movements. Technical indicators do not provide predictions; instead, they condense historical data into interpretable signals.
Their effectiveness depends heavily on market conditions, parameter settings, and how they are combined with other analytical tools. In algorithmic trading, indicators often serve as a core decision-making component.
