{"id":175416,"date":"2020-08-27T15:15:00","date_gmt":"2020-08-27T19:15:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/trading-lessons\/using-indicators\/"},"modified":"2026-06-30T15:03:58","modified_gmt":"2026-06-30T19:03:58","slug":"using-indicators","status":"publish","type":"trading-lessons","link":"https:\/\/www.interactivebrokers.com\/campus\/trading-lessons\/using-indicators\/","title":{"rendered":"Using Indicators"},"content":{"rendered":"\n

New to Interactive Brokers?<\/strong><\/p>\n\n\n\n

\n
Open Account<\/a><\/div>\n<\/div>\n\n\n

<\/p>\n\n\n

Using Indicators<\/h3>\nA time series derived from price data\n
    \n \t
  • (OHLC and sometimes V)<\/li>\n \t
  • Might sometimes consider related markets or other data series<\/li>\n<\/ul>\nVary in complexity\n
      \n \t
    • Difference between two closes is a simple indicator<\/li>\n \t
    • More complex indicators could be thousands of lines of code<\/li>\n<\/ul>\nHistorically, grew up with the rise in the easy availability of computing power\n
        \n \t
      • At one time, calculating a moving average was a chore!<\/li>\n<\/ul>\n

        A Common Misconception<\/h3>\nMany technical analysis texts (and websites) say there are leading and lagging indicators.\n\nThis is not true! Technical indicators are all calculated from (past and current) price data, so they reflect the past.\n\n(There are leading economic and fundamental indicators, but there are no leading technical indicators.)\n\nThere\u2019s always a tradeoff: If we try to make an indicator more sensitive to recent data it will also provide more false signals.\n\nThere are no leading technical indicators.\n

        Guidelines for Using Indicators<\/h3>\nUnderstand the calculation and tool you are using.\n
          \n \t
        • Maybe should be able to do it by hand?<\/li>\n \t
        • At least have that degree of understanding.<\/li>\n \t
        • Names for indicators can be imprecise and misleading<\/li>\n<\/ul>\nUnderstand what it shows and what its quirks are.\n\nIf you combine indicators, be careful of overlap.\n

          Categories of Indicators<\/h3>\n

          Trend<\/h4>\n
            \n \t
          • Moving Averages<\/li>\n \t
          • MACD<\/li>\n \t
          • Parabolic SAR<\/li>\n \t
          • ADX<\/li>\n<\/ul>\n

            Momentum Indicators<\/h4>\n
              \n \t
            • RSI<\/li>\n \t
            • Stochastic<\/li>\n \t
            • Williams %R<\/li>\n \t
            • CCI<\/li>\n<\/ul>\n

              Volatility<\/h4>\n
                \n \t
              • ATR<\/li>\n \t
              • Historical Volatility<\/li>\n<\/ul>\n

                Different Ways to Measure<\/h3>\n

                Bounded (Oscillators)<\/h4>\n
                  \n \t
                1. Chaikin Oscillator<\/li>\n \t
                2. Williams %R<\/li>\n \t
                3. Stochastic<\/li>\n \t
                4. RSI<\/li>\n<\/ol>\n

                  Unbounded<\/h4>\n
                    \n \t
                  • Momentum<\/li>\n \t
                  • Rate of Change<\/li>\n \t
                  • MACD<\/li>\n<\/ul>\n

                    Using Line Crossings as a Signal<\/h3>\n\"\"\n

                    Using Indicator for OB\/OS<\/h3>\n\"\"\n

                    Divergence<\/h3>\n\"\"\n

                    Much More Is Possible<\/h3>\nCan combine indicators\n\nCan take indicator signals as entries, exits, or input to other stages of your process.\n\nIndicators may be adaptive or adapted to cycles in the market.\n\nIndicators may be calculated on other indicators!\n
                      \n \t
                    • RSI of MACD, for instance<\/li>\n<\/ul>\nUnderstand what you\u2019re trying to accomplish and what the indicator measures.\n

                      Summary<\/h3>\nIndicators are calculated from OHLCV (and possibly OI) data.\n\nThey are usually visual presentations of processed price data.\n\nUnderstand how the indicator you choose is calculated and what it measures.","protected":false},"excerpt":{"rendered":"

                      In this unit we\u2019re going to talk about indicators. What are indicators? What can they do? Also, very importantly, what can they not do? We’re going to look at some common indicators, such as MACD, ADX, RSI, Stochastic and think about some ways that we might use them.<\/p>\n","protected":false},"author":899,"featured_media":221507,"parent":0,"comment_status":"open","ping_status":"closed","template":"","meta":{"_acf_changed":false,"footnotes":""},"contributors-categories":[13612],"traders-academy":[13125,13128,13132],"class_list":["post-175416","trading-lessons","type-trading-lessons","status-publish","has-post-thumbnail","contributors-categories-marketlife","traders-academy-beginner-trading","traders-academy-level","traders-academy-trading-lesson"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"\nArchives | Traders' Academy | IBKR Campus<\/title>\n<meta name=\"description\" content=\"We're going to look at some common indicators, such as MACD, ADX, RSI, Stochastic and think about some ways that we might use them.\" \/>\n<meta name=\"robots\" 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