Technical Indicators Cheat Sheet
Trend Indicators
Trend indicators smooth out price data to identify the direction and strength of a market move.
| Indicator | Formula / Logic | Signal | Best Timeframe |
|---|---|---|---|
| SMA (Simple Moving Average) | Sum of closing prices ÷ N periods | Price above SMA = bullish; below = bearish | 20, 50, 200-day |
| EMA (Exponential Moving Average) | Weighted average giving more weight to recent prices | More responsive than SMA — earlier signals | 12, 26-day (for MACD) |
| MACD | 12-EMA − 26-EMA; Signal Line = 9-EMA of MACD | MACD crosses above signal = buy; below = sell | Daily, weekly |
| ADX (Average Directional Index) | Measures trend strength from 0–100 | Above 25 = strong trend; below 20 = ranging | 14-period default |
| Parabolic SAR | Dots above/below price using acceleration factor | Dot flips below price = buy; above = sell | Daily |
Momentum Indicators
Momentum indicators measure the speed and magnitude of price changes. They’re best for spotting overbought/oversold conditions.
| Indicator | Formula / Logic | Signal | Range |
|---|---|---|---|
| RSI (Relative Strength Index) | 100 − [100 ÷ (1 + Avg Gain / Avg Loss)] | Above 70 = overbought; below 30 = oversold | 0–100 |
| Stochastic Oscillator | %K = (Close − Low₁₄) ÷ (High₁₄ − Low₁₄) × 100 | Above 80 = overbought; below 20 = oversold | 0–100 |
| CCI (Commodity Channel Index) | (Typical Price − SMA) ÷ (0.015 × Mean Deviation) | Above +100 = overbought; below −100 = oversold | Unbounded |
| Williams %R | (Highest High − Close) ÷ (Highest High − Lowest Low) × −100 | Above −20 = overbought; below −80 = oversold | −100 to 0 |
| ROC (Rate of Change) | (Current Price − Price N periods ago) ÷ Price N periods ago × 100 | Positive = bullish momentum; negative = bearish | Unbounded |
Volatility Indicators
| Indicator | Formula / Logic | Signal |
|---|---|---|
| Bollinger Bands | Middle = 20-SMA; Upper/Lower = ±2 standard deviations | Price at upper band = overbought; lower = oversold; squeeze = breakout imminent |
| ATR (Average True Range) | Average of True Range over N periods | High ATR = volatile market; low ATR = quiet market; useful for stop-loss placement |
| Keltner Channels | Middle = 20-EMA; Upper/Lower = ±2× ATR | Similar to Bollinger Bands but uses ATR instead of standard deviation |
| VIX | Implied volatility of S&P 500 options | Above 30 = high fear; below 15 = complacency |
Volume Indicators
| Indicator | Formula / Logic | Signal |
|---|---|---|
| OBV (On-Balance Volume) | Running total: +volume on up days, −volume on down days | Rising OBV confirms uptrend; divergence warns of reversal |
| VWAP | Cumulative (Price × Volume) ÷ Cumulative Volume | Price above VWAP = bullish intraday; institutional benchmark |
| A/D Line (Accumulation/Distribution) | CLV × Volume, where CLV = [(Close − Low) − (High − Close)] ÷ (High − Low) | Rising = accumulation; falling = distribution |
| Chaikin Money Flow | Sum of A/D values over 20 periods ÷ Sum of volume | Positive = buying pressure; negative = selling pressure |
Key Takeaways
- Technical indicators fall into four categories: trend, momentum, volatility, and volume
- RSI and MACD are the most widely used momentum and trend indicators
- Bollinger Bands and ATR measure volatility and help set stop-losses
- Volume indicators (OBV, VWAP) confirm whether price moves have real backing
- Always combine indicators from different categories for stronger signals
Frequently Asked Questions
What is the best technical indicator for beginners?
The RSI and simple moving averages (50-day and 200-day) are the easiest to learn and interpret. RSI gives clear overbought/oversold signals, while moving averages show trend direction.
How many technical indicators should I use at once?
Use 2–4 indicators from different categories. Using too many from the same category (like three momentum indicators) creates redundancy. One trend + one momentum + one volume indicator is a solid combination.
Do technical indicators work in all market conditions?
No. Trend indicators work best in trending markets but generate false signals in ranges. Oscillators (RSI, Stochastic) work best in ranging markets but stay overbought/oversold during strong trends. Match your indicators to the current market condition.
What is the difference between leading and lagging indicators?
Leading indicators (RSI, Stochastic) predict future price moves and give early signals. Lagging indicators (moving averages, MACD) confirm trends after they’ve started. Most traders use both for confirmation.
What does indicator divergence mean?
Divergence occurs when price moves one direction while an indicator moves the opposite way. Bearish divergence: price makes higher highs but RSI makes lower highs — warns of reversal. Bullish divergence: the opposite pattern signals a potential bottom.