Most trading terminals have the ability to connect indicators. The indicator allows you to quickly estimate either the volume of transactions taking place, or to obtain additional mathematically processed information based on historical data on price movement, allowing you to assess the probability of further price behavior and make a trading decision on this basis. The works of many developers and researchers of trading strategies are devoted to the use of indicators in trading. We present the most popular indicators in Table 1 and briefly indicate what they are needed for. The decision on the use of indicators is very individual and if you decide to use them anyway, we advise you to carefully understand the examples of their use in the relevant literature or the Internet.
Fig. 24. Chart window with Volume and AO indicators connected
Table 1. Trade indicators.
| n/a | Name of the indicator | Purpose of the indicator |
| 1 | Volume | Displays a volume histogram for each candle/bar. Allows you to evaluate the occurrence of significant events when increased volumes are observed. |
| 2 | AO (Awesome Oscillator) | Gives the following signals: Buy: The histogram above the zero line changes direction from descending to ascending. Selling: The histogram below the zero line changes direction from ascending to descending. Crossing the zero line down is a sell signal. Crossing the zero line up is a buy signal. A buy signal is given if AO is below zero and forms a vertex that turns out to be higher than the previous vertex. A buy signal is given if AO is above zero and forms a vertex that turns out to be below the previous vertex. When forming a buy signal, a conditional order is placed at the intersection of the maximum of the bar at which the signal was formed. When forming a sell signal, a conditional order is placed at the intersection of the minimum of the bar at which the signal was formed. Signals from the AO indicator can be received only after the corresponding buy/sell fractal has been formed. All purchases based on the signals of the AO indicator should be made only on the green values of AO, all sales – only on the red values. If the AO histogram changes its color before the request is executed, the request is canceled. |
| 3 | Alligator | If the lines of the Alligator are intertwined, then it “sleeps” — there is no movement in the market. When the price starts a directional movement, the Alligator “wakes up” and begins chasing prey, opening its “mouth”. Purchases should be made when the price is above the alligator, sales — when lower. |
| 4 | Fractals | The Fractals indicator is usually used in conjunction with the Alligator indicator, although it can also be used with other indicators. A buy signal is formed if the maximum of the bar on which the buy fractal was formed is above the teeth of the Alligator. At the same time, a conditional purchase order is placed at the intersection of this maximum of the bar on which the fractal was formed. Sell signals are given in the same way. Bill Williams (the developer of Chaos theory, in which the Fractals indicator is presented along with others) recommends entering the market gradually, and the first part of the money is entered only by the Fractals indicator. Based on signals from all other indicators of Chaos theory, you can enter the market only if the corresponding fractal has already been formed before. |
| 5 | MACD (Moving Average Convergence / Divergence) | The first line is often called the MACD line, the second line is often called the signal line. The indicator gives the following signals: If the MACD line crosses the signal line from the bottom up, it gives a buy signal, and from the top down, it gives a sell signal. High/low values of the MACD line indicate an overbought/oversold state. Bullish divergence: if on a bullish trend, the new top of the MACD line turned out to be lower than the previous top, then this indicates a weakening of the bullish trend. Bearish convergence: if on a bearish trend, the new top of the MACD line turned out to be higher than the previous top, then this indicates a weakening of the bearish trend. |
| 6 | AC (Accelerator/Decelerator) | Acceleration/Deceleration — shows the rate of change of the Awesome Oscillator indicator, that is, it shows the acceleration/deceleration of the driving force of the market. This indicator is recommended to be used in conjunction with the Alligator and Fractals indicators. It is usually depicted in the form of a color histogram. The indicator gives a buy signal if the minimum of its value is followed by an increase in the indicator. If AC is above zero, then two green columns should form after the red column. If AC is below zero, then three green columns should form after the red column. If AC has given a signal, then a conditional request is made to cross the maximum of the bar at which the signal from AC was formed. The sell signals are completely similar, but only after the AC growth should its fall follow. You cannot buy if the AC column is red, and you cannot sell if the AC column is green. Any AC signals should be ignored until a corresponding signal is received from the Fractals indicator. If the indicator gave a signal, but the AC changed color before executing the request, the request must be canceled. |
| 7 | %R (William’s Percent Range) | %R is interpreted as any oscillator: Finding an indicator above the -80 level indicates overbought, finding an indicator below the -20 level indicates oversold (there are also recommendations about the -30 and -70 levels; Transaq allows you to independently adjust the levels for any indicators, so you can set these values yourself so that they most correspond to reality). Bullish divergence: if on a bullish trend, the new top of %R was lower than the previous one, then this indicates the weakness of the bullish trend. Bearish convergence: if on a bearish trend the new top %R turned out to be higher than the previous one, then this indicates the weakness of the bearish trend. |
| 8 | ADX (Average Directional Index) | The PDI and MDI indicators show the relative amount of positive and negative movement, respectively. The ADX indicator shows the ratio of the difference between PDI and MDI to their sum, that is, what is the share of directional movement in the current overall market movement. ADX can be interpreted as follows, depending on its value: 0-15 — the market is trendless, 15-40, uptrend, More than 40 is a trend, but there is a chance that it is close to completion, 40-25, directed down — the end of the trend, 25-0, directed down — the absence of a trend. |
| 9 | Ichimoku Kinko Hyo | The Tenkan-sen line (red) shows the short-term direction of the market. If it is directed upwards, there is a bullish trend in the market. If down — bearish. The horizontal movement of the Tenkan-sen line shows a trendless market. Kijun-sen (blue) shows a longer-term trend. The interpretation is the same as that of the Tenkan-sen lines. The intersection of Tenkan-sen and Kijun-sen can be interpreted as a signal to open a position. The lines Senkou Span A (yellow) and Senkou Span B (pink) form a so-called “cloud” that is shaded. When the price is above this cloud, there is a bullish trend in the market. When lower — bearish. If the price is inside the cloud, then this indicates a sideways trend. There is a theory that the intersection of the Chinkou Span (green) price line also gives a signal to open a position, but many question this (including the author of the documentation). The Kijun-sen line is also a strong support/resistance level. |
| 10 | Momentum | Momentum provides the usual signals for oscillators: Bullish divergence: If the new Momentum peak is lower than the previous one on a bullish trend, then this indicates the weakness of the bullish trend. Bearish convergence: If the new Momentum peak is higher than the previous one on a bearish trend, then this indicates the weakness of the bearish trend. Momentum also shows overbought/oversold. Unlike other oscillators, it is measured not in relative values, but in absolute values, so overbought/oversold levels must be determined individually for each paper. It should also be noted that the Momentum indicator causes a lot of criticism due to the fact that it uses only two price values, without taking into account movements within its period. Also, using only two values leads to a rather low accuracy of the indicator. |
| 11 | RSI (Relative Strength Index) | The RSI is interpreted as any oscillator: Finding an indicator above the 80 level indicates overbought, finding an indicator below the 20 level indicates oversold (there are also recommendations about the 30 and 70 levels; Transaq allows you to independently adjust the levels for any indicators, so you can set these values yourself so that they most correspond to reality). Bullish divergence: If the new RSI peak is lower than the previous one on a bullish trend, then this indicates the weakness of the bullish trend. Bearish convergence: if on a bearish trend, the new RSI peak turned out to be higher than the previous one, then this indicates the weakness of the bearish trend. |
| 12 | Stochastic | Stochastic is interpreted as any oscillator: Finding an indicator above the 80 level indicates overbought, finding an indicator below the 20 level indicates oversold (there are also recommendations about the 30 and 70 levels; Transaq allows you to independently adjust the levels for any indicators, so you can set these values yourself so that they most correspond to reality). Bullish divergence: if the new Stochastic peak is lower than the previous one on a bullish trend, then this indicates the weakness of the bullish trend. Bearish convergence: if on a bearish trend, the new Stochastic peak turned out to be higher than the previous one, then this indicates the weakness of the bearish trend. The second stochastic line is built as an auxiliary one and helps to cut off false signals and random deviations of the indicator. |