- 4.1 1. Relative Strength Index (RSI)
- 4.2 2. Exponential Moving Average (EMA)
- 4.3 3. Moving Average Convergence Divergence (MACD)
- 4.4 4. Average Directional Momentum Index (ADX)
- 4.5 5. Fibonacci retracement
- 4.6 6. Squeeze pro indicator
- 4.7 7. Simple Moving Average (SMA)
- 4.8 8. On-Balance-Volume (OBV)
- 4.9 9. Bollinger Bands
- 4.10 10Stochastic Oscillator
Day trading is one of the most exciting things of the current century. But the works you put in needs to be wise and smart, and it requires you to understand the trading world to gain maximum profits. After all, your goal is to achieve maximum gains from slight movements of prices.
A successful day trading includes understanding the techniques and tools. This includes knowing about day trading best indicators. You will need to find the indicators that suit your target, and they will help you interpret trends and day trading signals. As a result, you will be able to cater to trading strategies accordingly.
We have a whole guideline waiting for you here. Throughout the article, you will learn about day trading basics. And eventually, we will enlighten you with the top 10 best indicators for day trading in 2021.
What is Day Trading?
So, we begin our discussion with a short brief on day trading. What does day trading mean? When does regular trading actually become day trading?
Day trading depends on the time of trading assets held in the hand of the traders. The overall process is swift and smooth. A day trader may hold assets for a few seconds to less than a day. This means that the trader is trading assets within one day. And that is where the term “Day Trading” comes.
Day trading cryptocurrency is exactly how the terminology sounds. You trade your assets within one day and do not move with them after 24 hours. So, it involves making decisions quickly to make maximum profits within a day. Thus, you will need the leading indicators for day trading to guide your strategies.
What Does Trading Indicator Mean?
Day trading is a very skillful task for traders, and if you are not good at it, you will incur losses. So, you will need to make the best decisions quickly. And that is why you need the most accurate intraday trading indicators.
Trading indicators and numerical indicators help you understand the trading market. They help traders figure out which directions prices move. These are calculation tools to predict the signals of asset prices in the trading market.
Trading indicators are the best friends of day traders. Almost every day, traders use these indicators to trade in the market. Today, our focus is on guiding you through the 10 best day trading indicators you can use in 2021.
Check Them Too
- Technical Indicators for Swing Trading
- General Indicators for Swing Trading
- Swing Trading for Dummies
- Swing Trading Strategies
- Swing Trading VS. Day Trading
- Best Stocks for Swing Trading
- Bullish VS. Bearish Market
3 Groups of Day Trading Indicators
Just like any other tool, day trading has many indicators in the market. The best-suited ones for you will depend on quite a few things. For instance, your day trading risk management and strategies will largely impact the indicator you decide to use.
All the day trading indicators can be divided into 3 groups. They are as follows:
This is the first group of forex day trading indicators. Sentiment indicators focus on the number of trades and traders to show the position of trades and traders in a particular currency pair.
Day traders can use this indicator to find out about extreme market conditions. As a result, day traders can figure out where prices can reverse and bring them losses.
Signal indicators provide warning signals when the market faces an alarming event. This can include signals for price crossovers. Day traders can use these indicators to strategize opening, closing, or managing trading assets.
This is the last group of indicators on our list. These indicators supplement the trading strategy of a day trader. Also, they provide usual market information to the traders. As a result, you can create generalized and straightforward strategies for day trading.
Top 10 Best Indicators for Day Trading in 2021
Technical indicators matter a lot for successful day trading. They analyze the volume, price movements, and other valuable data.
Here are 10 of the best indicators for day trading you should consider using in 2021.
1. Relative Strength Index (RSI)
RSI is a momentum indicator for intraday trading. It calculates the extent to which price changes in a day. The developer of this indicator is J. Welles Wilder. After that, Andrew Cardwell included positive and negative reversals into the indicator. And then, Constance Brown improved the overall indicator finally.
The relative Strength Index is a momentum oscillator. It indicates the speed at which price changes and moves. The range of the index is between 0 to 100.
A more than 70 index indicates overbuying of the RSI. And a less than 30 index indicates the oversell of the RSI. It is a trendy intraday trading indicator because of its many benefits.
You can also find out the past movements of the assets through this indicator. RSI also indicates you to buy assets when they are oversold and sell assets when they are overbought.
A convergence appears when the RSI’s highs and lows move according to the price changes. As a result, you can also figure out the short-term and long-term trends.
2. Exponential Moving Average (EMA)
Another name of Exponential Moving Average is Exponentially Weighted Moving Average. The indicator puts more weight on the recent data to indicate price trends.
EMA reacts more to recent price variations. Traders can use EMA to find signals of trades in terms of crossovers or divergences. You can mainly find trends in oversold and overbought market conditions. This indicator is also famous for finding resistance levels, support, reversals, and many more.
The most significant disadvantage of the indicator is that it relies heavily on trends. So other trading signals may not appear or may appear late. As a result, day traders should consider using other indicators for intraday trading along with EMA.
3. Moving Average Convergence Divergence (MACD)
Another momentum indicator is MACD. It indicates the moving averages of the price of two securities. Also, MACD is one of the best indicators for day traders today. It is also one of the best stock indicators for day trading.
Gerald Appel developed the Moving Average Convergence Divergence indicator in 1970. It is a volume indicator that also uses chart indicators for day trading. You will find two oscillating lines on the stock chart. The crossover lines provide trading trends to the traders.
When the MACD line is over the signal line, it is time for traders to buy trades. And the line being below the signal line indicates that it’s time to sell away the security. It is a great tool to follow momentum and trends together.
4. Average Directional Momentum Index (ADX)
ADX is a popular technical indicator that helps traders to understand trend strength – many different markets use this indicator.
ADX uses two different indicators to find out the strength of the market trend. These are the positive directional indicator and the negative directional indicator.
You can consider the trend to be strong when the ADX is more than 25. A below 20 ADX score means the trend is weak. Thus, ADX is a handy trend indicator for day traders.
5. Fibonacci retracement
Fibonacci retracement is based on the Fibonacci numbers. It is a remarkable technical tool for day trading indicators.
This indicator predicts the future prices of the assets. Traders can also spot support and resistance levels of assets through this indicator. With the future price indications, you can easily identify profitable trading opportunities.
6. Squeeze pro indicator
This is one of the most popular day trading indicators for day traders. The best feature of the indicator is its adaptation to market volatility. You will find three types of squeezes with this indicator. These are low, mid, and high squeezes.
Day traders can use this indicator for long and short-term trading. You can gain consistently high profits with this indicator. It is a highly significant indicator for day traders to use every day.
7. Simple Moving Average (SMA)
Simple Moving Average is a widely used indicator by many day traders. The indicator uses the average price of a security over a certain period. This way, you can easily predict the future price of the security for trading.
The calculation of SMA is straightforward. All you have to do is add the asset prices and divide the sum by adding the total periods.
Traders can use this indicator to determine the price action of an investment. You can also find out the direction of the trend from using SMA.
8. On-Balance-Volume (OBV)
OBV uses price volumes to indicate the changes and trends. Traders can use OBV to predict the market price of an asset. You can determine the buying and selling pressure of security by using the flow of volume.
OBV is also very useful to predict future prices. You can determine breakouts and breakdowns as well by using OBV. As a result, you will be able to make a better decision that brings the best results.
9. Bollinger Bands
Bollinger Bands can reveal the volatility of asset prices over a period of time. It is an indicator that creates price charts with relevant information. It is one of the best mt4 indicators for intraday trading.
This indicator is helpful to determine the value of the price. It means that you can figure out whether the current price of an asset is high or low. You can also find out profitable trading options in the market with Bollinger Bands.
Stochastic Oscillator is a very common momentum day trading indicator. The indicator uses resistance and support levels to analyze asset prices. It also uses resistance and support levels for trading analysis.
This indicator compares the closing price and the price range of an asset. As a result, traders can find the overbought and oversold prices.
The Stochastic Oscillator is a great tool to determine the momentum of a security. It uses historical data for such calculations. For traders, it gives an excellent accuracy for buying and selling of trades.
What Indicators Do Professional Day Traders Use?
Answer: Professional day traders use indicators from the top 10 list we provided you with. Among them, some of the popular ones are MACD, RSI, OBV, and others.
Which Time Frame is Best for Day Trading?
Answer: Day trading means using a short-time approach for buying and selling of trade. The most common time frame is 15 minutes to 4 hours.
How Many Trades Do Day Traders Make Per Day?
Answer: The number of trades a day trader might make per day depends on the strategies. On average, day traders usually make a hundred to a few hundred trades each day.
Why Do Most Day Traders Fail?
Answer: One of the primary reasons why most traders fail is a lack of knowledge. Day traders sometimes can fail to understand the market and asset prices properly. They also fail to evaluate risks and make profitable strategies.
hat are the 4 Types of Indicators?
Answer: The 4 types of indicators are, Input, Output Outcome, Impact
What is the Best EMA for Day Trading?
Answer: The best EMA for day trading is 8 and 20 days. If you are a long-term day trader, you can also opt for 50 and 200-day EMA.
Which is the Best Trend Indicator?
Answer: The Average Directional Momentum Index (ADX) is considered the best trend indicator. It is also one of the most accurate trend indicators out there.
Now you know about the top 10 best indicators for day trading in 2021. If you want to find the most suitable one, these are the basic guidelines you need. But we must tell you that there is no best one.
You will have to pick an indicator that works best in the situation and strategies. The best one will work the most perfectly for you. And it will suit your strategies to bring you maximum profits. It is also a great practice to combine different indicators.