Stock Chart Indicators are key components for technical analysis. Below are some interesting indicators that could be valuable for your trading!
Stock chart indicators are helpful tools for detecting trading opportunities. However, there are many stock chart indicators available on every trading platform. Which indicators are most useful?
In this article, we will show several stock chart indicators that we think very helpful for stock analysis. We will also provide you a script to import indicators to the FutuBull platform and create this topic in our forum for sharing opinions!
Disclaimer: The trade strategies and news coverage in this article are based on our opinions alone and are only for illustration purposes. We are not financial advisors. The information in this article should not be taken as financial advice or as guidance for buying or selling securities. We are only sharing our opinions based on personal experiences. An individual trader's results may not be typical and may vary from person to person. It is important to keep in mind that there are always risks associated with investing in the stock market and potentials for heavy losses. Thus, your trading should be based on your research and due diligence.
List of Stock Chart Indicators
1. EMA (Exponential Moving Average) Indicators
Definition: The EMA is an indicator for tracking the price of an investment (Stock in our case) over time with a weighted moving average that gives more weighting or importance to the recent price data. The detailed definition is here.
How to set up and use EMA Indicator:
Select on any stock and click on the highlighted setting button. Then set EMA Trend Lines to 7, 15, 30, 50 as follows.
Select on any stock and click on the highlighted setting button. Then set EMA Trend Lines to 7, 15, 30, 50 as follows
The price at 30 EMA is at the bottom. If the price breaks the 30 EMA, then it is better to stop loss from the trade. Price above 7 EMA is the strongest upper trend pattern. Example as follows with Ticker: LIVX.
The highlighted circles are the stock prices at 7, 15, 30, and 50 days before the current date. You can see that these circles are clearly pointing to the price movement with a red upper arrow signal. It is beneficial to highlight these prices and the price movement pattern. If 7-day price > 15-day price > 30-day price > 50-day price is observed, then the stock shows an upward trend.
Note, this EMA trend indicator does not exist in FutuBull's built-in functions. We will share the free script and installation guide if you subscribe to our website!
As you can see, the EMA trend for LIVX shows 7 EMA > 15 EMA > 30 EMA > 50 EMA, which is a strong upper trend in stock price movement. This would be a potential growth stock that we like to trade.
7 EMA and 15 EMA are considered as the upper trend lines. When the stock price corrects to 7 EMA or even 15 EMA lines, it will likely bounce up.
If the price falls below the 30 EMA, then it is a signal that the stock price tends to move downwards.
There will be strong support at 50 EMA on the 1D chart. Traders usually like to bet on the stock price to bounce up at this point. However, if the stock price breaks through 50 EMA and cannot recover within three days, then it is confirmed that the bull trend has switched to a bear trend.
When to buy and sell
Stock Entry Point:
Pre-requisite: No big sell-off identified in the market or on the specific company and purely technical correction
Entry Point for Swing Traders: Price corrected to 7 EMA and 15 EMA in 1h chart for industry-leading stocks, or Price corrected to 7 EMA and 15 EMA in 1D chart for other stocks
Entry Point for Day Traders: Stock Price break up VWAP first and then corrected towards VWAP line
Stock Exit Point:
Lock the profit: Stock Price is far away from all trend lines in 1h or 1d chart.
Lock the loss: a few points under 15 EMA when purchased the stock between 7 EMA and 15 EMA. Reason: All big institutions and brokers know the exact stop-loss prices set by all traders, and tend to move the price down to the price range where the majority of traders set on and wash the traders out, then bounce the price back. So we prefer to set the stop loss a few points lower than 15 EMA.
We still use LIVX 1D chart below to show the buy, sell points.
We are only looking at the Up Trend Pattern at the moment (the Down Trend pattern is similar). For beginners, it is good to just trade on one side. Even in a bear market, we can still find uptrend stocks such as those reverse index ETFs. e.g., SPXS or UVXY for reverse SPY, SQQQ for reverse QQQ, and SDOW for reverse DOW.
2. VWAP (Volume Weighted Average Price) Indicator
Definition: VWAP is a trading benchmark that shows the average price a security has traded at throughout the day, based on both volume and price. The detailed definition is here.
How to set up and use VWAP Indicator:
VWAP is a built-in indicator in FutuBull. It automatically appears on the screen of the Time Frame Chart.
Day traders use VWAP heavily to track stock movement and possible trending and confirm the entry and exit point during the day. It is also heavily used by swing traders to find the best entry point during the day.
Stock Price tends to move around the VWAP indicator throughout the day. We use the following three stocks to show how to use VWAP Indicator.
1) VWAP Indicator for JD Chart on Jan 8, 2021.
Firstly, from JD's 1D Chart, we noticed 7-day price > 15-day price and 7 EMA crosses 15 EMA above, which means the stock price tends to move higher. Secondly, the stock price on Jan 7 was a correction and hit on 15 EMA. So the price has a higher chance to bounce up from here. Of course, it is not guaranteed. But, it's still worth taking a shot at up moving stock price on Jan 8.
Note: The key point for day trading using VWAP is patience, i.e., wait patiently for the price to return to the VWAP line if you missed the entry point. While waiting for the price to go down, you will experience the fear that the price will continue to go up and never turn back and may buy on FOMO. Sometimes, it works if you get are lucky. But most of the time, you may find yourself buying too high and, all of a sudden, the price goes down. When you purchase the stock at a relatively high price, it is also hard to set up for the stop-loss. Thus, the risk-reward-rate is not good at all. The bottom line, it's better to miss an opportunity than lose money.
When to buy and sell
Then we look into the JD's Time Frame Chart below. We have listed potential entry and exit points in the chart as well for your reference. Note: This assumes it's for Day Trader Only.
For Swing Traders, it is also good to buy the stock when the price is close to VWAP.
2) VWAP Indicator for HYLN Chart on Jan 8, 2021.
First, from HYLN's 1D Chart, we noticed the 7-day price was close to the 15-Day price but 15-Day price < 30 EMA, and though 7 EMA is about to cross 15 EMA above, 50 EMA > 30 EMA > 15 EMA > 6 EMA. It means the stock price still does not have a strong signal to increase. So, the price can move either direction in this case but with a bit higher chance to decrease as the bear pattern is still strong. Of course, it is not 100% guaranteed but it's still worth a bet on the stock price moving downwards on Jan 8.
When to buy and sell
Note: Usually, we won't select this stock as it does not fit our screening criteria with the EMA indicator. But we continue to use this for introducing the 2nd VWAP Scenario.
In the HYLN Time Frame Chart below, we have listed potential entry and exit points in the chart for your reference. Note: This assumes it's for Day Trader Only.
3. RSI (Relative Strength Index) Indicator
Definition: RSI is a momentum indicator used in technical analysis that measures the magnitude of recent price changes to evaluate if the stock is overbought or oversold. The RSI is displayed as an oscillator ranging from 0 to 100. An RSI value > 70 indicates the stock is overbought and may be primed for a trend reversal or corrective pullback in price. An RSI value < 30 means the stock is oversold and may be primed for a trend reversal in price. The Detailed definition is here.
How to set up and use RSI Indicator:
RSI is a built-in indicator in FutuBull. You can select it from the indicator management as shown below.
RSI is heavily used by day traders and swing traders to identify if the stock is overbought or oversold. It is a good helper indicator to identify if it is a good entry point to sell or buy the stock.
However, people tend not to use RSI alone to determine the entry point and will use it along with other indicators such as MACD or the EMA Trend Lines to identify the entry or exit point
When to buy and sell
We use TSLA 4h Chart to show the indicator below. We have listed potential entry and exit points in the below chart as well for your reference. Note: This assumes it's for Swing Trader Only.
Note: On Jan 8, we noticed the TSLA's price was far away from all trend lines and the RSI value > 80. Technically, there could be a potential pullback for the stock price. So, traders would lock in the profit or even short the stock or buy put options at this position. In fact, if you checked, the aftermarket price of TSLA was already down to $867.51 from $880.02 on Jan 8, 2021.
4. GMMA (Guppy Multiple Moving Average) Indicator
Definition: The GMMA is a technical indicator that identifies changing trends, breakouts, and trading opportunities in the price of an asset by combining two groups of MAs based on different time periods. One is a short-term group of MAs and the other a long-term group of MAs. Both contain six MAs, for a total of 12 lines. The detailed definition is here.
How to set up and use GMMA Indicator:
GMMA is not a built-in indicator in FutuBull. So, we have developed a script for it. We will share the script and the installation guide for free if you subscribe to our website.
The short-term MAs are typically set for 3, 5, 8, 12, 15, and 19 periods and the long-term MAs for 30, 35, 40, 45, 50, and 60 periods.
· When short-term MAs are above and diverging from long-term MAs or short-term MAs are below and converging to long-term MAs, it indicates a high chance of a price uptrend.
When short-term MAs are above and converging to long-term MAs or short-term MAs are below and diverging from long-term MAs, it indicates a high chance of a price downtrend.
When both MAs become compressed with each other or even crisscross, it indicates a price trend reversal is possible.
Traders often trade in the direction of the long-term MAs and use the short-term MAs as trading signals for entry or exit.
When to buy and sell for Potential Stock
We use the RIDE 1D Chart below to show the indicator. We have listed potential entry and exit points in the chart as well for your reference. Note: This assumes it's for Swing Trader Only.
Note: As of Jan 8, the price had corrected back to short-term MAs but the risk-reward-rate was very low. So, there was no good entry point for this stock given the limited space for stopping loss.
5. TD9 (Tom Demark 9) Indicator
Definition: You may find there are some numbers shown in the above chart and wonder what they stand for. It is the TD9 Sequence Indicator. We may use it to find the turning point of the stock price. This indicator is a master tool in the field of technical analysis. Essentially, with any time frame, if the stock chart shows nine consecutive candles above or below the closures of four prior candles, then it prints a TD9.
How to set up and use TD9 Indicator:
TD9 is not a built-in indicator in FutuBull. We have developed the script and the installation guide, which we will share with you for free if you subscribe to our website.
The indicator will place the sequence numbers of 6, 7, 8, and 9 in the stock chart if consecutive candles appear above or below the closures of four prior candles.
When the price is in a downtrend and a "9" appears, the stock price may have reached a turning point and tends to go up.
When the price is in an uptrend and a "9" appears, the stock price may have reached a turning point and tends to go down.
Note: It is not 100% guaranteed that the TD9, similar to other indicators, will work. We recommend using TD9 in combination with other indicators for finding the best entry or exit points.
When to buy and sell
We use the RUN 1D Chart to show the TD9 indicator below. We have placed potential entry and exit points in the chart as well for your reference. Note: This assumes it's for Swing Trader Only.
Summary
Above are the top five Stock Chart Indicators we identified. We will continue to provide other interesting indicators such as MACD for your reference in our future blogs. Of course, the more indicators you know the better. It is always good to find and master your favorite indicators to support profitable trading.
If you are interested in getting the free scripts for generating the above indicators for FutuBull, please subscribe to our website. We will also introduce the indicators to TradingView in the future. Stay tuned!
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