Best Indicator on TradingView | How to Trade?

If you are a serious trader or want to become one, TradingView is the number one tool you will use for your stock analysis. TradingView has good charting tools and social sharing options (especially for indicators). That is why it is very popular among content creators. But we are not here to talk about YouTube. We are here to discuss indicators. So many indicators are available on TradingView, and picking just one indicator is difficult. In this post, we will show you which is the best indicator on TradingView. 

Introduction

Trading daily can be stressful. Yes, been there, done that. However, it can be even more stressful when your charts are filled with indicators. Many traders make the mistake of including too many indicators on their charts. It’s hard to read and impossible to make a good trade. My rule is to keep it simple. Only include three indicators – that’s it. Anything above that is just making your day-trading life stressful. 

Yes, TradingView gives you plenty of options – from TV indicators to custom indicators made by others. However, picking the one that matches your trading style is hard. Also, not all indicators work with every timeframe. 

Indicator Selection

You must consider various factors when searching for the best indicator on TradingView. Here are some essential aspects to keep in mind:

• Indicator type: Choosing between leading and lagging indicators is crucial. Leading indicators predict future price movements, while lagging indicators follow price trends.
• Trading style: Your trading style matters. Scalpers, day traders, and swing traders may prefer different indicators based on their timeframes.
• Volatility consideration: In highly volatile markets, oscillators like the Relative Strength Index (RSI) can be invaluable.

The best indicator on TradingView

TradingView offers a vast array of indicators, each with its unique strengths. Let’s delve into some other top contenders:

Bollinger Bands

Bollinger Bands consists of three lines: the middle line is a simple moving average flanked by two standard deviation lines. They help traders identify volatility and potential reversals. You can see overbought or oversold conditions with it. 

When those bands are expanded, the market is loud or volatile. When the bands are contracted, you know the market is quiet, and there is little volatility. 

The middle line represents a simple moving average (default is set to a 20-day period). The two other lines represent two standard deviations below and above the middle line. 

When the price hits the upper band, you know the price will go towards the middle again (going down). When the price hits the lower band, the price will go up towards the middle. It’s like you are looking at support and resistance lines. 

This strategy work only if there is no trend. Basically, when the stock is moving within some range and there is no obvious trend (up or down) you can trade this strategy. 

MACD (Moving Average Convergence Divergence)

The MACD is a versatile tool for detecting changes in the strength, direction, momentum, and duration of a trend. It’s especially handy for identifying trend reversals.

The MACD line is calculated by subtracting the 26-period EMA from the 12-period EMA. A signal line is a nine-day EMA of the MACD line and it functions as a trigger for buy or sell signals. When the MACD line crosses above the signal line you can buy the stock. When the MACD line crosses below the signal line, you can sell the stock. 

MACD is a lagging indicator because it tracks past pricing data and it cannot predict the future. MACD signals could be used in combination with a variety of other technical indicators, such as Bollinger Bands, to help you make more informed decisions.

RSI (Relative Strength Index)

The RSI measures the speed and change of price movements. It’s perfect for spotting overbought and oversold conditions, aiding in entry and exit decisions.

RSI is often plotted beneath the graph, just like the MACD indicator. When the RSI is above 70, an asset is considered overbought, and you can expect the price to fall. When the RSI is below 30, an asset is considered oversold, and you can expect the price to rise. 

The RSI works best in trading ranges. Basically, if there is no visible trend, you can use this indicator. It’s calculated using average price gains and losses over a given period of time. The default time period is 14 periods, with values bounded from 0 to 100.

You can use RSI alongside with MACD. As mentioned before, the MACD indicator measures the relationship between two EMAs. RSI, on the other hand, measures price changes in relation to recent price highs and lows. 

Read more: How to Analyze Stocks