Trading indicators are mathematical calculations plotted as lines on a price chart and can assist traders in identifying specific signals and market trends.
There are two kinds of trading indicators: leading indicators and lagging indicators. A leading indicator is a forecast signal that predicts future price movements, whereas a lagging indicator examines past trends to determine momentum. Below is a list of the most popular NinjaTrader indicators.
Moving average (MA)
The MA, also known as the simple moving average' (SMA), is a price trend indicator used to determine the direction of a current price trend without the interference of shorter-term price spikes. The MA indicator produces a single trend line by dividing a set of price points from a financial instrument by the number of data points.
The data used is determined by the length of the MA. Using the MA indicator, you can study support, resistance, and previous price action levels. This means you can predict possible future patterns.
Stochastic Oscillator
A stochastic oscillator is a momentum and trend strength indicator that compares a specific closing price of an asset to a range of its prices over time. As such, it employs a 0 to 100 scale.
A reading of less than 20 indicates an oversold market, while a reading of more than 80 indicates an overbought market. However, a correction or rally will not necessarily follow if there is a strong trend.
Ichimoku Cloud
Like many other NinjaTrader indicators, the Ichimoku Cloud identifies support and resistance levels. However, it estimates price momentum and provides traders with signals to aid decision-making.
The literal translation of ‘Ichimoku' is ‘one-look equilibrium chart,' which is why this indicator is popular among traders who require a lot of information from a single chart. It identifies market trends while displaying current support and resistance levels and forecasting future levels.
Bollinger Bands
An indicator called a Bollinger band shows the typical trading range for the price of an asset. The width of the band varies in response to recent volatility. The perceived volatility of the financial instrument is lower the closer the bands are to one another or the “narrower” they are. The perceived volatility is higher, the wider the bands are.
Bollinger bands are primarily used to forecast long-term price movements and identify when an asset trades outside its typical levels. Price fluctuations outside the band's upper and lower bounds may indicate overbought or oversold conditions.
Fibonacci Retracement
The Fibonacci retracement is an indicator that can predict how far a market will deviate from its current trend. A retracement occurs when the market temporarily declines. Traders frequently use the Fibonacci retracement to confirm their suspicions that the market is about to move.
This is because it assists in locating potential points of support and resistance, which may indicate an upward or downward trend. This indicator allows traders to find levels of support and resistance, which can assist them in determining where to place stops and limits and when to open and close positions.
To Summarise
Whether you are interested in forex trading, commodities trading, or share trading, using technical analysis as part of your strategy, including studying various trading indicators, can be beneficial. You can use your knowledge and risk tolerance to determine which of these NinjaTrader indicators is best for your strategy.
