Predicting the future value of shares is not based on guessing or luck. Traders and investors use technical indicators to study past price behaviour and estimate how a stock may move in the future.
This article explains important indicators such as RSI, Aroon Oscillator, Moving Averages, Volume, and Support & Resistance in a simple and easy-to-understand way.
Why Technical Indicators Are Used
Share prices move due to demand and supply, company performance, news, market sentiment, and human emotions such as fear and greed. Technical indicators help traders understand these movements through charts.
Indicators are mainly used to identify the trend, find good entry and exit points, and avoid emotional decision-making.
Relative Strength Index (RSI)
RSI measures how strong or weak a stock is by comparing recent price gains and losses. The RSI value moves between 0 and 100.
When RSI goes above 70, the stock is considered overbought, meaning the price may fall or slow down. When RSI goes below 30, the stock is considered oversold, meaning the price may rise.
RSI is mainly used to time entries and exits rather than to identify long-term trends.
Aroon Oscillator
The Aroon Oscillator helps identify whether a stock is trending or moving sideways. It consists of two lines: Aroon Up and Aroon Down.
When the Aroon Up line stays high, it indicates a strong upward trend. When the Aroon Down line stays high, it indicates a strong downward trend. If both lines remain low, the stock is usually moving sideways.
Aroon is very useful for avoiding stocks that do not have a clear direction.
Moving Averages
Moving Averages smooth out price fluctuations and help identify the overall trend. Commonly used averages include the 20-day, 50-day, and 200-day moving averages.
When the price stays above a moving average, the trend is considered bullish. When the price stays below it, the trend is considered bearish.
Moving average crossovers are also used to identify possible trend changes.
Volume
Volume represents the number of shares traded in a given period. It confirms whether a price movement is strong or weak.
If prices rise with high volume, the move is considered strong. If prices rise with low volume, the move may not last long.
Support and Resistance
Support is a price level where buying interest is strong enough to stop the price from falling further. Resistance is a price level where selling pressure prevents the price from rising further.
Traders often buy near support and sell near resistance. A breakout above resistance with high volume usually indicates a strong move.
Using Indicators Together
Relying on a single indicator can be misleading. Better decisions are made when multiple indicators confirm the same signal.
For example, RSI near oversold levels, price near support, rising volume, and a strengthening trend together provide a higher probability setup.
Conclusion
Indicators such as RSI, Aroon Oscillator, Moving Averages, Volume, and Support & Resistance help traders analyse price behaviour and estimate future share movement.
They do not predict exact prices but help improve timing, reduce emotional trading, and increase consistency.