MACD is the abbreviation of moving average convergence/divergence. Here is how the volume looks like on the chart. Closely watch for day trading indicators like this that can clue you in when things are about to change. When the stock goes up or down for quite a while, you can note exhaustion moves, which are sharp moves, which, along with higher volume, show a possible trend reversal. So, keep in mind that an apparently sharp trend with decreasing volume is not such a good signal. Volume is about market interest, and it has to support the trend. This is why when you see an uptrend but a decreasing volume, then there is a lack of interest and the trend may soon change its direction downwards. The bulls want higher prices and increasing enthusiasm to continue their long positions.
Since volume is directly defined by the number of trades in the market, an increasing trend should be followed by a rising volume. Basically, volume is not just a profitable tool – it can also help you reduce risk. A lower volume shows the weakness of a trend and traders prefer to stay away from entering the market because the trend is not so strong. When the volume is higher, it suggests the market is stronger and you can have confidence in the current trend. The trading volume is a great indicator because you can really understand how much traction a trend or a price rally has. The volume is particularly important in stock trading because it shows how active the traders were during a certain period. Using a combination of important day trading indicators can help you gain a balanced view of what to expect. Take a balanced approach by watching the SMA, and keep an eye on volatility with the EMA sight.
Keeping this in mind, you can choose what indicators to use for day trading. The SMA, on the contrary, is more balanced, giving equal consideration to both recent and older price changes. The EMA pays more attention to the recent price movements against the older ones, which makes it more volatile. However, only the simple and the exponential MAs are used most of the time. When we say moving averages, we refer to the simple ones, but there is also the exponential moving average (EMA), smoother moving average (SMMA), and the linear weighted moving average (LWMA). In this example below you will see what the moving averages look like and what signals can generate a fast and a slow MA: When the fast MA crosses the slow one from bottom to top, then it is time to buy, and vice versa. The best signal comes from at least two MAs – a fast MA and a slow MA. MAs with lower periods (fast MAs) are more volatile, while the ones with higher periods (slow MAs) tend to be smoother. It is particularly important to watch the MA angle – if the indicator goes horizontally, then there is a sideways trend, and if there is a visible angle, then the price is trending. As the price fluctuates, its MA goes up or down as well. The main function of the MA is to average the stock price over a determined period. In fact, MAs are one of the oldest indicators for analyzing stock prices. It is worth mentioning that many other indicators are built based on moving averages. An MA is a trend following indicator that helps you find the trend without being distracted by the price fluctuations and high volatility. Moving averages (MAs) represent one of the most popular technical day trading indicators and are used by all the traders, no matter their style, approach, psychology, and so on. Some of the indicators are more important than others, and we want to show you three of the most potent indicators that can help you predict the stock price with more accuracy. Do their signals provide the same value? No. Technical indicators are a click away on the chart, in the technical indicators menu, but there are so many options, it can be difficult to understand the best indicators for day trading.