• Indicators are the lines or graph on a

price chart. Indicators help us to

analyse the price movement of the
stock. Indicators are built on preset
logic using which traders can
supplement their technical study
(candlesticks, volumes, S&R) to arrive
at a trading decision.
• Indicators are of two types:
1. Leading 2. Lagging

Indicators • Leading Indicators:

• It leads the price i.e., it gives signal of
reversal or new trend in advance .But we
should understand that all leading
indicators are not accurate .A majority of
leading indicators are called oscillators as
they oscillate within a range.
• Lagging Indicators:
• On the other hands the lagging
indicators give signals of the trend after it
has occurred . One of the best lagging
indicator is moving average.
 • The Exponential Moving Average (EMA) is a type
of moving average that places a greater weight
and significance on the most recent data points.
The EMA reacts more significantly to recent price
changes than a simple moving average (SMA),
which applies an equal weight to all observations
in the period.

Moving The EMA is widely used in trading strategies

for the following purposes:
Average • Identifying Trends: When the price is above the
EMA, it may indicate an uptrend; when below, it
EMA may indicate a downtrend.
• Support and Resistance Levels: EMAs can act
as dynamic support or resistance levels.
• Trading Signals: Crossovers (e.g., when a short-
term EMA crosses above a long-term EMA) can
generate buy or sell signals.
Let us see an example of it to understand it better :
•The black line with circles represents the daily closing prices.
•The red line represents the 5-day EMA
• The 5-day EMA is calculated for each day, giving more weight to recent prices.
• Day 1: EMA = 10 (same as closing price)
• Day 2: EMA ≈ 10.67
• Day 3: EMA ≈ 11.78
• Day 4: EMA ≈ 13.18
• Day 5: EMA ≈ 14.79
• Day 6: EMA ≈ 15.52
• Day 7: EMA ≈ 16.68
• Day 8: EMA ≈ 18.45
• Day 9: EMA ≈ 19.30
• Day 10: EMA ≈ 20.20

Key Observation:

•The EMA line is smoother and lags behind the actual closing prices, providing a more stable trend
indication.
•When the price is above the EMA, it indicates a potential uptrend.
•When the price is below the EMA, it suggests a potential downtrend.
RSI (Relative Strength Index)
If we want to understand RSI then before that we should understand that what is
momentum? Momentum in trading refers to the speed and direction of a price movement .
It's the tendency of a security's price to continue moving in the same direction for a period
of time .
Understand this with the help of example given below:
Imagine a snowball rolling downhill
•Small snowball (slow price movement): At the top of the hill, the snowball is small and moves
slowly. This is like a stock with a small price increase.
•Gaining momentum (accelerating price): As the snowball rolls down, it gets bigger and faster. This is
similar to a stock whose price is increasing rapidly.
•Big snowball (strong momentum): At the bottom of the hill, the snowball is huge and moving very
fast. This represents a stock with strong upward momentum, where the price is increasing significantly.
• RSI is a leading momentum indicator
which helps in identifying a trend
reversal. It oscillates between the
range of 0 to 100 and with the help of
this range we take decision. RSI
mainly shows the internal strength of
the [Link] is one of the best leading
indicator as it gives the best signal to
enter the trade during the sideway
market.
• The objective of using RSI is to help
the trader identify over sold and
overbought price areas. Overbought
implies that the positive momentum in
the stock is so high that it may not be
sustainable for long and hence there
could be a correction. Likewise, an
oversold position indicates that the
negative momentum is high leading to
a possible reversal.
• We generally use 14 days period for
RSI as it is more suitable for it.
As you can see in the image that when the RSI reading is between 30 and 0,
the security is supposed to be oversold and ready for an upward correction.
When the security reading is between 70 and 100, the security is supposed
to be heavily bought and is ready for a downward correction.
The first vertical line marked from left shows a level where RSI is below 30,
in fact RSI is 20.8. Hence RSI suggests that the stock is oversold. This gives
the trader a confirmation to go long! But we should not be reliable on the
stocks we should also see the support and resistance.
The second vertical line, points to a level where the RSI turns 75.36, a value
which is considered overbought. Hence, if not for looking at shorting
opportunities, the trader should be careful in his decision to buy the stock.
 • VWAP considers Average price + Volume.
• VWAP can be used for intraday trading and not for
positional trading.
• VWAP cannot be applied to the index because as the

VWAP(Volume first word says volume so it is clear that the index chart
does not volume . We can see VWAP in index futures.

Weighted The best way to identify the buying and selling

signal with the help of VWAP is :

Average) • When the price is below VWAP then it is considered that

the stock will be bearish and if the price is above the
VWAP then there are chances that it will be bullish.
Now let us understand the VWAP with the help of
example
• As you have just seen that when the price of stock was above the VWAP there was
upward movement of the stock price and when the price was below the VWAP then the
price moved downward. This is the traditional way of using VWAP.
Pivot Points

A pivot point is a technical analysis indicator used to determine the overall trend of the
market over different time frames. It's calculated as an average of the high, low, and
closing prices from the previous trading day. Pivot points are often used by traders to
identify potential support and resistance levels.
Pivot point help us in :
•Trend Identification: If the price is above the pivot point, it's typically considered bullish. If the price is
below the pivot point, it's considered bearish.
•Support and Resistance: Pivot points help traders to identify potential support and resistance levels.
These levels are where the price might reverse or break through.
•Entry and Exit Points: Traders use pivot points to determine where to enter or exit trades. For
example, if the price is approaching a resistance level, a trader might consider selling. Conversely, if the
price is approaching a support level, a trader might consider buying.
•Risk Management: Pivot points can be used to set stop-loss and take-profit orders. This helps traders
to manage their risk by defining levels where they will exit the trade if the market moves against them or
take profit if the market moves in their favor.
Let us understand this with the help of example:
 • Let's assume you have the following pivot point levels calculated:
• Pivot Point (P): $145
• First Resistance (R1): $150
• First Support (S1): $140
• Scenario: Bullish Trade Example with Candlestick Pattern
[Link] stock opens above the pivot point at $147.
[Link] see a bullish candlestick pattern (e.g., a Hammer) forming at the pivot point
($145), indicating a potential reversal upwards.
[Link] decide to buy when the price confirms the reversal and starts to rise from the pivot
point.
[Link] a take-profit order at the first resistance level ($150).
[Link] a stop-loss order slightly below the pivot point, say at $143.
Outcomes :
•If the price moves from $145 to $150, you make a profit of $5 per share.
•If the price drops to $143, your stop-loss order will be triggered, limiting your loss to $2 per share.