The Ultimate Guide to Indicator Categories in Technical Analysis

Whether you’re a seasoned trader or just diving into the world of technical analysis, you’ve probably encountered dozens of indicators. But not all indicators serve the same purpose. Understanding which category an indicator belongs to helps you use it more effectively—and avoid stacking five tools that all tell you the same thing.

In this guide, we’ll break down the main categories of indicators, explain what each does, and provide examples so you can apply them smartly in your trading strategies.

1. Trend Indicators: Ride the Direction

Trend indicators help you identify the direction of the market—whether it’s going up, down, or sideways. They’re great for spotting trends early or confirming that you’re still in one.

Popular trend indicators include:

• Moving Averages (SMA, EMA, WMA, HMA): Smooth out price to reveal trends.
• MACD (Moving Average Convergence Divergence): Combines two EMAs to measure momentum and trend direction.
• ADX (Average Directional Index): Measures the strength (not direction) of a trend.
• Ichimoku Cloud: Offers trend direction, momentum, and potential support/resistance—all in one view.
• Parabolic SAR: Dots that suggest potential reversal points.
• DMI (Directional Movement Index): Works with ADX to show trend direction.

Use trend indicators to follow the direction of the market, not fight it.

2. Oscillators: Spot Overbought & Oversold

Oscillators help you detect when the market is overbought or oversold—key moments where price may reverse or pause. They typically work best in ranging markets, not trending ones.

Common oscillators:

• RSI (Relative Strength Index): Ranges from 0 to 100; values above 70 = overbought, below 30 = oversold.
• Stochastic Oscillator: Compares closing price to recent highs/lows.
• Stochastic RSI: The stochastic of RSI itself—super sensitive.
• Williams %R: Like the stochastic, but on a reverse scale (-100 to 0).
• CCI (Commodity Channel Index): Measures how far price is from its statistical average.
• Ultimate Oscillator: Combines multiple timeframes for more robust momentum signals.

Use oscillators to find potential turning points—especially when they diverge from price.

3. Volume-Based Indicators: Follow the Fuel

Price moves are only meaningful if they have volume to back them up. Volume-based indicators help you detect buying/selling pressure, confirm breakouts, or warn of false moves.

Top volume indicators:

• OBV (On-Balance Volume): Accumulates volume based on whether price closes up or down.
• VWAP (Volume Weighted Average Price): Shows the average price weighted by volume; used by institutions.
• Chaikin Money Flow (CMF): Combines price and volume to gauge accumulation/distribution.
• A/D Line (Accumulation/Distribution): Tracks money flow into or out of a security.
• VPT (Volume Price Trend): Similar to OBV but adjusts by percentage changes.

Volume confirms the validity of price movement—no volume, no conviction.

4. Volatility Indicators: Measure the Storm

Volatility indicators don’t care about direction—they measure how wild or quiet the market is. These tools are useful for setting stop losses, position sizing, or timing entries in volatile conditions.

Key volatility tools:

• ATR (Average True Range): Measures average price range over time.
• Bollinger Bands: Two standard deviations above and below a moving average.
• Keltner Channels: Based on ATR and EMA—less volatile than Bollinger Bands.
• Donchian Channels: Plots the highest high and lowest low over N periods.

Volatility tells you when the market is calm or explosive—plan your risk accordingly.

5. Stochastic-Type Indicators: Momentum in a Box

This is a subcategory of oscillators. These indicators focus on the relative position of price within a range, helping spot momentum shifts and reversals.

Popular stochastic-based tools:

• Stochastic Oscillator (%K and %D): Classic tool comparing close to high/low range.
• Stochastic RSI: Super-sensitive, used for fast entries/exits.
• Williams %R: Similar to stochastic but easier to read for some traders.
• CCI (Commodity Channel Index): Measures distance from the mean.

Think of these as momentum thermometers—they show when price is stretched.

6. Support, Resistance & Price Action Tools

These tools aren’t “indicators” in the traditional sense, but they’re critical for context.

• Pivot Points: Widely used horizontal levels based on prior highs/lows.
• Fibonacci Retracements: Plot retracement zones like 38.2%, 50%, and 61.8%.
• ZigZag: Filters out smaller price movements to show structure.
• Price Channels: High-low envelopes over time.

Use these as decision zones—where price is likely to react.

7. Custom, Market Internal & Hybrid Indicators

Many platforms (like TradingView) allow for custom indicators that combine logic or track broader market behavior.

Examples:

• Divergence Tools (MACD/RSI Divergence): Show hidden or classic divergence.
• Breadth Indicators (A/D Line, TICK, TRIN): Measure strength of the overall market.
• Order Flow Tools: Volume Profile, Cumulative Delta.
• Sentiment-Based Indicators: Commitment of Traders (COT), Fear & Greed Index.
• TDI (Traders Dynamic Index): Combines RSI + Bollinger Bands + MA.

If you can code it or find it in the community, you can probably trade with it.

Summary Table

Final Thoughts

Understanding the categories of technical indicators isn’t just theory—it’s how you avoid overloading your chart with redundant tools.

Next time you build a strategy or scan for entries, ask: “Do I already have something covering trend, momentum, volume, and volatility?” If yes, you’re on the right track. If not, you might be trading blind.

What Do You Think?

That’s a wrap on the core categories of trading indicators and how to use them effectively.

Now I’d love to hear from you: Which indicator category do you rely on the most in your strategy? Are you more of a momentum trader, or do you lean on volume and volatility?

Drop your thoughts, questions, or favorite indicator combos in the comments.