The 11 Best TradingView Indicators and How to Use Them
TradingView is one of the most popular platforms among traders due to its user-friendly interface, advanced charting tools, and a vast library of indicators. Knowing which indicators to use and how to combine them can make all the difference in successful trading. This article will introduce the 11 best TradingView indicators, supported by research and practical examples, and explain how to use them effectively in your trading strategy.
1. Relative Strength Index (RSI)
Overview
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. It ranges from 0 to 100 and is commonly used to identify overbought (above 70) or oversold (below 30) conditions.
How to Use It
RSI is excellent for identifying potential reversals. For example, a day trader might enter a buy position when RSI falls below 30, indicating that the asset is oversold. Conversely, an RSI above 70 could signal that it’s time to sell.
Case Study
In 2021, a forex trader used RSI on the GBP/USD pair. When RSI dropped to 25, signaling oversold conditions, the trader entered a long position, securing a 50-pip gain as the market rebounded.
2. Moving Average Convergence Divergence (MACD)
Overview
The Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator. It consists of the MACD line, the signal line, and a histogram that shows the difference between the two.
How to Use It
MACD is effective for spotting trend reversals. A bullish crossover occurs when the MACD line crosses above the signal line, indicating a buy signal. A bearish crossover happens when the MACD line crosses below the signal line, suggesting a sell.
Case Study
In 2022, a stock trader observed a bullish MACD crossover on Apple’s chart. The trader entered a long position and made a 10% gain as the stock continued to rise.
3. Bollinger Bands
Overview
Bollinger Bands are volatility indicators consisting of a middle band (usually a 20-day simple moving average) and two outer bands (standard deviations from the average).
How to Use It
When the price touches the upper band, it signals overbought conditions, while touching the lower band suggests oversold conditions. This indicator is particularly useful in range-bound markets.
Case Study
A trader noticed that the price of gold was touching the lower Bollinger Band in early 2023. Coupled with an oversold RSI, the trader entered a long position, leading to a profitable 3% move upward.
4. Fibonacci Retracement
Overview
Fibonacci Retracement is a tool that uses horizontal lines to indicate potential support and resistance levels. Key levels include 23.6%, 38.2%, 50%, 61.8%, and 100%.
How to Use It
Traders use Fibonacci levels to predict where the price might reverse during a trend. For example, in an uptrend, a buy signal might occur if the price retraces to the 61.8% level.
Case Study
In 2022, a trader used Fibonacci retracement on the NASDAQ 100 index during a correction. The price retraced to the 50% level before continuing its upward trend, allowing the trader to capture a 5% gain.
5. Volume Profile
Overview
Volume Profile shows the amount of trading activity at different price levels. It highlights areas where significant buying or selling has occurred.
How to Use It
Volume Profile helps traders identify strong support and resistance zones. A high-volume node can act as a key level to enter or exit trades.
Case Study
A forex trader saw that the EUR/USD pair had a high-volume node around 1.1200. The price bounced off this level several times, confirming it as strong support, leading to a profitable long position.
6. Stochastic Oscillator
Overview
The Stochastic Oscillator is another momentum indicator that compares an asset’s closing price to its price range over a specific period. It ranges from 0 to 100, with values above 80 indicating overbought conditions and below 20 signaling oversold conditions.
How to Use It
Traders often use the Stochastic Oscillator to confirm trend reversals. A buy signal occurs when the oscillator falls below 20 and starts to rise, while a sell signal appears when it crosses below 80.
Case Study
In 2021, a forex trader spotted oversold conditions in the USD/JPY pair using the Stochastic Oscillator. The trade resulted in a 100-pip gain as the price bounced back.
7. Ichimoku Cloud
Overview
The Ichimoku Cloud is a comprehensive indicator that shows trend direction, support and resistance levels, and momentum all at once. It consists of five lines that form a “cloud.”
How to Use It
When the price is above the cloud, it signals an uptrend; when the price is below, it indicates a downtrend. The cloud also acts as support and resistance.
Case Study
A crypto trader using the Ichimoku Cloud on Bitcoin saw the price break above the cloud in November 2021. The trader held a long position and gained 20% as Bitcoin continued to rise.
8. Parabolic SAR
Overview
The Parabolic Stop and Reverse (SAR) is a trend-following indicator that places dots above or below the price to signal reversals.
How to Use It
When dots are below the price, it indicates an uptrend. When dots are above the price, it signals a downtrend.
Case Study
A day trader used Parabolic SAR in the S&P 500 market and spotted an uptrend reversal. The trader exited a long position at the top, securing a 4% profit before the market reversed.
9. Average Directional Index (ADX)
Overview
The Average Directional Index (ADX) measures the strength of a trend. Values above 25 indicate a strong trend, while values below 20 suggest a weak trend or range-bound market.
How to Use It
Traders use ADX to confirm whether the market is trending. A reading above 25, combined with other trend-following indicators, can provide strong trade signals.
Case Study
In 2022, a trader noticed that the ADX reading on the EUR/GBP pair was 28, confirming a strong downtrend. The trader shorted the pair and profited as the trend continued.
10. On-Balance Volume (OBV)
Overview
On-Balance Volume (OBV) is a volume-based indicator that adds volume on up days and subtracts volume on down days. It helps identify buying and selling pressure.
How to Use It
When OBV rises, it signals that buying pressure is increasing, which is a bullish sign. A falling OBV suggests growing selling pressure.
Case Study
A stock trader noticed that OBV for Tesla was rising even though the price remained flat. This divergence suggested accumulation, and the trader went long, capturing a 15% rally.
11. ATR (Average True Range)
Overview
Average True Range (ATR) measures market volatility by calculating the average range between the high and low of a given period. Higher ATR values indicate greater volatility, while lower values suggest quieter market conditions.
How to Use It
ATR is useful for setting stop-loss levels and understanding market volatility. Traders often use ATR to avoid placing stops too close in volatile markets.
Case Study
In June 2022, a trader used ATR to set wider stop-losses on a highly volatile EUR/USD trade, preventing the position from being prematurely stopped out and allowing a 100-pip profit.
Conclusion
The best TradingView indicators help traders gain insights into market trends, reversals, momentum, and volatility. The top 11 indicators—RSI, MACD, Bollinger Bands, Fibonacci Retracement, Volume Profile, Stochastic Oscillator, Ichimoku Cloud, Parabolic SAR, ADX, OBV, and ATR—offer a powerful combination of tools that can enhance your trading strategy. By understanding and applying these indicators, traders can make more informed decisions and increase their chances of success.
