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What indicators to use for Day Trading?

Zeynep Tufekcioglu


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Hello, thanks for asking the question.

There is a number of useful indicators in day trading, some of which are the moving average (MA), moving average convergence divergence (MACD) and the relative strength index (RSI).

The MA is used to identify the direction of a current trend, without the disturbance from the shorter-term price surges. This indicator utilizes price points of a financial tool over a certain time period and divides by the number of data points to provide a single trend line.  

The amount of required depends on the length of the moving average - 200-day MA demands 200 days of data. 

On the other hand, MACD serves to identify changes in momentum by comparing two moving averages. It’s very useful because it detects potential buy and sell opportunities placed around support/resistance levels.

‘Convergence’ in MACD means that two MAs are coming together, while ‘divergence’ means that they’re pulling away.

Finally, the RSI is used by traders to detect momentum, market circumstances and warning signals for risky price moves. The value of this indicator is expressed between 0 and 100. For instance, if an asset is around 70 it’s considered overbought while an asset with an RSI of 30 is considered oversold. 

If you get an overbought signal for an asset it usually means that its short-term returns may be about to come to a head and a price reversal could be expected. Conversely, an oversold signal indicates that short-term price drops are coming to a head and a rally could be expected next.

Other useful indicators for day trading include Bollinger Bands, Exponential Moving Average (EMA), Stochastic Oscillator and more. 

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