Everyone looks for the “holy grail” in trading and everyone looks for the best trading indicators out there that point out “buy” and “sell” signals. Unfortunately, there isn’t such an indicator that will give you free money. Instead, there are really good indicators out there that can help you understand how to read the market better. Using the price action in confluence with these indicators can help you find “confluence” in your trading. Meaning 2-3 qualifiers that help you get in or out of a trade.
So which indicators are better than others? At TRADEPRO Academy we like to focus on order flow and market structure. We use different tools for different assets. In this post, we are going to post about Options and Stocks.
Using TradingView as our main platform we can find a plethora of different indicators, however, they’re not all useful. The top three indicators we’re going to go through are:
- Volume profile
- Moving Averages
- Pivot points
These Trading indicators are considered to be the best indicators for swing trading and day trading at TRADEPRO Academy. These indicators are not worth much without understanding the market structure and the overall price action of the market.
Volume Profile is the volume histogram you see on a vertical axis. Rather than seeing the volume at the bottom based on a single candle. The volume profile is based on the actual price, how much volume was actually traded at the price level. This shows you a lot of information.
- At which level was the most volume traded?
- At which level was the least volume traded?
- Where is the highest volume area (67% of the sessions volume)
The best use of volume profiles on a day trade basis or swing trade basis is understanding that price is attracted to high volume areas. Meaning we go from one high volume area to another.
The low volume areas are used as support and resistance levels that attempt to stall price and either push to the next high volume area or back to the high volume area from where price came from.
Here is an intraday example of the volume profile. The 5-min chart on the SPY. We have 2 volume areas created. The green box and the purple box. Price will want to move from one end to the other. It’s important to use the prior day’s volume profile for the current day so you can see where the volume was and where it could go should an area break.
When price falls under the purple box of value you can see a very fast and sharp move to the next level, the green box of value. And vice versa.
If you want to add the volume profile study on TradingView you will have to go to the “Indicators” Key which looks like a function sign. From there In the library you will see the volume profile on the left-hand side, the volume profile you see above is the session volume profile. There are many others to choose from.
Here is a video to better explain volume profiles:
If you want to know how to trade stocks or options with this knowledge you need to know how to use the volume profile first. Will you sell the breakout of the bottom of the volume profile area or the pullback into it? Which options contract will you select? If you are day trading, then you can trade weekly options with 30+ delta. If you want more knowledge on this, join us at community.tradeproacademy.com.
Another candidate for the best indicator is the moving averages. A lot of traders put a plethora of different moving averages on their charts which makes the chart look messy. There is nothing wrong with having multiple moving averages. As long as you know what you’re using them for. There is a larger focus on the exponential moving average.
The primary moving averages used when day trading and swing trading differ slightly.
To add to that, other than using many different moving averages and overlapping them, we use exponential moving average clouds that create ribbons between the two moving averages. They also change colors when they move from positive to negative.
These are the exponential moving averages used for each timeframe.
- Daily: 20EMA & 34/50 EMA cloud
- Hourly: 34/50 EMA cloud
- 10-min: 34/50 EMA cloud & 5/12 EMA cloud
- 5-min: 20 EMA
On TradingView you can get the exponential moving average clouds from an individual named “Zamboniman” in the search for indicators. Search “EMA Cloud”
Here are the settings for the clouds. Change the short and long EMA length as you’d like.
A rule of thumb for using these moving averages with each of the time frames is relatively simple.
On a daily chart, you want to see the price above the 20EMA and ride that wave to the upside. If you break below then the trend shifts to bearish and you could see the price actually holding the 20EMA as resistance and riding the downside. The last chance for a trend is 34/50 EMA. Once that turns negative then the trend is very much confirmed bearish.
For example, below is LOVE (Lovesac) you can see that for the most part, the (blue ribbon) 34/50 is positive (blue) if it were negative it would be purple. The 20EMA does hold but you can see some breaks here and there but the last line of defense holds out well.
Below is a stock, DMTK (DermTech) on a daily chart and you can pinpoint and notice where the flip from bullish to bearish to bullish happens. Once the price breaks under the 20EMA (blue thin line) you want to see the 34/50 hold the support well. In this case, we break under the 34/50 but don’t flip it bearish just yet. The turning point is when the 20EMA starts holding resistance rather than support. Even before the 34/50 changes color, you know the bulls are lost.
The final indicator of our choosing as the top three best indicators you can find for stocks and options is the pivot point indicator. A lot of traders of all walks use this indicator as a go too for support and resistance levels. The pivot point like others can be found in the TradingView library as “Pivot Points Standard”.
Pivot points are calculated by the prior days: high, low & close. If you want a more in depth read on the pivot points check out this article: https://tradeproacademy.com/how-to-use-pivot-points-in-day-trading/
The indicator will automatically draw several lines on your chart. The main use of these lines is two-fold:
- Support and resistance.
Sentiment based on pivot points is a simpler concept. Traders are inherently bullish above the pivot point and bearish under the pivot point. The further you get through the r1, r2, r3, etc levels the more bullish you get. There is such a thing as being overextended to the upside. Keep that in mind if you get too far into the “R” levels you may be too high up! The same thing goes for the downside and “S” levels.
Using the pivots as support and resistance points you can use ANY of the levels from the pivots as key support and resistance areas. Use them as targets as well. If you slip under the pivot point you would expect to see price move into the S1 area as a target. When you move up to the pivot and break above, you would expect to see the R1 target area get hit.
Here is an example of AAPL stock with its pivots. (5-min chart)
Using AAPL as an example, you can see that we open well above the pivot point and start the move even above r1 off the open. From here you can use all of the things that we’ve learned in this post to find a good trade. The first one is the immediate retest of the r1 support level along with the 20EMA on a 5-min chart. You can even use volume at the bottom to confirm the strength of the move. The original target would be the r2 but you can see that we blow right through it fast, so the next level above is r3 logically. At this point, one can consider the move a little overextended.
You can even look at the pullback into the r2 area which comes into confluence with the 20EMA as well. That area is a strong level to look for longs, which then forms a lower high so that would be the extent of the move.
After having understood these best indicators that you can find on TradingView you can apply these to your stocks and options trading. Keep in mind that there are more than just indicators to become a profitable trader. You will have to understand how to implement them in a trading plan. If you want to join a free community, check us out Tradeproacademy Community
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The information contained in this post is solely for educational purposes and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable for your own financial situation. TRADEPRO AcademyTM is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.