Why TradingView Indicators Are Essential for Modern Traders

TradingView is renowned for its powerful charting capabilities and real-time data. It also offers an arsenal of indicators that can help simplify market analysis and refine trading strategies.

This guide explores why TradingView indicators have become indispensable in today’s trading landscape. We also discuss the best indicators available on TradingView and offer tips for optimizing them.

What are TradingView Indicators?

TradingView is an analysis platform for traders. It offers real-time data on a wide range of asset classes, including stocks, forex, commodities, indices, and cryptocurrencies. Moreover, the platform has an extensive library of technical analysis tools. Crucially, TradingView boasts a user-friendly interface.

Whether you’re a beginner or professional, TradingView has tools specific to your expertise. For those unaware, indicators are tools used to dissect an asset’s price movement. With these tools, traders can evaluate if a trend will be sustained. Or if a reversal is more likely.

Indicators also help traders decide when to enter and exit trades. On TradingView, these indicators are seamlessly integrated into the charting interface. This lets you access indicators with just a few clicks. Once applied, these indicators are visually represented on charts.

Put otherwise, TradingView makes complex data easier to interpret and apply to trading strategies. There are virtually hundreds of TradingView indicators available for each asset class. The challenging part is knowing how to interpret the indicator’s findings and make trading decisions accordingly.

How TradingView Indicators Work?

TradingView comes loaded with built-in indicators. Additionally, you can also access indicators developed by other users. The specifics of how a TradingView indicator works vary from one tool to another.

However, you can sum up the process as follows:

• Collection of Data – Indicators gather data from financial reports and price charts. This includes variables like price action and trading volume over specific periods.
• Applying Formulas: The data collected is then processed using mathematical formulas. For instance, the Moving Average indicator collects the average of closing prices over the specified time frame.
• Overlay on the Chart: The indicator then calculates values, which are plotted on the chart. Taking the Moving Average as an example, the indicator will draw a line that represents the average price over the required period, such as 200 days. The line helps traders see the overall price trend by smoothing out short-term fluctuations.

Traders can analyze these plotted lines or values to make trading decisions. For example, if the asset’s price is on top of the Moving Average line, it points to an uptrend. Conversely, if the price is below the line, it points to a downtrend.

TradingView indicators can also be used with other tools and analysis techniques. This helps to refine strategies further and improve decision-making.

Types of TradingView Indicators

On TradingView, the types of indicators available will depend on the specific asset. Moreover, you might need a premium subscription to access some of the built-in indicators.

TradingView indicators can be broadly classified into four sections.

Financial Indicators 

The financial indicators available on TradingView are used for stock fundamental analysis. They help investors assess companies’ financial health and performance.

Financial TradingView indicators typically cover the following metrics:

• Income Statement – The income statement summarizes the earnings, expenditures, and profits of a company over a specific period.
• Balance Sheet – This indicator offers an overview of a company’s financial standing at a specific point in time.
• Cash Flow – This statement outlines how cash is generated and used in a company’s activities. This includes operations, expenses, and investments. 
• Statistics – These indicators offer insight into ratios and metrics based on a company’s financial statements. These figures analyze the various aspects of a company’s performance and valuation. For instance, Earnings Per Share, Price-to-Earnings, Debt-to-Equity, and Return on Equity can be found under this tab.

TradingView obtains this financial data from annual and interim company reports. Additionally, the financial data is standardized on par with international codes. This is because companies release reports at different times and have unique accounting procedures. Standardization helps ensure consistency and comparability of financial data across different companies.

Technical Indicators 

TradingView boasts hundreds of indicators tailored for technical analysis.

The different types of technical TradingView indicators are summarized below:

• Trend Indicators – These indicators help determine the direction and strength of market trends. Common examples include Moving Average and  Moving Average Convergence Divergence.
• Momentum Indicators – These indicators are designed to estimate the pace and magnitude of price movements. They help assess whether a trend is gaining or losing strength. Key examples include the Relative Strength Index and the Stochastic Oscillator.
• Volume Indicators – These tools analyze trading volume to confirm trends and identify potential reversals. A notable indicator in this category is the On-Balance Volume.
• Volatility Indicators – These indicators measure market volatility and help traders understand the degree of change in an asset’s price. Examples include Bollinger Bands and the Average True Range (ATR).

Note that on TradingView, the indicators aren’t categorized by type. You can either browse through the entire selection or search for specific indicators.

Chart Patterns

TradingView indicators also include a variety of chart patterns. These indicators look for recurring price trends on the chart. They help traders determine price target levels and forecast price action. TradingView offers three types of chart patterns – continuation, reversal, and undefined.

Some examples include bullish and bearish flags, triangle charts, triple bottom, and rising and falling wedge patterns. Additionally, you can also find patterns based on theories such as the Elliott Wave.

Pine Script

Tech-savvy traders can also create their own TradingView indicators. This is done using Pine Script, a programming language developed by TradingView. The code editor is located in the lower panel of the chart. Users can write, save, and publish their indicators through this editor.

For beginners, TradingView provides detailed guides on learning Pine Script. Additionally, users can also backtest and forward-test these strategies. The paper trades are simulated directly on your charts.

As the chart data updates, so does the strategy report, reflecting forward testing. This allows traders to test their strategies and fine-tune trading decisions. TradingView also has a long list of strategies developed by its other users. You can explore and modify these existing scripts from TradingView’s ‘Community’ panel.

How to Use TradingView Indicators on Charts?

For those new to TradingView, here are the required steps to access indicators:

1. Open a Chart – Start by logging into your TradingView account and opening a chart of the asset you want to analyze.
2. Open the Indicators Menu – Above the asset’s chart, you can find the ‘Indicators’ icon. This is usually represented by a set of stacked bars or lines. This lets you access the indicators menu.
3. Browse Built-In Indicators – Here, you’ll find a comprehensive list of built-in indicators categorized by type, such as technical, financial, and community. You can scroll through these categories to find indicators like Moving Average, Relative Strength Index, or Bollinger Bands. Alternatively, you can also search for specific indicators.
4. Add an Indicator – To add an indicator, simply click on its name.

The indicator will automatically be applied to your chart, and you’ll see its graphical elements displayed. One of the best aspects of TradingView indicators is that they can be customized. Each indicator has a gear icon next to its name on the chart.

Once you click it, you can adjust the different parameters, such as the period length, calculation methods, and visual styles. These customization options allow you to fine-tune the indicators so they align more closely with your trading goals and existing market conditions.

TradingView Indicators Benefits

TradingView indicators come with several benefits – which are discussed below.

Comprehensive Market Analysis 

One of TradingView’s biggest benefits is the ease of access. It provides all the tools needed for a comprehensive analysis in one place. Moreover, the platform is compatible with almost all asset classes. This includes stocks, ETFs, indices, cryptocurrencies, forex, and bonds. You can also track derivatives such as options and futures.

Additionally, TradingView features countless indicators and prebuilt strategies. You can also create your own Tradingview indicators. When used together, these tools help traders understand market dynamics from multiple perspectives.

Graphical Representation 

Another key advantage of TradingView is its ability to overlay various indicators directly onto charts. This simplifies data visualization for traders. TradingView extends this capability to fundamental indicators as well – which is not commonly found on other platforms. For example, metrics such as total revenue, gross profit, and cash flow can be integrated into stock charts.

Usually, stock traders must read through reports to understand the company’s financials. With graphical visualization, TradingView makes the process considerably easier. Moreover, overlays help traders correlate with market price movements. Needless to say, this enhances accessibility and interoperability for traders.

Customization of Indicators 

TradingView allows extensive customization for its indicators. Traders can adjust settings and visual styles to tailor indicators to their specific trading goals.

Customizing indicators helps in optimizing them for particular assets, time frames, and market conditions – improving their relevance and accuracy.

Real-Time Data and Alerts

TradingView lets users set alerts based on indicator conditions. This functionality helps traders stay informed of noteworthy market changes and trading signals. Moreover, this removes the need to constantly watch over pricing charts.

Instead, you can make trading decisions and orders when you receive notifications. Alerts can be customized for specific indicator values or patterns, enhancing proactive trading.

TradingView Community

TradingView isn’t just limited to built-in indicators. It also lists a vast library of indicators developed by other users. In fact, you can use test third-party indicators in a demo account or use them for copy trading strategies.

Moreover, TradingView’s scripting language is very transparent. You can view and modify the code behind each indicator, allowing you to experiment and learn from other traders. Not only that, you can also interact with other TradingView users – the platform comes with a built-in chat tool.

Manage Risk Effectively 

No matter your trading style, risk management must play a vital role in your strategy. TradingView indicators can be of significant help here. For instance, you can use trend indicators to decide on the direction of trades. Similarly, volatility-based indicators can assist in finding appropriate exit price points for your positions.

By using multiple indicators, traders can better handle their risk exposure. This ensures that losses are minimized. This disciplined approach to managing risk is paramount for success. You can also find user-created risk management tools on TradingView. Some send signals regarding the entry and exit prices, as per your risk level.

Educational Resources and Support

If you’re new to trading, TradingView also has a wealth of educational resources for you. These are designed to help beginners understand indicators effectively. This makes TradingView indicators accessible to novice traders.

The resources include documentation and tutorials. Moreover, there is a supportive community where users can look for advice.

Top TradingView Indicators for Traders

This section explores the best TradingView indicators. Read on to choose the most suitable indicators for your trading strategy and preferred asset class.

Moving Average 

Moving Average is a popular TradingView indicator used to identify trends. It’s relatively easy to use, so is considered a beginner-friendly indicator. Moreover, the Moving Average can be used for all asset classes.

In essence, this indicator calculates the average price of an asset over a given period. Traders use this tool to see the general direction of the market.

For instance:

• If the price of an asset is above the Moving Average, it suggests an uptrend.
• On the contrary, if the price moves below the Moving Average, it signifies a downtrend.

On TradingView, you can choose from different versions of Moving Average, such as Simple, Ribbon, Exponential, Weighted, and more. Each serves a different purpose and can be selected based on your trading strategy and the asset you’re analyzing.

Moving Average Convergence Divergence 

The Moving Average Convergence Divergence is another technical indicator used to spot buy and sell signals. It’s an oscillator with two lines – the MACD and the signal. Traders consider an asset to be in a bullish trend when the MACD line surpasses the signal level and vice versa.

Additionally, the indicator also has an MACD histogram. This is a graphical representation showing the difference between the MACD line and the signal line.

Bollinger Bands 

Among volatility indicators, Bollinger Bands is perhaps the most newbie-friendly option. It’s often used in combination with indicators like Moving Average and Relative Strength Index. This indicator has three lines – a Moving Average in the middle and two outer bands representing the deviation of the price movement.

When the asset’s price moves within the outer bands, then the market is considered to be in the normal volatility range. Conversely, when the asset’s price moves past the outer bands, the asset is considered to be overbought or oversold. When this happens, a potential trend reversal might occur.

Relative Strength Index 

This TradingView indicator gauges how fast an asset’s price changes. In other words, it offers insight into the momentum. It ranges between 0 and 100. Usually, values above 70 points to overbought conditions. And levels below 30 are considered oversold.

Traders use the Relative Strength Index to interpret potential reversal points. Additionally, if this indicator conflicts with the underlying trend, it could reveal the continuation of the pattern.

Fibonacci Retracement 

Support and resistance levels are used to determine trend direction and reversals. The Fibonacci Retracement indicator helps traders find these levels. These are horizontal lines plotted on the price chart using Fibonacci ratios.

The line is drawn by connecting the high and low points of a trend. The indicator then generates potential price points that could work as support and resistance levels. They can also be used to determine entry and exit positions.

Average True Range 

This indicator offers insights into market volatility. It calculates the average price variations over a given period. Typically, the default time duration used for the Average True Range is 14 days. However, TradingView lets you adjust this period based on your strategy.

When the indicator is high, it implies that the market’s volatility is increasing. Conversely, a low Average True Range suggests less volatility. Notably, the Average True Range is not commonly used as a standalone indicator. Rather, it’s combined with other indicators to confirm its findings.

Parabolic SAR

The Parabolic SAR can help traders find potential reversal points in a market trend. The indicator signals where a trend might change direction by plotting dots either above or below the price chart. These dots are positioned based on the price action and trend direction.

When the price is above the SAR dots, it indicates an uptrend. Therefore, traders may consider holding long positions or entering new ones.

Conversely, when the price falls below the SAR dots, it signals a downtrend. This suggests that traders might look for sell signals or consider closing long positions. The Parabolic SAR is particularly useful for risk management by identifying stop-loss limits.

On-Balance Volume 

As the name suggests, this indicator tracks an asset’s trading volume. It measures volume relative to its price movements. The On-Balance Volume  is calculated daily. Moreover, it’s commonly used for stocks, forex, and commodities. This is because these assets often fluctuate based on trading volume.

Furthermore, the On-Balance Volume is also used to confirm trends. An increasing On-Balance Volume line suggests that the existing trend is likely to continue. On the contrary, a declining On-Balance Volume line may indicate that the trend is weakening.

How to Choose the Best TradingView Indicator?

With a long array of TradingView indicators at your disposal, it’s confusing to know which ones to use. Moreover, there is no single indicator that works the same for everyone.

Here’s what to consider when choosing the best TradingView indicator for your requirements:

Understand Your Trading Style and Goal 

The first step is to define your trading goals and style. This will significantly influence which indicators are most useful for you.

For instance:

• A day trader might prioritize indicators that provide quick signals. In this case, the Moving Average Convergence Divergence or the Relative Strength Index indicators.
• Swing traders might prefer Bollinger Bands or the Stochastic Oscillator. These indicators help capture medium-term trends and reversals.
• For price action trading, you could use a combination of these trend, momentum, and volume indicators.
• On the other hand, Long-term investors often favor indicators that highlight broader market trends and stability. Examples include Simple Moving Average or fundamental indicators like Earnings Per Share.

In other words, the first step is to have a clear plan for approaching the market.

Consider the Chosen Asset

The type of asset you’re trading also plays a crucial role in selecting appropriate indicators. Different assets have unique characteristics that may require specific indicators for optimal analysis. For example,

• Stocks – For stock trading, fundamental TradingView indicators such as Price-to-Earnings ratios or financial data are useful. Additionally, technical indicators like Moving Average Crossovers can also provide insights into potential stock trends.
• Forex – When trading currency pairs, indicators that handle high volatility and liquidity are often preferred. This includes TradingView indicators like the Average True Range or the Parabolic SAR.
• Cryptocurrencies – Since cryptocurrencies are famously volatile, it’s best to use indicators that consider extreme price fluctuations. Indicators like the Chaikin Money Flow and the Ichimoku Cloud can offer insights into trends and momentum in the crypto markets.

In a nutshell, you must consider the asset’s specific dynamics to find the most relevant TradingView indicators.

Test Chosen Indicators

Once you’ve identified potential TradingView indicators, it’s essential to test and validate them. You can do this by deploying indicators and testing them on a demo trading account.

TradingView also offers tools for backtesting and forward-testing indicators. As mentioned, these tests will be displayed directly under the charts.  This process helps determine their reliability and effectiveness in identifying profitable trade opportunities.

Tailor Indicators to Your Trading Plan

TradingView indicators are also customizable, enabling you to adjust them to your unique needs. The majority of indicators have adjustable parameters, such as time frame or visualization style.

To give an example, the Relative Strength Index uses a 14-period time frame. However, day traders can shorten this period to 8 or 10 to capture shorter-term momentum changes. Similarly, long-term investors can extend the time period to 30 or longer for a smoother trend analysis.

Combine TradingView Indicators 

No single indicator is perfect, and each comes with its own set of limitations. By combining two or more indicators, you’ll get more accurate signals.

• For example, pairing a trend-following indicator like the Moving Average with a volatility indicator like the Average True Range can validate whether a trend is strong and sustainable.
• Combining indicators can also refine entry and exit points. While one indicator might signal a potential trade, another can help determine the best timing.
• Indicators like the Moving Average Convergence Divergence might indicate a trend change. At the same time, the Relative Strength Index can confirm whether the market is overbought or oversold, optimizing your decision-making.

This way, you can change your trading approach to the evolving market parameters.

What are the Limitations of TradingView Indicators?

As with all analysis tools, TradingView indicators come with limitations.

Let’s take a closer look at the key drawbacks:

Lagging Signals

The majority of TradingView indicators rely on historical data to generate signals. This means they tend to lag behind current market conditions. Even a delay of a few seconds can affect short-term trading outcomes in volatile markets.

For instance, the Moving Average is based on past price movements and might not reflect sudden market shifts. This lag can result in delayed responses to new trends or price reversals, potentially causing traders to enter or exit positions too late.

False Signals

Another drawback is that indicators can produce false signals, leading to incorrect trading decisions.

For example:

• Suppose you’re using the Relative Strength Index to spot trend reversals
• The RSI value goes above 70. Usually, the inference here is that the asset is overbought.
• Based on this signal, you decide to sell the asset, anticipating a price decline.
• However, contrary to your expectation, the stock continues to rise sharply after the RSI value surpasses 70.

Conclusion 

TradingView provides an extensive suite of analysis tools that deliver critical insights to traders. From a single interface, traders can access hundreds of fundamental and technical indicators. Moreover, indicators are available for a wide variety of asset classes.

To maximize the benefits of these indicators, traders must invest time in understanding their functionalities and limitations. Crucially, it’s best to use these indicators with other analytical methods to get a comprehensive view of the market.

FAQs

How do TradingView indicators help in trading?

TradingView indicators provide visual tools for analyzing market movements and price action. They simplify complex data into actionable insights, aiding traders in developing strategies.

What is the best TradingView indicator?

Some of the most popular TradingView indicators include Moving Average, Relative Strength Index, Bollinger Bands, and Fibonacci Retracement. Traders can pick the best indicator for their specific trading goals.

How to use TradingView indicators?

TradingView users can go to the ‘Indicator’ menu above the chart to find their preferred tool. The indicator will automatically be displayed on the chart.

Is it possible to customize TradingView indicators?

Yes, TradingView allows users to customize indicators by adjusting parameters or creating custom scripts via Pine Script. This flexibility allows traders to tailor indicators to their specific strategies.