Stock Market Indicators Cheat Sheet PDF

Stock market indicators are metrics or data points used to assess a stock market’s overall health and direction or specific segments within it.

They help investors and analysts make informed decisions about buying, selling, or holding investments.

This post reviews the most popular indicators and gives you a cheat sheet for stock market indicators.

NOTE: Get your free stock market indicators cheat sheet below.

FREE PDF GUIDE: Get Your Stock Market Indicators Cheat Sheet PDF Here

Table of Contents

What are Stock Market Indicators

Stock market indicators encompass various metrics that collectively gauge the health and direction of stock markets or specific segments within them.

The primary role of using stock market indicators is to help you assess market conditions and make informed investment trading decisions.

These indicators include widely tracked price indices such as the S&P 500 and NASDAQ Composite, which reflect overall market performance. Volume indicators measure trading activity, while volatility indicators like the VIX predict market volatility.

Market breadth indicators, such as the Advance-Decline Ratio, provide insights into market sentiment by comparing advancing and declining stocks. Sectoral indices track specific industries like technology or healthcare, offering sector-specific trends. Economic indicators, such as GDP growth rates and employment data, impact market conditions.

Sentiment indicators, like investor surveys and put/call ratios, gauge market sentiment.

Technical indicators like moving averages and RSI analyze price trends and momentum.

Some of the Most Popular Stock Market Indicators

Some common types of stock market indicators include:

Price Indices: These include the S&P 500, Dow Jones Industrial Average (DJIA), and NASDAQ Composite, which track the performance of a specific group of stocks.
Volume Indicators: Reflecting the total number of shares or contracts traded in a specific period, indicating the level of market activity.
Volatility Measures: Like the VIX (CBOE Volatility Index), which gauges the expected volatility in the market over the near term.
Market Breadth Indicators: The Advance-Decline Ratio compares the number of advancing stocks to declining stocks, giving insight into overall market sentiment.
Sectoral Indices: Showing the performance of specific sectors like technology, healthcare, or energy, which can indicate trends within those industries.
Economic Indicators: Include factors like GDP growth rates, employment data, and inflation rates, which can influence overall market performance.
Sentiment Indicators, such as investor surveys or put/call ratios, gauge investor sentiment and expectations about future market movements.
Technical Indicators: These include moving averages, relative strength index (RSI), and MACD (Moving Average Convergence Divergence), which analyze price trends and momentum.

These indicators provide a comprehensive view of market conditions and trends, helping investors make informed decisions about their portfolios.

Moving Averages

Moving averages are a statistical technique that smooths out price data over a specified period, making trends more apparent by filtering out day-to-day fluctuations. They are commonly used in technical analysis to identify trends and potential entry or exit points for investments.

There are two main types of moving averages:

Simple Moving Average (SMA): This is calculated by averaging the closing prices of a security over a specific number of periods (e.g., 10 days, 50 days, 200 days). Each day, the oldest price is dropped, and the newest price is added to calculate the average.
Exponential Moving Average (EMA): This gives more weight to recent prices, making it more responsive to recent price changes than the SMA. It is calculated using a formula that gives greater importance to the most recent data points.

Moving averages help traders and investors:

Identify Trends: A rising moving average indicates an uptrend, while a falling moving average suggests a downtrend.
Signal Reversals: Crossovers between different moving averages or between a moving average and the price can signal potential trend changes.
Support and Resistance Levels: Moving averages can act as dynamic support or resistance levels, influencing buying or selling decisions.

They are versatile tools with other technical indicators to make informed decisions about buying, selling, or holding investments based on historical price trends.

MACD

MACD, or Moving Average Convergence Divergence, is a popular technical analysis indicator used to identify changes in the strength, direction, momentum, and duration of a trend in a stock’s price. It consists of three main components:

MACD Line: The MACD line is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. The line oscillates above and below zero, reflecting the relationship between these two EMAs.
Signal Line: The signal line, also known as the trigger line, is a 9-period EMA of the MACD line. It smooths out the MACD line to generate trading signals.
Histogram: The MACD histogram represents the difference between the MACD and signal lines. It provides a visual representation of the difference between the two lines and helps traders anticipate changes in trend momentum.

Interpretation of MACD:

Crossovers: When the MACD line crosses above the signal line, it is considered bullish, indicating potential upward momentum. Conversely, when the MACD line crosses below the signal line, it is seen as a bearish signal, suggesting potential downward momentum.
Divergence: Divergence between the MACD line and the underlying security price can indicate potential reversals or shifts in momentum. A bullish divergence occurs when the MACD line forms higher lows while the price forms lower lows, suggesting a possible upward reversal. A bearish divergence occurs when the MACD line forms lower highs while the price forms higher highs, indicating a potential downward reversal.
Histogram Analysis: The histogram’s bars above or below the zero line indicate whether the MACD line is above or below the signal line. Positive histogram bars (above zero) indicate bullish momentum, while negative histogram bars (below zero) indicate bearish momentum.

MACD is a versatile indicator used in various timeframes and markets.

Traders often combine MACD with other technical indicators to confirm signals and improve trading decisions.

Average True Range

The Average True Range (ATR) is a technical analysis indicator used to measure market volatility. Developed by J. Welles Wilder Jr., ATR does not provide directional information like trend indicators but quantifies volatility over a specified period. Here’s how it works:

Calculation: ATR is typically calculated as an exponential moving average (EMA) of the True Range (TR) over a specified number of periods. The True Range itself is the greatest of the following:
- Current high minus current low.
- The absolute value of the current high minus the previous close.
- The absolute value of the current low minus the previous close.
Interpretation: A higher ATR value indicates higher volatility, while a lower ATR value suggests lower volatility. It is important to note that ATR values are absolute and not directional; they do not indicate whether prices are trending up or down but rather how much they fluctuate.
Usage: Traders use ATR in various ways:
- Setting Stop Losses: ATR can help set stop-loss levels by accounting for market volatility. A more comprehensive stop loss may be used in more volatile markets, while a tighter stop loss may be appropriate in less volatile conditions.
- Position Sizing: ATR can help determine position sizes. Traders may adjust their position size based on the current ATR to align with risk tolerance.
- Filtering Breakouts: ATR can be used to filter out breakouts. A breakout accompanied by a high ATR suggests stronger momentum and potentially more excellent follow-through.
Timeframe: ATR can be calculated for any timeframe, from intraday charts to weekly or monthly charts, depending on the trader’s preference and trading style.

The Average True Range (ATR) indicator is valuable for assessing volatility, helping traders manage risk, and making informed decisions about position sizing and stop-loss placement in their trading strategies.

Fibonacci

Fibonacci retracement levels are a popular technical analysis tool to identify potential support and resistance levels in a price trend. These levels are based on Fibonacci ratios derived from the Fibonacci sequence, where each number is the sum of the two preceding ones (0, 1, 1, 2, 3, 5, 8, 13, 21, etc.).

The key Fibonacci ratios used in trading are:

0.236 (23.6%)
0.382 (38.2%)
0.500 (50.0%)
0.618 (61.8%)
0.786 (78.6%)

The Fibonacci retracement levels are drawn between a significant high and low in a price chart. Here’s how they are typically applied:

Identify Swing High and Low: Determine the recent significant high and low points in the price chart.
Draw Fibonacci Levels: Draw horizontal lines at the Fibonacci levels (typically from 0% to 100%) between the high and low points.
Support and Resistance: These Fibonacci levels act as potential support (uptrends) or resistance (downtrends). For example, suppose a stock is in an uptrend and retraces downward. In that case, traders might look for it to find support near one of the Fibonacci levels before potentially resuming its upward movement.
Extensions: Beyond retracement levels, Fibonacci extensions (such as 161.8% and 261.8%) are also used to forecast potential price targets in the direction of the trend.
Combined with Other Indicators: Fibonacci retracement levels are often used with other technical indicators to confirm signals and make trading decisions.

Fibonacci retracement levels are based on the idea that markets often retrace a portion of a trend before continuing in its original direction. Traders use these levels to anticipate potential turning points and manage risk by placing stop-loss orders and profit targets accordingly.

How to Use Stock Market Indicators to Make Trades

Using stock market indicators effectively to make trades involves systematically integrating technical analysis with fundamental insights. Here’s a structured process:

Select Relevant Indicators: Choose indicators that align with your trading strategy and timeframe. Technical indicators include moving averages, MACD, RSI, and Fibonacci retracements. Fundamental indicators might include earnings reports, economic data, and industry trends.
Understand Indicator Signals: Each indicator has specific signals. For instance, an RSI above 70 suggests overbought conditions, while MACD crossovers indicate potential changes in momentum. Understand how these signals relate to market conditions and your trading objectives.
Combine Indicators for Confirmation: Use multiple indicators to confirm signals. For example, if RSI and MACD signal overbought conditions, the case for a potential downturn strengthens.
Set Entry and Exit Criteria: Define straightforward entry and exit points based on indicator signals. For example, a trader might enter a long position when the price breaks above a 50-day moving average and exit if the MACD crosses below its signal line.
Consider Risk Management: Incorporate risk management techniques such as setting stop-loss orders based on support levels or volatility (e.g., using ATR). This helps limit losses and protect capital.
Monitor Market Conditions: Monitor market conditions and adjust your strategy as needed. Market volatility, news events, and economic data can influence indicator signals and trading outcomes.
Backtesting and Practice: Before trading live, backtest your strategy using historical data to evaluate its performance. Practice executing trades in a simulated environment to gain confidence and refine your approach.
Review and Learn: Regularly review your trades to assess performance and identify areas for improvement. Analyze how indicators performed in different market conditions to fine-tune your strategy.

Following a structured approach and leveraging technical and fundamental insights, traders can use stock market indicators effectively to make informed trading decisions and manage risk in dynamic market environments.