Indicators, such as moving averages and Bollinger Bands®, are mathematically-based technical analysis tools that traders and investors use to analyze the past and anticipate future price trends and patterns. Where fundamentalists may track economic data, annual reports, or various other measures of corporate profitability, technical traders rely on charts and indicators to help interpret price moves.

The goal when using indicators is to identify trading opportunities. For example, a moving average crossover often signals an upcoming trend change. In this instance, applying the moving average indicator to a price chart allows traders to identify areas where the trend may run out of gas and change direction, which creates a trading opportunity.

Key Takeaways
Technical indicators are used to see past trends and anticipate future moves.
Moving averages, relative strength index, and stochastic oscillators are examples of technical indicators.
Trading strategies, including entry, exit, and trade management rules, often use one or more indicators to guide day-to-day decisions.
There is no evidence to suggest that one indicator is foolproof or a holy grail for traders.
Strategies (and indicators used within those strategies) will vary depending on the investor’s risk tolerance, experience, and objectives.
Strategies frequently use technical indicators in an objective manner to determine entry, exit, and/or trade management rules. A strategy specifies the exact conditions under which traders are established—called setups—as well as when positions are adjusted and closed. Strategies typically include the detailed use of indicators (often multiple indicators) to establish instances where trading activity will occur.

While this article does not focus on any specific trading strategy, it serves as an explanation of how indicators and strategies are different (and how they work together) to help technical analysts identify high-probability trading setups.