Choosing the Best Indicators for Day Trading

2021-12-01 | Simpler Trading Team

Day trading is the buying and selling of securities within the same day and often at multiple points throughout the day. As a day trader, you rely on indicators and real-time information for quick decision making – when to enter (or buy) and exit (or sell). 

But how do you choose the right day trading indicators? We have some tips on how to select the best indicators for you – what to look for and how to find the best fit for your style. We also have a list of our Simpler Trading team’s favorite indicators for day trading. 

If you’re ready to dive straight into the details behind the indicators and how our team uses them, download our free ebook, Best Day Trading Indicators. It’s the most comprehensive free guide on indicators that we’ve created!

Why are Indicators Important?

How do you know when to enter, hold, or exit a stock trade? Certainly, you rely on your trading plan and many other factors. But indicators will also play a large role in your decision making. Derived from both historical price data and predictive tools, indicators drive the technical analysis of a trade, and are a critical part of any trading strategy.

Indicators serve a number of purposes. They simplify price information, provide trend trade signals, and signal warnings for changes in trend.  

Free Indicators vs. Premium Indicators

Free indicators can be found on your chosen trading platform, and using them can be as simple as following the platform’s instructions. You’ll have to check if your platform offers the free indicators you want to use.

Premium indicators are purchased. You’ll also want to confirm that your preferred platform is compatible with the premium indicator you choose.

Overall, try different indicators and settings within your chosen platform to see which ones work best for you. 

If you find yourself needing assistance, our customer service team at Simpler Trading regularly helps members with installation processes for free and premium indicators on a variety of platforms. 

How are Day Trading Indicators Different?

You’ll want to choose your indicator based on the type of trading you like to do. Maybe you’ve always been a longer-term investor or a swing trader. How is day trading different? The biggest factor is time. 

If you’re a swing trader, for example, you hold your securities for days, weeks, or even months; day traders enter and exit trades on the same day. You’ll need information as a day trader that provides projections on short-term changes in price.

You may, in reality, use the exact same tools for swing trading and day trading. It’s likely that the base setup for each style will look similar, but you’ll need to adapt the settings – adjust the time parameters to hourly instead of daily, for example. 

By definition, indicators make patterns more noticeable, and when quick decision making is important, a good indicator can make the difference in your trade. You’ll be best served by tools or settings that provide easy visual cues and definitive signaling for opportunities intraday.

Prices can pivot in a moment during volatile markets. Choose a tool that you can interpret easily and at a glance.

Our Favorite Indicators for Day Trading

The Simpler Trading team uses indicators across 4 categories:  volume, volatility, momentum, and trend. We balance the input to validate entries and exits, and make more precise decisions. 

Our all-time favorite indicator is the Squeeze. We think it’s the best free indicator available, hands down. Given its popularity, a lot of other people agree. It was developed by John Carter, Founder of Simpler Trading, and he has used this indicator to make multiple million-dollar trades.

The Squeeze checks all the boxes for day traders and swing traders alike. It incorporates a lot of information into one tool and provides easy-to-use visual signals to help you see when a trading opportunity is present.

The Squeeze actually has three different indicators working in the background to bring the Squeeze magic to life – each one offers different insights about what the price is doing:

  • Bollinger Bands – measures the standard deviation of price over time 
  • Keltner Channels –  measures the average true range of price over time
  • Momentum Oscillator – shows the momentum strength over time

Squeeze Pro, the premium version of the Squeeze, is designed to catch even more opportunities by identifying three Squeeze “strengths”. These include the original Squeeze and two others to catch faster and more powerful moves.  

In addition to the Squeeze, we have several other free and premium indicators that our traders love!

Free Indicators

  • Ichimoku Cloud – five different calculations rolled into one, showing the current and projected state of prices
  • Keltner Channels – three bands that measure upper and lower ranges of prices, and the moving average, revealing both trends and volatility
  • AwesomeOscillator – moving averages plotted on histograms that demonstrate momentum 
  • Volume – a trading staple that demonstrates the number of shares changing hands and highlights opportunities for quick entry and exit

Premium Indicators

  • 10X Bars – two indices in one tool that show the volume and direction of average price range for trend quality and strength 
  • Voodoo Lines – a support and resistance level prediction, based on Fibonacci analysis and Elliot Waves, for future and potential entry and exit points
  • VWAP Max – average pricing throughout a given day, with volume factored in, showing the strength of a move in greater precision

Indicators can be complicated, and we’d love to give you more insight into these Simpler Trading favorites. Download our free ebook, Best Day Trading Indicators for an in-depth explanation on each of these tools, and how Simpler Trading’s professional day traders use them in their own trades.

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