Indicators

The 4 Types of Technical Indicators Explained

Astron Team · 09/24/2026 · 4 min read

There are dozens of technical indicators available on any charting platform, and it's common for a beginner to get lost trying to memorize formulas instead of understanding what each tool is for. The good news is that, despite the sheer number, almost every technical indicator fits into one of four families: trend, momentum, volatility, and volume.

Understanding these families helps build a more balanced analysis, avoiding the common mistake of using three different indicators that, in practice, are measuring the same thing.

Trend indicators

Trend indicators answer a simple question: which way is the market heading, and how consistently? Moving averages are the best-known example: a 20-period average, for instance, smooths the price and shows the predominant direction, filtering out short-term noise.

Other examples are the MACD, which compares two moving averages to indicate direction changes, and the ADX, which doesn't show the trend's direction, but rather its strength — an ADX above 25, for example, usually indicates a trend strong enough to be followed, while low values suggest a market with no clear direction.

Momentum indicators (oscillators)

Momentum oscillators measure the speed of price changes, not just whether it's going up or down. They usually oscillate between fixed limits, like 0 and 100, and help identify when a move has gotten too stretched.

The RSI (Relative Strength Index) is the most used example: values above 70 usually indicate an overbought condition, and below 30, oversold. The Stochastic follows similar logic, comparing the closing price with the recent trading range. These indicators are useful for anticipating pauses or corrections within a trend, but shouldn't be used as a standalone signal of a full reversal — an asset in a strong trend can stay overbought for a long time before correcting.

Volatility indicators

While the previous two groups deal with direction and speed, volatility indicators measure the size of price swings, without taking a stance on direction. Bollinger Bands are the most popular example: formed by a central moving average and two bands that widen when volatility increases and narrow when it decreases.

The ATR (Average True Range) is another indicator in this family, widely used to calculate a stop loss size compatible with an asset's recent behavior. If an asset has a daily ATR of R$ 1.20, for example, a stop of only R$ 0.20 will likely be hit just by the market's normal noise, with no connection to the trade's original idea.

Volume indicators

Finally, volume indicators analyze the amount of trading behind a price move, answering a different question from the other three families: how many participants are backing this move? On Balance Volume (OBV), for example, accumulates volume by adding it on up days and subtracting it on down days, forming a line that can confirm or contradict the price trend.

A price making new highs with the OBV also rising suggests a healthy move. A price rising while the OBV falls, on the other hand, is a divergence signal, which can indicate weakening buying strength.

How to combine the four families without overdoing it

The most common mistake beginners make is filling the chart with indicators from the same family — for example, RSI, Stochastic, and another momentum oscillator at the same time. Since they measure similar things, they tend to confirm the same signal repeatedly, giving a false sense of confidence.

A more balanced combination uses, at most, one indicator from each family: a trend one to know the direction, a momentum one to assess entry timing, a volatility one to calibrate the stop, and, when available, a volume one to confirm the strength of the move. On Astron, you can test these combinations on different assets and see which set best fits your trading style.

No indicator, from any family, predicts the future with certainty — they're all calculations based on past prices. Use them to organize your analysis and set clear entry, exit, and position size criteria, always remembering that real risk of loss exists in every trade.