Prerequisites
Before starting this chapter, you must complete:
- Chapter 1: Foundations (trading basics, risk management, broker setup)
- Chapter 2: Charts & Candlesticks (reading charts, timeframes, patterns)
Skipped these? Please go back—each chapter builds on the previous one.
What You Will Learn
By the end of Chapter 3, you will be able to:
- Set up and configure a TradingView Free account with professional layout
- Add and customize indicators while working within the 2-indicator limit
- Understand what each indicator actually shows—not as magic predictors, but as tools that summarize price behavior
- Read trend, momentum, and participation (volume) on Forex and Crypto charts
- Create a simple trading plan for demo practice combining indicators with price structure
- Avoid common beginner mistakes like indicator overload and ignoring the bigger trend
Section 1: What Are Indicators?
1.1 Simple Definition (Plain English)
Let's start with a simple, honest definition:
Technical indicators are mathematical calculations based on price and volume data.
That's it. Nothing magical. Nothing mysterious.
Imagine you want to know the average temperature in Manila over the last 7 days. You add up the daily temperatures and divide by 7. That's your 7-day average.
A moving average indicator does the same thing with prices. It calculates the average closing price over the last 20 days (or 50 days, or 200 days) and draws a smooth line on your chart.
That line helps you see the general direction of price without getting distracted by daily ups and downs.
1.2 The Truth About Indicators (No Sugarcoating)
Indicators are based on past prices. They tell you what ALREADY HAPPENED, not what WILL happen next.
Think of it this way: Looking at a moving average is like looking at your car's rearview mirror. It shows you where you've been, not where you're going.
So why use them at all?
Because even though they don't predict the future, they help you:
- Spot trends faster — Is price generally moving up or down over time?
- Measure momentum — Is price moving strongly, or slowing down?
- Add confirmation — Does this setup align with the bigger picture?
- Filter out noise — Should I pay attention to this move, or is it random?
Indicators don't give you certainty. They give you probability and context.
1.3 Why Do We Use Indicators?
Let's be practical. If indicators don't predict the future, why do millions of traders use them?
Answer: Because they help us make better decisions—when used correctly.
A. They Summarize Price Behavior Quickly
Imagine staring at 200 candlesticks trying to figure out: "Is this trending up or down overall?" A moving average gives you the answer in one glance.
B. They Add Confirmation to Your Analysis
You see price bouncing off support (from Chapter 2). That's good. But is momentum behind the bounce? An indicator like RSI can tell you: "Yes, momentum is shifting upward" or "No, this looks weak."
C. They Help You Stay Disciplined
Indicators give you objective rules to follow. Instead of guessing, you can say: "Price is above the 50-period moving average, so yes, the trend is up." Rules reduce emotional guessing.
1.4 The Danger of "Indicator Overload"
Many beginners think: "If one indicator is good, then ten indicators must be amazing!" So they load their chart with 3 moving averages, RSI, MACD, Stochastic, Bollinger Bands, Volume, ATR, Fibonacci, and 5 more random indicators.
The result? Their chart looks like a Christmas tree. It's confusing, overwhelming, and full of conflicting signals. They freeze up—unable to make a decision.
Professional traders use 2 to 4 indicators maximum. Often just 1 or 2.
Simple, proven combination:
- 1 Trend Indicator (like Moving Average) → tells you direction
- 1 Momentum Indicator (like RSI or MACD) → tells you strength
- Volume (optional) → tells you participation and conviction
That's it. Master these first. You can always explore more later.
1.5 How Indicators Fit Into Your Complete System
Trading is not just about indicators. It's about combining multiple layers of analysis.
Indicators are just TWO pieces of this puzzle—Layers 2 and 3. They do not replace price structure. They support it.
Price structure (support/resistance) is your main ingredient—like rice or noodles.
Indicators are the seasoning—like salt, pepper, or soy sauce. They make it better, but you can't have seasoning without the main dish.
Always remember: Price is king. Indicators are helpers.
1.6 Chapter Roadmap
Here's what we'll cover step by step in this chapter:
Ready to Start Learning?
You now understand what indicators are, what they're NOT, and why we use them. Let's get practical—time to set up your TradingView account!
Start Section 2: TradingView Setup