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Indicator
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Indicators are used by market timers to try and divine future market action. There are three primary varieties of indicators; technical, market and economic.
Technical indicators are mathematical or graphical representations of recent market activity. Most technical indicators are based solely on movements in price, but some also incorporate trading volume into the calculation. Because they use existing data, all technical indicators are by definition lagging indicators. Examples of widely used technical indicators are RSI, CCI and Bollinger Bands.
Market indicators attempt to measure characteristics of the market as a whole. The Volatility Index (VIX), for example, is an indicator of the market's expectations for future volatility. Other market indicators include the Arms Index (TRIN) and the McClellan Summation Index.
Economic indicators can be useful in determining prospects for the economy. Many economic indicators, such as unemployment and inflation numbers, are calculated by the government. Others, such as GDP growth and measures of consumer sentiment, are calculated by semi-public or private organizations.
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