SoFi

While some stock analysis tools rely on company fundamentals (such as earnings reports), technical indicators focus solely on stock price movements. Traders use technical analysis to identify patterns in price and volume data to glean insights about how a stock might move in the future.

For that reason, although technical indicators can assist with trend identification, most traders combine different indicators when conducting stock analysis.

How Do Stock Technical Indicators Work?

Technical analysis uses various sets of data and indicators, such as price and volume, to identify patterns and trends in a security’s price movements. This type of analysis is different from fundamental analysis, which looks at company financials, industry trends, and macroeconomics.

Rather, technical analysis solely analyzes a stock’s performance. Stock technical indicators are often rendered as a pattern that can overlay a stock’s price chart to predict the market trend, and whether the stock would be considered “overbought” or “oversold.”

Two Main Types of Technical Indicators

Stock technical indicators generally come in two flavors: overlay indicators and oscillators.

Overlay Indicators

An overlay indicator typically overlays one trend onto another on a stock chart, often using different colors to distinguish between the lines.

Oscillator Indicators

An oscillator typically uses metrics such as a stock’s price or trading volume to determine momentum, or rate of change, over time. It uses this info to generate a signal, or trend line, whose fluctuations between two values in a range can indicate if a stock may be overbought or oversold.

If the trend line moves above the higher value of the range, it can indicate a stock is overbought, while dipping below the lower value can indicate it’s oversold. For example, a stochastic oscillator uses a range of 0 to 100. When levels are above 80, it may indicate an asset is overbought; when the indicator is below 20, it may be oversold

The movements of the trend line thus can help investors determine support and resistance in certain price trends when trading stocks, so they can decide whether to sell or buy (support being the price at which a downturn generally bounces back up, and resistance being the point at which rising prices generally start to fall).

Oscillator indicators can be leading or lagging:

•  A leading indicator tracks current market movements to anticipate where the trend is headed next.

•  A lagging indicator is based on recent history and seeks patterns that will indicate potential price movements.

The moving average is a common oscillator; it’s considered a lagging indicator as it measures specific intervals in the past.

Naturally, every stock indicator has its pros and cons. Various trading indicators can be used by investors to analyze supply and demand forces on stock price, to help shed light on market psychology, or to manage risk.

But while stock indicators and trading tools can help with buy and sell points, false signals can also occur.

Reasons to Use Stock Market Indicators

Knowing some of the most popular trading tools might benefit your investing strategy by providing you with easier-to-spot buy and sell signals. You don’t have to know every single technical indicator, and there are many ways to analyze stocks, but using multiple stock indicators may help you improve trading results.

You can also use these stock indicators to help you manage risk when you are actively trading, when investing online or through a traditional platform.

Price trend indicators are some of the most important technical trading tools since identifying a security price’s trend is often a first step to forming a trading strategy. Long positions are often initiated during uptrends, while short sale opportunities can occur when prices are in a downtrend.

Volume trend indicators are also helpful to gauge the power or conviction of an asset’s price move. Some believe that the higher the stock volume on a bullish breakout or bearish breakdown, the more confident the move is. Higher volume could signal a lengthier trend continuation.

7 Stock Indicators for Technical Analysis

It’s important to remember that these trading tools were developed based on the belief that mathematically derived patterns may be valuable as predictors of stock movements. Past performance, however, is not a guarantee of future results. So while it can be useful to employ stock technical indicators, they are best used in combination before deciding on a potential trade.

Also, many of these trading tools are lagging indicators, which can lead to an inaccurate reflection of current and future market conditions.

Following are seven of the most common technical stock indicators, along with their advantages and disadvantages.

•  Moving Averages (MA)

•  Moving Average Convergence Divergence (MACD)

•  Relative Strength Index (RSI)

•  Stochastic Oscillator

•  On-Balance Volume (OBV)

•  Accumulation / Distribution Line (ADL)

•  Standard Deviation

1. Moving Averages (MA)

A moving average (MA) is the average value of a security over a specific time. The MA can be:

•  Simple Moving Average (SMA)

•  Exponential Moving Average (EMA)

•  Weighted Moving Average (WMA).

A moving average smooths stock price volatility, and is taken as an indicator of the direction a price may be headed. If the price is above the moving average, it’s considered an uptrend versus when the price moves below the MA, which can signal a downtrend.

Moving averages are typically used in combination with each other, or other stock indicators, to identify trends.

Pros

•  Using moving averages can filter out the noise that comes from price fluctuations and focus on the overall trend.

•  Moving average crossovers are commonly used to pinpoint trend changes.

•  You can customize moving average periods: common time frames include 20-day, 30-day, 50-day, 100-day, 200-day.

Cons

•  A simple moving average may not help some traders as much as an exponential moving average (EMA), which puts more weight on recent price changes.

•  Market turbulence can make the MA less informative.

•  Moving averages can be simple, exponential, or weighted, which might be confusing to new traders.

2. Moving Average Convergence Divergence (MACD)

The Moving Average Convergence Divergence (MACD) helps investors gauge whether a security’s movement is bullish or bearish, and helps gauge the momentum of the trend. The MACD uses two different exponential moving averages (EMAs) to do so.

A 26-period EMA is subtracted from a short-term 12-period EMA to generate the MACD line. Then a signal line, based on a nine-day EMA, is plotted on top of the MACD to help reveal buy and sell entry points.

If the MACD line crosses above the signal line, that can signal a buy opportunity. If it crosses below the signal line, that could signal a price decline and an opportunity to sell or take a short position.

Pros

•  The MACD, used in combination with the relative strength index (below) can help identify overbought or oversold conditions.

•  It can be used to indicate a trend and also momentum.

•  Can help spot reversals.

Cons

•  The MACD might provide false reversal signals.

•  It responds mainly to the speed of price movements; less accurate in gauging the direction of a trend.

3. Relative Strength Index (RSI)

The relative strength index or RSI is an oscillator tool that looks at price fluctuations in a given period and calculates average price losses and gains. It ranges from 0 to 100. Generally, above 70 is considered overbought and under 30 is thought to be oversold.

Traders often use the RSI in conjunction with the MACD to confirm a price trend. The RSI can sometimes identify a divergence, when the indicator moves in opposition to the price; this can show the price trend is weakening.

Pros

•  An RSI can help investors spot buy or sell signals.

•  It may also help detect bull market or bear market trends.

•  It can be combined with moving average indicators to spot breakout trends or reversals.

Cons

•  The RSI can move without exhibiting a clear trend.

•  The RSI can remain at an overbought or oversold level for a long time, making this tool less useful.

•  It does not give clues as to volume trends.

Recommended: 5 Bullish Indicators for a Stock

4. Stochastic Oscillator

Traders will often use the stochastic oscillator, which is a momentum indicator, to determine whether a given security is overbought or oversold. The stochastic oscillator allows traders to compare a specific closing price of a security to a range of its prices over a certain time frame.

By using a stochastic chart, traders can gauge the momentum of a security’s price with the aim of anticipating trends and reversals. A stochastic oscillator uses a range of 0 to 100 to determine if an asset is overbought (when the measurements are above 80) or oversold (when the measurement is below 20).

Pros

•  Clearer entry/exit signals: The oscillator has a basic design and generates visual signals when it reaches the outer bounds of a price range. This can help a trader determine when it may be time to buy or to sell stocks.

•  Frequent signals: For more active traders who trade on intraday charts such as the 5-, 10-, or 15-minute time frames, the stochastic oscillator generates signals more often as price action oscillates in smaller ranges.

•  Easy to understand: The oscillator’s fluctuating lines are fairly clear for investors who know how to use them.

Cons

•  Possible false signals: Depending on the time settings chosen, traders may misperceive a sharp oscillation as a buy or sell signal, especially if it goes against the trend. This is more common during periods of market volatility.

•  Doesn’t measure the trend or direction: It calculates the strength or weakness of price action in a market, not the overall trend or direction.

5. On-Balance Volume (OBV)

OBV is a little different from the other indicators mentioned. It primarily uses volume flow to gauge future price action on a security or market. When there’s a new OBV peak, it generally indicates that buyers are strong, sellers are weak, and the price of the security may increase.

Similarly, a new OBV low is taken to mean that sellers are strong and buyers are weak, and the price is trending down.

The numerical value of the OBV isn’t important — it’s the direction that matters. In that respect it can be used as a trend confirmation tool. It can also signal divergences, when the price and the volume move in opposite directions.

Pros

•  Volume-based indicator gauges market sentiment to predict a bullish or bearish outcome.

•  OBV can be used to confirm price action and identify divergences.

Cons

•  It can be hard to find definitive buy and sell price levels.

•  False signals can happen when divergences and confirmations fail.

•  Volume surges can distort the indicator for short-term traders.

6. Accumulation / Distribution Line (ADL)

The accumulation/distribution line (ADL) looks at the trading range for a certain stock, and uses price and volume data to gauge whether shares are being accumulated or distributed. Like OBV it also looks for divergences, so that if a price trend isn’t supported by volume flow it could indicate the trend is about to reverse.

Although this sounds similar to OBV, they are calculated differently, and the ADL gives more attention to price and volume data within a specified range.

Pros

•  Traders can use the ADL to spot divergences in price compared with volume that can confirm price trends or signal reversals.

•  The ADL can be used as an indicator of the flow of cash in the market.

Cons

•  It doesn’t capture trading gaps or factor in their impact.

•  Smaller changes in volume are hard to detect.

7. Standard Deviation

Standard deviation measures the extent to which a data point deviates from an expected value, i.e. the mean return. When used as a technical indicator, standard deviation is a common stock volatility measure; it refers to how far a stock’s performance varies from its average.

Investors often measure an investment’s volatility by the standard deviation of returns compared with a broader market index or past returns.

Pros

•  Standard deviation mathematically captures the volatility of a stock’s movements, i.e. how far the price moves from the mean.

•  It provides technicians with an estimate for expected price movements.

•  It can be used to measure expected risk and return.

Cons

•  It does not provide precise buy and sell signals.

•  It must be used in conjunction with other indicators.

The Takeaway

Technical analysis tools use past price and volume data to help traders identify price trends and make buy and sell decisions. It’s important to know that technical analysis does not use fundamentals, like earnings reports, to assess the underlying companies, their industries, or any macroeconomic trends that might drive their success or failure. Rather, technical analysis solely analyzes the movement and volume inherent in a stock’s performance.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

What is the most popular technical indicator for stocks?

Traders typically combine technical indicators, so it’s difficult to point to one as being a top choice. That said, many traders use the moving average indicators in combination with others to gauge price trends.

What is the most accurate indicator of the stock market?

There is no single indicator that can anticipate overall stock market performance. In fact, it’s an important factor to keep in mind when using technical indicators: For every successful price prediction or winning trade, there are countless others that don’t pan out. There are no crystal balls.

Which indicator gives buy and sell signals?

Different traders favor different indicators when looking for signals about how to place a trade. That said, the stochastic oscillator is relatively clear-cut in that it can help traders identify buy and sell opportunities based on price closes and trends within a certain range.

---

Photo credit: iStock/staticnak1983

Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC. For a full listing of the fees associated with Sofi Invest, see our fee schedule.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOIN-Q126-043

Read more

A lot of personal finance advice is about saving for retirement. But the need for saving and investing doesn’t stop once you’re done working; seniors also need to maintain a sound investment strategy during retirement.

Retirees face several challenges that make investing after 65 necessary, including preserving safe income streams, outpacing inflation, and avoiding the risk of running out of money. Here are some tips seniors may consider as they choose the right path for investing after retirement.

1. Assess Income Sources and Budget

Once in retirement, seniors likely don’t have an income stream from a steady paycheck. Instead, retirees typically utilize a mix of sources to pay the bills, such as Social Security, withdrawals from retirement, savings, and online brokerage accounts, and perhaps passive sources of income such as rental properties. This change, going from relying on a regular salary to relying on savings and investments to fund a particular lifestyle, can be daunting.

Retirees should first understand where their income is coming from and how much is coming in to help navigate this financial change. This initial step can help establish a budget that allows them to comfortably cover typical retirement expenses and map out discretionary spending or new investments in their golden years.

2. Track Down Forgotten 401(k)s and Other Lost Money

If you changed jobs during your career, it’s possible that you left an old 401(k) plan behind. As of July 2025, there were 31.9 million forgotten or left-behind 401(k) accounts, according to estimates by Capitalize, a company that helps with 401(k) rollovers, and the Center for Retirement Research. These forgotten accounts hold about $2.1 trillion in assets.

To determine if you have a forgotten 401(k), make a list of every company you worked for and where you participated in a 401(k) plan. Contact them to see if they still have an account in your name. If a company no longer exists, or if it merged with another company, check with the U.S. Department of Labor (DOL). Visit the DOL’s Lost and Found Retirement Savings Database website, where you can track down your former company’s Form 5500, which is required to be filed annually for employee benefit plans. That should give you contact information you can reach out to or at least tell you who your 401(k) plan’s administrator was.

If you still can’t find a forgotten 401(k), you could try the National Registry of Unclaimed Retirement Benefits. Be aware that you’ll need to supply your Social Security number to search on their website.

Another option is to check the website for the National Association of Unclaimed Property Administrators, which may be able to help you find unclaimed funds, including an old 401(k). Check under every state that you’ve lived and worked in. If and when you find an old 401(k), you can roll it over into an IRA.

If you don’t yet have one, you can set up an IRA online. Then you can invest the money as you see fit.

3. Understand Time Horizon and Risk

Considering investment time horizon and risk in post-retirement investment plans is essential. Time horizon is the amount of time an individual has to invest before reaching a financial goal or needing the investment earnings for living expenses.

Time horizon significantly affects risk tolerance, which is the balance an individual is willing to strike between risk and reward. Generally speaking, seniors with a time horizon of a decade or more might choose to invest in riskier assets, such as stocks, because they feel they may have time to possibly ride out any short-term downturns in the market. Individuals with a short time horizon of just a few years may stick to more conservative investments, such as bonds, where they could potentially benefit from capital preservation and interest income.

4. Consider Diversification

Portfolio diversification involves spreading out investment across different asset classes, such as stocks, bonds, real estate, and cash. Diversification also involves spreading investments out among factors such as sector, size, and geography within each asset class.

It is important to take diversification into consideration before and after retirement. Diversification may help investors potentially avoid the risk and volatility unique to one specific type of investment, although there is still risk involved. Concentrating a portfolio with any one asset may increase volatility during a period when retirees want a low risk tolerance.

5. Rebalance Regularly

A retiree’s financial goals, risk tolerance, and time horizon generally affect the desired asset allocation in an investment portfolio. However, those initial goals and risk considerations can change during a retiree’s golden years.

Additionally, since the market is constantly in flux, potentially shifting the proportions of assets a person holds, it may make sense to rebalance the assets inside a portfolio regularly.

Rebalancing a portfolio may be thought of like the routine upkeep of your investments. For example, if a portfolio has an asset allocation of 70% bonds and 30% stocks and the stocks do well during a year, they might make up a higher percentage of a portfolio than planned. By the end of the year, the asset allocation may be 65% bonds and 35% stocks.

In that case, the investor may want to rebalance by selling stock and buying more conservative assets, such as bonds, to ensure the portfolio’s asset allocation is in line with their goals.

6. Keep an Eye on Inflation

Retirees living on a fixed income can be negatively affected by rising inflation. As prices increase, the fixed income that an individual relies on will be worth less the following year. For example, if an individual receives $1,000 a month in a fixed income and inflation rises by a 4% annual rate, then that $1,000 monthly income will be worth $960 in today’s money.

Investments that pay out a fixed interest rate, such as bonds, are most vulnerable to inflation risk as inflation may outpace the earned interest rate. Some other assets are more likely to outpace inflation, such as stocks or inflation-protected securities.

Smart Investment Options for Retirees

Retirees have a lot of choices when it comes to making new investments. But their financial goals, age, and risk tolerance can impact which investments they choose to make. With those factors in mind, here are a few investments seniors in retirement may want to consider.

Cash

Cash is the most stable way to hold money, and it is a necessary part of a retiree’s financial portfolio. Keeping cash on hand can help cover necessities like housing, utilities, food, and clothes.

Retirees could put a portion of their cash in a money market account or a high-yield savings account to earn interest while having easy access to their cash. However, the interest paid out in typical savings or checking accounts tends to be quite low and may not beat the inflation rate. That means the money in these accounts may slowly lose its value over time.

By comparison, some high-yield savings accounts have an annual percentage rate (APY) of up to 4.00%, compared to the 0.38% national average savings account rate.

Bonds

Bonds generally don’t offer the same potential for high returns as stocks and other assets, but they may have advantages for investing after retirement. Bonds typically pay interest regularly, such as twice a year, which may provide investors with a predictable income desired in retirement. Also, if investors hold a bond to maturity, they typically get back their entire principal, which can help preserve their savings while investing.

However, it’s important to be aware that while bonds are considered by investors to be a less risky investment, it’s still possible to lose money investing in them. For instance, a bond issuer may fail to make interest payments and default on the bond. Retirees should be aware of the risks involved when considering bonds.

Various types of bonds may help investors preserve capital and realize interest income during retirement, including relatively safe U.S. Treasuries. Additionally, Treasury-Inflation Protected Securities (TIPS) are bonds that hedge against inflation, which can be helpful for retirees worried about rising prices.

Stocks

Stocks are considered a risky investment; they tend to be more volatile than more conservative assets like bonds or certificates of deposit. Though investing in stocks may potentially lead to significant returns, it also means there is the potential for big losses. However, there may be value in investing in stocks for some seniors.

For example, stock investments may help a portfolio experience capital gains that outpace inflation. It may not make sense for older investors to chase returns from higher risk stocks like tech start-ups. Instead, retirees may want to look for proven companies whose stocks generally offer steadier growth. Retirees might also wish to consider investing in companies that provide stable dividend payouts that generate a regular income source.

Certificates of Deposit

Certificates of deposit, otherwise known as CDs, are low-risk investments that may offer higher interest rates than typical savings accounts. Investors put their money in a CD and choose a term, or length of time, that the bank will hold their money. The typical term length is anywhere from three months to five years, and during this period, the investor can’t touch the money until the term is up. Once the term is over, the investor gets the principal back, plus interest. Typically, the longer the investor’s money is in the account, the more interest the bank will pay.

Fixed Annuities

Fixed annuities may provide retirees with a regular income, bolster the gains from other investments, and supplement savings. In short, an annuity is a contract with an insurance company. The buyer pays into the annuity for a certain number of years, and the insurance company pays back the money in monthly payments.

The Takeaway

It’s never too early to start investing for retirement. But the need for a sound investing strategy doesn’t stop once an individual reaches retirement. You need to ensure that your savings and investments are working for you throughout your golden years.

One step that could help retirees manage their retirement savings is doing a 401(k) rollover, where they move funds from an old account to a rollover IRA. It’s possible to search for a lost or forgotten 401(k) from a previous employer to roll over into an IRA.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

Help build your nest egg with a SoFi IRA.

FAQ

What is the best investment strategy for retirees?

While the best investment strategy for retirees depends on an individual’s unique circumstances and financial needs, a balanced plan that combines generating a steady stream of income, outpacing inflation to protect purchasing power, and having a supply of cash for short-term needs is one that retirees may want to explore.

What is the number-one mistake retirees make?

The number-one mistake many retirees make is not having a strategic and comprehensive retirement plan in place. This may cause them to put off saving for retirement, underestimate how much money they will need, and claim Social Security benefits too early (for example at age 62 rather than at full retirement age, which results in a lower monthly amount). Having a retirement plan in place and reviewing it regularly to ensure that it still aligns with the individual’s needs and goals is essential.

What is considered a good retirement nest egg?

Saving at least 10 times your annual income by age 67 is generally considered a good retirement nest egg, according to an estimation by Fidelity. Benchmarks to potentially help reach that goal include saving 1x your salary by age 30, 3x your salary by 40, 6x by 50, 8x by 60, and 10x by age 67. While these are simply guidelines, having some specific numbers to work with may help you come up with a plan that fits your specific retirement goals and lifestyle.

---

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Investment Risk: Diversification can help reduce some investment risk, but cannot guarantee profit nor fully protect in a down market.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOIN-Q226-059

Read more