Top 3 Indicators on TradingView That Can Transform Your Trading Strategy

Imagine logging into TradingView and being armed with the top three indicators that could entirely change your trading game. No more guessing, no more impulsive decisions. Instead, you’re equipped with tools that give you confidence and edge in the markets.

But here’s the kicker: many traders overlook these powerful indicators, or worse, they misuse them. In this guide, we’ll dive into the top 3 indicators on TradingView, explaining why they matter, how to use them, and what makes them so effective. Spoiler: By the end of this article, you’ll wonder how you ever traded without them.

The Magic of Indicators

Before we dig into the specific indicators, let’s set the stage. Indicators are essentially tools that help traders analyze price data and predict potential market moves. They do not guarantee success, but used wisely, they improve your chances. Think of them like a compass: guiding your decisions, but you still need to steer the ship.

Here are the top three indicators that have consistently made a difference for traders:

1. Relative Strength Index (RSI) – Your Go-To for Overbought and Oversold Markets

Let’s start with Relative Strength Index (RSI), arguably one of the most popular indicators in the trading world. But here’s the twist – most traders use it the wrong way.

RSI measures the speed and change of price movements, oscillating between 0 and 100. Traditionally, an asset is considered overbought when RSI is above 70 and oversold when it’s below 30. However, smart traders don’t just sell when RSI hits 70 or buy at 30.

Why RSI Matters

RSI reveals momentum, which is a key element in price action. When prices move rapidly and consistently in one direction, momentum builds, and RSI picks up on this. What traders often miss is that RSI signals can be more powerful in combination with trends.

For example, when RSI remains above 50 during an uptrend, it can signal strength, not just an overbought condition. Similarly, during a downtrend, RSI sticking below 50 suggests continued weakness.

How to Use RSI Effectively:

• Trend Confirmation: Don’t just look at the absolute number; see if the RSI level confirms the prevailing trend.
• Divergence: If price is making new highs, but RSI isn't, this is a signal that momentum is weakening – a potential reversal is in sight.
• Extreme Readings: Instead of simply reacting to 70/30 levels, adjust to market conditions. In a strong bull market, RSI might consistently stay above 70, without a reversal.

RSI is simple but powerful, especially when used with other indicators like moving averages.

2. Moving Average Convergence Divergence (MACD) – The Ultimate Trend Detector

Next up is MACD – a trend-following indicator that shows the relationship between two moving averages of an asset’s price. MACD consists of two lines: the MACD line (the difference between two exponential moving averages, usually 12 and 26 periods) and the signal line (a 9-period EMA of the MACD line).

When these lines cross, it signals potential buy or sell opportunities. But again, the magic isn’t in blindly following the crosses.

Why MACD Matters

The beauty of MACD is its ability to show both trend and momentum. When the MACD line crosses above the signal line, it suggests that the trend is gaining momentum upwards, and the reverse is true for downward movements. But MACD’s real power lies in its ability to identify changes in the strength of a trend.

How to Use MACD Effectively:

• MACD Crossovers: Many traders make the mistake of solely focusing on MACD crossovers, but the key is to look for confirmation from the overall market trend. For example, if MACD crosses below the signal line in a strong uptrend, it might just be a pullback, not a complete reversal.
• Histogram Readings: The MACD histogram represents the difference between the MACD and signal lines. A rising histogram suggests increased buying strength, while a falling one signals selling strength.
• Divergence: Just like RSI, divergence between MACD and price action can signal potential reversals.

MACD is most effective when paired with other trend-following tools, but on its own, it’s a fantastic way to gauge both trend direction and strength.

3. Bollinger Bands – The Master of Volatility

Lastly, we have Bollinger Bands, the ultimate indicator for volatility. John Bollinger created these bands to help traders identify “overbought” or “oversold” conditions in a market. They consist of a simple moving average (usually 20 periods) and two standard deviations plotted above and below the average.

When prices move close to the upper band, the market is overbought, while prices near the lower band suggest the market is oversold. But here’s where traders often go wrong: Bollinger Bands are not reversal indicators. Many assume that hitting the upper or lower band means a price will reverse, but that’s not always true.

Why Bollinger Bands Matter

Bollinger Bands are all about volatility. When the bands contract, it suggests a period of low volatility, which is often followed by an explosive move. Conversely, when the bands expand, it indicates high volatility, and traders should be cautious of potential breakouts.

How to Use Bollinger Bands Effectively:

• Squeeze: When the bands narrow, it’s called a Bollinger Band Squeeze, signaling that volatility is low and a sharp move could be on the horizon.
• Walking the Bands: In strong trends, price can "walk the bands," staying near the upper or lower band for extended periods. This is not a signal to sell or buy – it’s an indication of trend strength.
• Combine with Other Indicators: Bollinger Bands work best when combined with other tools, such as RSI or MACD, for confirmation of potential breakouts or reversals.

Putting It All Together: A Strategy That Works

Now that you’re armed with RSI, MACD, and Bollinger Bands, how do you use them together? The trick is to look for confluence – multiple signals pointing in the same direction.

For instance:

• When RSI shows divergence, and MACD is giving a crossover signal, you might have a strong setup.
• Combine Bollinger Band squeezes with MACD crossovers for potential breakout trades.

Example Setup: The Perfect Trade

Let’s walk through an example. Imagine the price of a stock is rising and hitting the upper Bollinger Band, suggesting it’s overbought. At the same time, RSI shows a divergence – price is making higher highs, but RSI isn’t. Finally, MACD crosses below its signal line, signaling a potential reversal. This confluence of signals suggests the market might be ready for a pullback. You could take a short position with confidence, knowing that multiple indicators support the idea.

Conclusion: Master the Indicators, Master the Market

By now, you should see that RSI, MACD, and Bollinger Bands are not just standalone tools – they’re pieces of a larger puzzle. The real power comes from understanding how to use them together to confirm trends, detect reversals, and ride the waves of volatility.

Indicators won’t make you a millionaire overnight, but they can give you the edge you need to make smarter, more informed decisions. And remember: the best traders know that indicators are only as powerful as the trader using them. Master the basics, and these three indicators will become some of the most valuable tools in your trading arsenal.