What it means
Faster settings lag less but give more false signals. Use indicators to describe conditions and confirm structure, not to predict.
In practice
Indicators summarise something about price that is hard to judge by eye: the trend's direction, the strength of momentum, how volatile the market is or how much volume is involved. Used that way they make decisions more consistent.
A sensible setup uses one tool for each job and no more, with price structure as the main evidence and the indicator as confirmation or as a filter.
What to watch for
Adding more indicators does not add more information, because they are all calculated from the same prices. Tuning settings until past results look perfect produces a system that fits history and fails on new data.
Related terms
3 terms- Moving averageMAThe average closing price of the last N candles, recalculated each candle to smooth out noise.
- RSIWilder's momentum oscillator from 0 to 100 comparing recent gains with recent losses.
- ConfluenceSeveral independent reasons pointing to the same price and direction; it raises the odds, never to certainty.