What it is:
How it works/Example:
Market indicators are used in technical analysis to forecast market trends. Market indicators are ratios and formulas that explain current gains and losses in stocks and indexes, and furthermore, indicate if an index such as the S&P 500 will experience short-term or long-term gains or losses.
For example, the market breadth index is a commonly used market indicator that measures the number of rising stocks versus the number of declining stocks. An index of greater than 1.0 suggests a future rise in market indices. An index of less than 1.0 suggests that market indices will fall.
Why it matters:
Market indicators aid traders and investors in their decisions about the best times to buy and sell. To learn more, click here to read Technical Indicators: 5 Key Metrics for Market Watchers.