Now we get into what most consider the real technical methods, mathematical formulae that have been observed or at least claimed to have some kind of significance in trading. A variety of formulae get tripped when a variety of things happen to the share price. They are suited to a variety of trading styles, some are called "oscillators" and these ones fire when a stock is chopping about in a fixed range and the stock upturns or downturns. Then there are "moving averages" you buy when a stock is above its moving average and sell when it crosses below, "momentum" indicators show how fast a stock is moving, and "divergences" are indicators that momentum may be waning or picking up, indicating a possible trend change. In skilled hands they usually work, but again the good traders are highly dependent on a decent exit strategy.

Indicators are what make up the majority of features of most software packages, and a variety of indicators suit a variety of methods and trading climates.

Oscillators signal that a trend is reversing, the value of the oscillator moves up and down like a sine wave, rising above or falling below certain levels triggers them. They usually work best in a trading range, that is to say when a stock is just bouncing up and down between an upper and lower bound an oscillator player longs and shorts each up and down to make profits as long as the range continues.

Divergence signals mean that momentum is waning, they may indicate an impending trend change.

Moving average crossovers give lagging buy signals when a stock is above its moving average. When the stock crosses below the moving average you sell. Obviously these things aren't rocket science, and I honestly wonder why most people even bother with most indicators since it is usually completely obvious with the quickest of glances when a stock is turning around and moving up.

As the name suggests momentum indicators show the rate of change of the price. When a stock takes off violently on good news it often spends a number of days piling up big gains. Momentum indicators show increased volatility and rapid movements backed up by volume.

A good site that sums up many of the commonly used indicators is at the Equis site (the software company that makes Metastock), they have an A to Z of technical analysis.

Between you and me I think they only wrote that page because 99% of traders don't know, and don't care what a money flow RSI crossover is, and so they weren't using it and realising that they probably paid too much when they had a choice between the $200 software that did everything they wanted it to with 15 functions, or the $700 software that did everything and had an extra 300 odd indicators, expert advisor systems and automatic pattern identification, so of course went out and bought the expensive one because one should never take risks with one's personal finance by skimping on important tools.

At risk of sounding repetitive here, it is money management and exit strategies that ward off going broke long enough for you to learn trading. If you want an entrance signal and the MK1 eyeball is not good enough, and it sounds more scientific to buy a stock on a stochastic crossover rather than an upturn, go ahead and use an indicator.

Many traders use computer indicators because they feel the computer is better at finding patterns than the naked eye. Forget that, the human eye/brain is the most powerful pattern recognition system in existence today. Computer scientists think of it as a great coup if they can get a computer to recognise the difference between a picture of a kitten and a main battle tank, and the pattern recognition software they use is a lot more sophisticated than the five lines of code that tell the computer what to do with some OHLV stock data. Your eye is perfectly adequate for seeing trends and reversals, the whole trouble is that the eye is too good at finding patterns in pictures, because it means traders are always seeing trends and reversals that aren't really there.

Like everything in life what is important is finding the 10% of things that make 90% of the difference. Most systems put together by beginners are of Byzantine complexity, seeking out multiple confirmation from synergistic indicators. So what ever happened to buying a stock because the trend is up?

Futures, on the other hand, are far more actively traded by technical analysts and technical signals may have more meaning. Indicators are especially popular among futures traders. (NB: popularity does not necessarily translate into effectiveness!!)