Successful day traders rely on technical indicators to make informed trading decisions. These indicators help traders analyze price action, identify trends, and spot potential trade opportunities. Whether you're new to trading or looking to refine your strategies, understanding and applying the right indicators is key.

In this guide, we’ll explore some of the best day trading indicators, how to use them effectively, and how to practice them risk-free on Trading Blitz, a powerful trading simulator that allows traders to test strategies with historical stock charts.

1. Moving Averages (MA)

What It Does: Moving averages smooth price data to identify trends and potential entry/exit points. The two most commonly used types are:

• Simple Moving Average (SMA): A basic average of prices over a set period.
• Exponential Moving Average (EMA): Places more weight on recent prices for a more responsive indicator.

How to Use It:

• Use a 50-day SMA and 200-day SMA to identify long-term trends.
• A short-term EMA (such as the 9-day EMA) crossing above a longer-term EMA (like the 21-day EMA) signals a potential buy opportunity.

Trading Blitz Assignment:

• Open the Trading Blitz simulator and click indicators (top left).
• Find and add "Moving Average Multiple" - you will see 6 moving averages (MAs).
• Double click on any of the MAs to view the indicator Settings.
• Select the Style tab and uncheck four of the six MAs.
• Select the Inputs tab and change the values of the two remaining MAs (e.g. 50 and 200)
• Use these MAs to practice identifying the overall trend of the stock you're practicing on.

2. Relative Strength Index (RSI)

What It Does: RSI measures momentum and indicates whether a stock is overbought or oversold.

• RSI values above 70 suggest an overbought condition (potential sell signal).
• RSI values below 30 suggest an oversold condition (potential buy signal).

How to Use It:

• Look for RSI crossing above 50 as a bullish signal.
• Watch for divergence between RSI and price action as a sign of trend reversals.

Trading Blitz Assignment:

• Filter charts on Trading Blitz by RSI crossing 50 and test entering trades when momentum shifts.
• Practice spotting divergence setups to improve recognition of potential reversals.

3. Moving Average Convergence Divergence (MACD)

What It Does: MACD helps traders spot trend direction and momentum shifts.

• Consists of the MACD line, signal line, and a histogram.
• A bullish crossover occurs when the MACD line crosses above the signal line.
• A bearish crossover happens when the MACD line crosses below the signal line.

How to Use It:

• Trade long when the MACD crosses above the signal line.
• Trade short when the MACD crosses below the signal line.
• Use histogram bars to gauge momentum strength.

Trading Blitz Assignment:

• Select charts with MACD crossovers and practice executing trades based on bullish/bearish signals.
• Track how MACD histogram changes help confirm trade decisions.

4. Bollinger Bands

What It Does: Bollinger Bands measure volatility and help traders identify breakout or reversal setups.

• Consist of a middle SMA, an upper band, and a lower band.
• When price touches the upper band, it may indicate overbought conditions.
• When price touches the lower band, it may indicate oversold conditions.

How to Use It:

• Look for Bollinger Band squeeze setups (when bands contract), signaling upcoming volatility.
• Use band breakouts as confirmation of trend continuation or reversal.

Trading Blitz Assignment:

• Add the Bollinger Bands on your Trading Blitz chart.
• Filter charts by Breakouts or Gap Up patterns.
• Experiment with placing trades near band extremes to identify high-probability reversals.

Conclusion

Mastering these indicators takes time, but using Trading Blitz allows you to practice without financial risk. The simulator provides randomly selected stock charts, letting you refine strategies in simulated market conditions. Whether you’re testing moving averages, RSI, MACD, or Bollinger Bands, Trading Blitz helps you bridge the gap between theory and execution.

Start practicing today on Trading Blitz and take your day trading skills to the next level!

About Trading Blitz
Trading Blitz is a free trading simulator game which allows students to learn and practice technical analysis on historical stock charts. Players start with a virtual account balance of $100,000 and try to grow it as large as possible. When you're ready, you can battle it out against other players in 90-second matches trading the same anonymous charts. The simulator offers basic and advanced statistics, forums, and the ability to filter charts.