What is an ‘Indicator’
Indicators are statistics used to measure current conditions as well as to
forecast financial or economic trends. Economic indicators are statistical
metrics used to measure the growth or contraction of the economy as a whole or
sectors within the economy. Technical indicators are used extensively in
technical analysis to predict changes in stock trends or price patterns in any
traded asset. In fundamental analysis, economic indicators that quantify
current economic and industry conditions are used to provide insight into the
future profitability potential of public companies.
BREAKING DOWN ‘Indicator’
There are many Economic indicators created by different people in both the
private and the public sector. The Bureau of Labor Statistics, which is the
research arm of the U.S. Department of Labor, compiles data on prices,
employment and unemployment, compensation and work conditions and productivity.
Within the price report is information on inflation, import and export prices
and consumer spending.
In the context of technical analysis, an indicator is a mathematical
calculation based on a security’s price and/or volume. The result is used to
predict future prices. Common technical analysis indicators are the moving average
convergence-divergence (MACD) indicator and the relative strength index (RSI).