Which indicator is best for day trading, and how do you use them to fit your trading strategies? Hello, everyone? My name is shay aka humboldt trader, as somebody who's been day trading for over seven years now, i've certainly gone through tons of different indicators from macd, ichimoku clouds, simple moving averages view up, bollinger bands and smashing the like button. The list just goes on and on as a full-time day trader. I personally do not recommend relying on indicators anymore. I prefer to have my charts very clean, like this without layers of indicators, and i will explain why later on in the video.

But if you are a beginner day trader using indicators is definitely a good way to start learning, to plan your entries and exit and start building. Your trading strategy in this video we'll be talking about the most popular trading indicators out there for new traders and how to use them to fit your trading strategies. Let's start by talking about the first indicator, macd macd stands for moving average convergence divergence. This is the trend indicator, meaning that it's an indicator that short-term day traders like you and i can use to predict the potential reversal of the stock direction.

So, basically, how you use this indicator is by looking at the lines and the little green and red little histogram charts at the bottom. So the blue line over here, it's called the fast line and the slow line is this white or yellow line here when they start crossing over, the blue line goes under under the white line. That's when it starts to change in trend and at the same time, you're going to see this green bar slowly disappear and turn red. So during this transition, usually it's where people look for the reversal.

So when you start transitioning here, as you can see, tesla stock reached a high of 10 54 and when, during the slowly roll over all the way down to 10 40. That's where you see the lines, crossover and the histogram slowly disappear and the same thing would be for the other way around right. When you see a stock, that's just aggressively selling off when you're. Looking for the bounce, so atvi you can see.

The stock went from 72 dollars all the way down to 66 dollars, so this is where, when it's aggressively selling off, you can look at the histogram now you're looking for the other way around now, so you want to look for the red histogram slowly. Turning the green and the white line to go under the blue line this time around, so during this transition you can see the stock reach a low of 66 dollars and over here it's when the slow transition of histogram slowly happens. Note that it's a very slow transition when you're using these kind of trend indicators, because it needs time for the prices to catch up. So you see the blue line slowly crosses over the white line and the histogram slowly turn from red to green.

That's where you start getting the bounce from low of the day, around 65 dollars and slowly recovered over to 66 and 67 dollars and very important here when it comes to indicators like macd and a couple other ones that we're going to talk about later. In the video you want to just stick with the default settings here. So if you look at this macd here, it's on the 12 26 and 9 exponential settings - and here are some tips i have for you. If you decide to try out this macd indicator use this indicator on the higher time frames, such as 10 minutes or 5 minutes notice that earlier on the demo, i showed you i'm using it on the five minute chart instead of one or two minutes.

The reason is because again, this macd indicator is a trend indicator and for trends to form for the stocks for each candle. You need to give it time for the volatility and the price action to slowly catch up. If you use the one minute or two minute chart on this macd indicator, you're gon na get a lot of false breakouts and false breakdowns. A second tip i have for you is to add another indicator to this strategy, essentially using two indicator pairs which brings us to the second indicator: that's very friendly.

For beginner day traders, rsi rsi stands for relative strength index. This is a momentum indicator this time around, and it tells you when your stock is overbought or oversold, meaning that there's too many buyers or sellers crowded on one side of the trade so down here you can see this is the rsi indicator, this white line on The top is 70 value and down here is 30.. Whenever you see this line crossing above 70 and especially when it gets really close to the 90 territory, that means the stock is potentially overbought means. There's a lot of buying in the top over here and the buyers could potentially get exhausted and you might see some short-term profit taking and the other side will be using this indicator to find oversold stocks means the stocks had a lot of emotional selling.

As you can see here, when the stock went from 148, all the way down to 143 and then later on 140 to 80s, when there's a lot of emotional selling - and you see the rsi crosses below 30 mark, that's when it's oversold and a lot of times. That's where traders use it to time the bounce the reversal to the upside once again, this is how you set up your indicator in your broker platform or, if you're you also using thinkorswim over here, go to the edit studies and search for rsi and just add It over that's where you'll find the rsi indicator, i'm using the default settings again. The length is 14, the overbought i still have it set at 70 and 30 for oversold. The whole purpose of why traders like using rsi indicator is to try to find the top and the bottom of a stock on the reversals, which sounds pretty similar to the trend indicator.

We just talked about with macd, so that's the reason why many traders like to use macd and rsi together as a pair because by itself macd is a lagging indicator, meaning that it takes a while for the fast line to slowly converge with a slow line and Same thing with a histogram, on the other hand, though, rsi indicator is usually early so over here we're looking at the charts for rivian rivn and on the indicators you can see that i have the rsi and the macd all the default settings lined up at the Bottom over here, you can see that while rsi had turned red and went above the 70 mark for a couple of times, the stock just kept on climbing higher around the same time over here right. It turned red over here, but the stock was still near. The highs and it still made another new high later on, but if we also use the macd near the bottom, you can see that only slowly started converging around this time. So the fast line crosses under the slow line, and you can see the green slowly rolled over to become the red histogram.

So that's why you can pair them up together and slowly find the top you can see in this example. Here this stock rivian just kept on climbing to new highs around 150s, even though the rsi had shown that it's overbought for a couple of times. So that's why rsi is usually early like we talked about earlier over here, but if you pair it up with the macd indicator near the bottom, you can see that it only started rolling over around here. Around 12 o'clock after the stock had retested that 150 mark.

Many times on the five minute charts, so that's why it's a good idea to line both of these up. You see the rsi. Yes, it turns red over here and also the histogram and the fast line slowly crossing under the slow line on the macd. If you pair them up together, that's where you can get a better timing, nothing is going to be exact, but it's a lot better than all the way about an hour early and it will work as well, if you're, using the pair to find reversal to the Upside so, for example, after the stock rivian started selling off from 150s down here to around 139, you can see yeah.

You can also get a wick candle on the five minute chart and you see rsi it's at 30s and yes, that's still early on, but you can see slowly. This macd near the bottom starts to converge. The fast line crosses over the slow line. That's where you get the confirmation for the bounce and you slowly get the reversal to the upside to new highs.

So you can see now with the examples by using the rsi and the indicator together as a pair, they can provide you information where there's potential reversal. Coming up soon, but they still require you to be patient and wait for multiple confirmations instead of just jumping into the stock right away. So earlier we mentioned that the first tip for using the macd and rsi indicator pair is to use higher time frames. Like 5 minutes or 10 minutes now, the second tip i have for you is to use this indicator pair for the large cap stocks.

Only when i used this indicator pair in my first two years of day trading, i personally found them useful for the large cap or the mint cap stocks because they tend to trend a lot better, not so much for the volatile low flow smoke cap stocks, because, Let's face it a lot of times, they give you the fake breakout and a lot of sudden rug pose. Is this indicator pair going to give you a hundred percent win rate all the time? No, absolutely not. The only way to do so is, if you remember, to hit the like button at the bottom of the video. I find that the better indicator pairs to use for trading low float.

Small cap stocks are v-wap and volume, and these two indicators are the only ones. I have on my charts, so here's how you set up the v-wap and volume indicator go back to your studies on thinkorswim, um and search for vwab and very important that to get get rid of the arc macd and rsi and go to view up settings because By default, if you just click apply, you get tons of lines a lot of like these. Like useless lines, i don't know why they give you like three lines when you really just need the middle. So how you get rid of the top and bottom is: go back to the settings for v1, go to upper band and get rid of show plot and show bubble and same thing for the lower band.

You want to uncheck every single one and that's how you get only the true view app to show up on your charts. So it would look something like this. That's the correct view of setting to use and once again we want to add volume as well. So go back to studies and i like to use volume average and add selected and apply so that's where you get the volume at the bottom of the chart and v-wap and again, that's all i use when it comes to day trading.

V-Wap stands for volume weighted average price, so it takes accounts into the historical price and the volume when indicating to you, the traders, the strength or the weakness of the stock. So you see this pink line over here once the stock is trading above this v-wap indicator. Above this line, if you see steady volume coming in and a stock is creating higher highs and higher lows, then the stock is strong. It's up trending and it's relatively strong in comparison to the historical price and volume.

Intraday now remember to look at the volume indicator down here. Ask yourself: is the volume consistent and is it slowly increasing? That would be ideal and over here? If you see that the volume is yes, it's consistent and it's increasing while the stock is trading above v-wap, then it's very bullish, then you can look for pullbacks to long the stock and vice versa. If you're looking to short a stock to the downside, if you see a stock breaking below v-wap and, most importantly, holding below it, that means the stock is very weak and the sellers have control of the stock. Now take a look at the volume beneath that v-wap indicator.

Is the volume slowly increasing while the stock is trending below v-wap? In this case right, you can see especially near the end of the day the volume really increased. Then the stock is going to be a no bounce city on the way down. This is simply just the most general way to use v-wap. It's a guide to indicate whether the stock is bullish or bearish short term for day trading.

Now that you've seen the two pairs of indicators i recommend using, you must be wondering: okay shay, why are you not using any of these fancy pretty looking indicators anymore, i thought the more indicators you use, the more money you make. The truth is all these indicators. Look picture perfect in hindsight after the move is finished, it's kind of just like memorizing candlestick patterns. These stains do not provide you the little nuances regarding who is trapped in pain and where the momentum is going.

It's all about taking baby steps, especially if you're a brand new trader using a lot of indicators in trading is like having training wheels when learning to bike. It's perfectly fine to start if you're new, but eventually you are going to outgrow them as a trader. Only indicators i leave on my charts nowadays are vwop volume and elon musk's twitter account if you're interested in learning more of my day, trading strategies without relying on indicators or memorizing patterns feel free to check out the humble trader academy on my website. Let me know in the comment section below what kind of indicators you are personally using when day trading, if you enjoyed the video, please remember to drop a like and subscribe.

Thank you guys so much for watching. As always, i'm the humble trader and i'll see you guys next time you.