In technical analysis in finance, a technical indicator is a mathematical calculation based on historic price, volume, or (in the case of futures contracts) open interest information that aims to forecast financial market direction.
New Indicators are often backtested on historic price and volume data to see how effective they would have been to predict future events.
False signs may emerge because of various components, including timing slacks, inconsistencies in information sources, smoothing strategies or even the calculation by which the pointer is determined.
Technical analysis tries to capture market psychology and sentiment by analyzing price trends and chart patterns for possible trading opportunities.
Traders should be careful when taking trades solely based on indicators since they are not foolproof.