A trading indicator is a statistical tool used by traders to make informed decisions about buying or selling securities. These indicators analyze historical data, such as price, volume, and volatility, to forecast future market movements. They are essential in technical analysis, where traders rely on chart patterns and statistical measures rather than fundamental data.

Trading indicators can be broadly categorized into leading and lagging indicators. Leading indicators, like the Relative Strength Index (RSI) and Stochastic Oscillator, predict future price movements and are used to identify potential entry and exit points before the market makes a move. Lagging indicators, such as Moving Averages (MA) and Moving Average Convergence Divergence (MACD), confirm trends after they have started and are useful for validating the strength and direction of a trend.

There are also volume-based indicators, such as the On-Balance Volume (OBV) and the Chaikin Money Flow (CMF), which analyze the flow of volume to gauge the strength of a trend. Additionally, volatility indicators, like Bollinger Bands and the Average True Range (ATR), help traders understand market volatility and potential price fluctuations.

Overall, trading indicators are crucial for traders to make more systematic and objective trading decisions, reducing the reliance on emotion and increasing the likelihood of success in the markets.