Day Trading Indicators: Software Reacting to Market Trends

Technical day trading indicators are statistic based calculations made off of price and/or volume in a given financial instrument such as futures contracts and forex lots.

Various day trading indicators can be applied to your trading software to help spot trends in the market & identify when a potentially tradeable opportunity arises. There are a vast number of indicators available to traders accessible through trading platforms both “out of the box” and through developers that build custom indicators.

Backtesting Indicators in NinjaTrader

Day trading indicators such as Bollinger Bands and Relative Strength Index (RSI) can serve as both entry and exit points of a trade. To see if an indicator will potentially work in a real-time market scenario, backtesting can be used to determine if the indicator would have predicted historic market moves that demonstrated similar day trading setups.

Please see the chart below showing both Bollinger Bands (top) and Relative Strength Index (bottom):


On the top part of the above chart, the S&P 500 index (ES contract) penetrates the bottom line of the Bollinger Band. At the same time, the Relative Strength Index penetrates the 30 level. The correlation of these two day trading software indicators hitting extreme levels, in itself, serves as an indication for a trade. Using automation capabilities through NinjaTrader, these two factors could be automatically programmed to initiate a trade based on this particular instance occurring during similar, future market conditions.

In addition to ‘putting on’ the above trade, a stop or exit strategy could be planned as part of a trade. This stop could also be automated and set to trigger when both indicators have touched opposite extreme levels. Referring to the above screenshot, that could mean both the S&P 500 index touched or penetrated the top end of the Bollinger Bands and the Relative Strength Index touched or penetrated the top end of its spectrum (70).

NinjaTrader’s Advanced Trade Management (ATM) helps eliminate emotions from your trading by protecting open positions with automatically submitted stop and target orders. The video below provides an intro to the use of NinjaTrader’s ATM strategies.

Download NinjaTrader to get started with free strategy backtesting using day trading indicators. NinjaTrader is always free to use for advanced charting, backtesting and trade simulation.