A technical indicator is the result of a mathematical formula that is applied to the historical price action of an underlying instrument. The data used to calculate technical indicators includes combinations of open, close, high and low prices over certain periods of time. Other indicators may use information such as volume and velocity to drive their results.
Essentially, technical indicators consist of a series of data points that can be overlaid on current price action in order to see how an instrument is currently performing in comparison to how it performed in the past. They are employed by traders to determine an asset’s future movements, as well as to determine the best points at which to open and/or close positions.