Best Trading Indicators: Which One Is Right for Beginners?

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"Which indicator should I use?"
This is one of the most popular questions asked by beginner traders in Malaysia. And it is perfectly valid — when you open TradingView or any trading platform, there are over 100 types of technical indicators to choose from. From RSI, MACD, Moving Average, all the way to Bollinger Bands and Ichimoku Cloud.
The result? Many traders end up placing 5-6 indicators at once on a single chart, and end up more confused than before.
In this article, we will answer this question based on actual backtest data — not mere opinions. We reference studies that analysed nearly 100 years of stock market data to determine which indicators truly work.
RSI (Relative Strength Index) is the most reliable indicator with a win rate of 79.4% based on a 100-year study of Dow Jones data by NewTrading.io. However, the best indicator actually depends on your trading style — and combining 2-3 indicators from different categories is more effective than relying on a single indicator alone.
A technical indicator is a mathematical tool that calculates price and volume data to help traders make decisions. It is not a crystal ball that can predict the future with precision — but it helps you read the "language" of price movements.
Think of an indicator like a compass when hiking a mountain. A compass cannot tell you whether it will rain or not, but it helps you know the right direction.
Each indicator has a different purpose:
That is why it is important for you to understand indicator categories before choosing which one to use.
Before we go to the ranking, you need to understand that all technical indicators can be categorised into 3 main groups:
Purpose: Identify market direction — uptrend, downtrend, or sideways.
Examples: Moving Average (SMA/EMA), Ichimoku Cloud, Parabolic SAR
When to use: To confirm whether the market is trending or not before entering a position.
Purpose: Measure the speed and strength of price movements. Helps identify when prices are overbought (too expensive) or oversold (too cheap).
Examples: RSI, MACD, Stochastic Oscillator
When to use: To find precise entry points and identify potential reversals.
Purpose: Measure the degree of price fluctuation. Is the market calm or turbulent?
Examples: Bollinger Bands, Average True Range (ATR)
When to use: To set appropriate stop losses and identify breakouts.
Important Rule: Do not use more than one indicator from the same category. This is called indicator redundancy — you only get the same information repeated without any additional benefit.
This ranking is based on a comprehensive study by NewTrading.io that analysed nearly 100 years of DJIA (Dow Jones Industrial Average) data using backtesting. The study was divided into two phases: In-Sample Period (1928-1995) to develop strategies, and Out-of-Sample Period (1996-2024) to validate their effectiveness.
Category: Momentum
Difficulty: Easy (suitable for beginners)
RSI is the most reliable indicator based on this study, with an average win rate of 79.4% across both test periods. A separate study by LiberatedStockTrader.com which tested RSI on over 23,000 trades also confirmed its effectiveness.
What RSI shows:
How to use RSI for beginners:
Pro Tip: A study by QuantifiedStrategies.com found that RSI with a 2-day setting on SPY achieved a win rate of up to 91%. However, this shorter setting is more suitable for experienced traders.
For a more detailed guide on RSI and Stochastic, read our article: Stochastic Oscillator & RSI Indicator on TradingView.
Category: Trend
Difficulty: Very Easy (most suitable for beginners)
Moving Average is the easiest indicator to understand and one of the most effective. EMA (50) recorded a return rate of 1.60 in the same study — meaning every RM1 of risk has the potential to return RM1.60.
What MA shows:
Two main types:
Popular strategy — Golden Cross & Death Cross:
Moving Average is the foundation for many other indicators including MACD and Bollinger Bands. If you only want to learn one indicator, start with this one.
Category: Momentum + Trend
Difficulty: Moderate
MACD is a unique indicator because it combines trend and momentum elements. When combined with RSI, this combo achieves a win rate of 73% according to QuantifiedStrategies.com.
What MACD shows:
Key signals:
MACD is most effective in a trending market — when the market is clearly going up or clearly going down. In a sideways market, MACD can give false signals.
Want to learn more? Read our guides: MACD Indicator - How to Use It in Stock Analysis and How to Use MACD on TradingView.
Category: Volatility
Difficulty: Moderate
Bollinger Bands recorded a win rate of 77.8% — the second highest after RSI. This indicator was created by John Bollinger in the 1980s and remains relevant to this day.
What Bollinger Bands show:
How to read:
Bollinger Squeeze is one of the strongest signals — when bands narrow for a long time, it is like a compressed spring. When it breaks, the price movement is usually strong and sudden.
For the full tutorial: Bollinger Bands Indicator & How to Use It on TradingView.
Category: Confirmation
Difficulty: Easy
Volume is not a traditional technical indicator, but it is the most important for confirmation. Without volume, all signals from other indicators may be meaningless.
Basic principles:
OBV (On-Balance Volume) calculates volume cumulatively — adding volume on up days and subtracting on down days. When OBV rises while prices remain flat, this is a sign that smart money is accumulating shares (accumulation).
On Bursa Malaysia, pay particular attention to unusual volume — when volume is significantly higher than average. This often signals major interest from institutions or market "sharks".

| Indicator | Category | Win Rate | Difficulty | Best For |
|---|---|---|---|---|
| RSI | Momentum | 79.4% | Easy | Entry/exit timing |
| Moving Average | Trend | — | Very Easy | Identifying trend direction |
| MACD | Momentum + Trend | 73%* | Moderate | Confirming trend + momentum |
| Bollinger Bands | Volatility | 77.8% | Moderate | Identifying breakouts |
| Volume | Confirmation | — | Easy | Confirming signal strength |
*MACD win rate is based on a combo with RSI
The real secret is not finding one "best" indicator — but combining 2-3 indicators from different categories to get a more complete picture, as recommended by Tradeciety.com.
This is the combination we recommend for new traders:
Example setup:
For traders who are already comfortable with the basics:
This is the #1 mistake made by beginner traders — placing 5-6 indicators on a single chart until the chart looks like a rainbow.
Maximum 2-3 indicators only. Choose one from each category:
This is more than enough to make good trading decisions.
To learn how to set up indicators in TradingView, refer to our guide: TradingView: How to Add & Remove Indicators.
The best indicator depends on your trading style:
If you are just starting out and unsure where to begin, follow these steps:
Week 1-2: Learn to Read Charts
Week 3-4: Add Your First Indicator
Week 5-6: Add RSI
Week 7-8: Observe Volume
After 2 months of practice, you will have a basic trading system that works. From there, you can explore additional indicators such as MACD, Bollinger Bands, or Ichimoku Cloud.
You can, but it is less effective. A single indicator only provides one perspective. Combining 2-3 indicators from different categories gives a more complete picture and reduces false signals.
RSI + EMA + Volume is the most versatile combo for Bursa Malaysia stocks. Most stocks on Bursa respond well to RSI overbought/oversold signals, especially blue chip and mid-cap stocks.
All indicators mentioned in this article are free on TradingView and most trading platforms. You do not need to buy expensive indicators — the standard indicators that are already available are more than sufficient.
Indicators are based on past data (lagging). They calculate price data that has already occurred, not predict the future. That is why indicators are sometimes late or give false signals, especially in a sideways market. Risk management remains essential.
For gold trading, Bollinger Bands + RSI is a popular combo because gold often moves within a range. According to Google Trends Malaysia, "best indicator for gold trading" is among the popular searches related to indicators.
Realistically, you will need 2-3 months of consistent practice to be comfortable with 2-3 basic indicators. Do not rush — focus on mastering one indicator first before adding another.
For scalping (very short trades), MACD + Bollinger Bands + VWAP on a 1-5 minute timeframe. However, scalping requires extensive experience and is not recommended for beginners.
Leading indicators attempt to predict future movements (e.g., Stochastic, Williams %R). Lagging indicators confirm movements that have already occurred (e.g., MA, MACD). Most popular indicators are lagging — and that is perfectly fine. Confirmation is safer than prediction.
Back to the original question: "Which indicator should I use?"
Based on 100 years of backtest data:
But remember — no single indicator is perfect. The real secret is:
If you are just starting out in the world of stocks and do not yet have a foundation, we recommend downloading our free Stock Basics Ebook at /ebookasas to understand the fundamentals before using technical indicators.
And if you do not yet have a trading account, you can open a CDS Account through this link to start investing on Bursa Malaysia.