Investing with a long-term perspective can give you better returns, and there are fewer chances of any risk, except unexpected situations. For long-term investment, you can use fundamental analysis to analyse the various factors that can affect the stock price in the long term.

However, for long-term buying, you need to take a little help from technical analysis and use the technical indicators. This will help you grab the stocks at lower levels, increasing your rate of return on such long-term investments. In technical analysis, multiple indicators can be used, but for the long term, only a few of them are useful. Let’s talk about which one is better for a long-term investment strategy.

Top 5Best Indicators for Long-term Investment:

1.Relative Strength Index (RSI) for Long-term investment

The momentum oscillator will help you to know if the stock is trading in an overbought or oversold zone. It measures the speed and change of price movements to represent trading conditions in the range of 0 to 100. Buying a stock at lower levels for long-term investment will improve your chances of profitability. You can use the overbought and oversold stock condition to take action on your investment strategy.

To use the RSI, you need to keep watching the levels. When the RSI value goes below 20 or, for the long term, below 30, then it means the stock is trading in the oversold trading zone. And this could be the best opportunity to accumulate the stock in your portfolio at these levels.

Also Read: How to Use RSI Indicator for Intraday Trading or Day Trading

On the other hand, the RSI levels showing above 80 or 70 from long-term investing perspectives show the stock is moving into the overbought trading zone. Here you need to avoid buying the stocks, even if you already have the position and are running into a profit, you can sell the shares. For long-term investment, you can adjust the RSI parameters with long days to get better results.

2. Moving Averages for Long-term Investment

Moving averages are also one of the best technical indicators you can use to pick stocks from a long-term investment point of view. It will help you to know the trend of the stock price movement with indications when you can buy this stock whenever there is a positive crossover between the short-term moving averages with long-term moving averages.

There are two types of moving averages, simple moving average (SMA) and exponential moving average (EMA). SMA is calculated on the basis of the average price of the stock for a specific period, while EMA shows the average price trading period, but more weightage is given to the recent price data, which helps to get a more accurate price trend as per the recent market conditions and economic conditions.

If you are looking to use moving averages for long-term investment decisions, you can consider the 50-day, 100-day, or 200-day moving averages, either its SMA or the EMA. Crossover of the shorter days’ moving average crossing above the longer days moving average shows the bullish trend, while the shorter days’ moving averages crossing from above to below indicates the bearish trend in the stock.

3. Bollinger Bands for Long-term Investment

Apart from short-term trading, this indicator can also be used for a long-term investment viewpoint. The three bands used in this indicator, moving away from each other or expanding, show the volatility in the market or stock trading with high swings in the price during that period.

On the other hand, when the Bollinger Bands move closer to each other or contract signifies the low volatility in the price. The level of volatility in stock price movement is measured through the standard deviation, which moves when volatility rises or falls.

Also Read: How to Trade in High Volatile Market: Best Trading Strategies

To use this indicator for long-term investment, you need to keep monitoring when the price moves towards the upper band, which shows the price is trading in the overbought condition. Conversely, the price moving closer to the lower band means the price is trading in oversold conditions. Here you can identify the phase of high or low volatility and potential breakout points to pick the stock at such points.

4. Fibonacci Retracement for Long term Investment

This is another useful indicator that can help you pick the stocks at the right levels, especially when a long rally is visible in the stock price and where or at which points you can accumulate the stocks. This indicator will help you to identify the support and resistance levels of the stock. And the Fibonacci ratios will show you the different price retracement levels during these trends.

Buying a stock at a high price during an uptrend could be risky; you need to wait for the correction or retracement when a stock price moves with a long rally. The Fibonacci retracement ratios will show you the various retracement levels like 23.6%, 38.2%, 61.8%, and 78.6% that a stock can retrace.

Also Read: How to Use Fibonacci Retracement for Trading: Setting & Strategy

You can use these retracement points to accumulate the stock from a long-term perspective. These retracement levels also work as support and resistance to utilise for trading or picking the stock from a long-term perspective. For a long-term investment perspective, you need to choose a long time frame while applying this indicator on the technical chart to get the long-term view.

5. Supertrend Indicator for Long-term investment

This is a trend following indicator that can help you to identify the current trend in the stock with the signal of buying the stock at the right levels. Though you can use this indicator for intraday, swing trading, as well as positional trading or for investing in the stock with a long-term viewpoint.

When you apply this Supertrend indicator, it combines many periods, which will indicate to you whether the current trend is likely to continue further or not. However, while calculating the single line in the Supertrend indicator combines trend detection and volatility in the stock price.

Also Read: How to Identify Trend in Stock Market: 10 Points to Find Trend

From a positional trading or long-term investment point of view, you use the Supertrend indicator with a longer time frame. This strategy will help you to perceive the right signals while outperforming the short-term volatility in the stock price movement you are eyeing to accumulate the stock with a long-term viewpoint. For long-term investment, you need to adjust its parameters for long-term factors, as the default settings of supertrend in technical charts are set for a short-term trading point of view.

Best Long-Term Investment Strategy

Merely choosing a technical indicator to pick the stocks for the long-term investment would not be enough; you also need to invest with the right strategy to ensure the highest profitability in the shortest time. Apart from fundamental analysis and technical analysis, you also need to identify your investment goals.

Your investment strategy should include various factors like the time horizon of investment or how long you can hold your position, or how much risk you can afford if the stock price comes down or if you have any more funds to accumulate the stock to keep averaging your position.

The best strategy for the long-term investment should be choosing the stocks showing consistence growth as per the earnings growth of the company. And you should not put all your money once, instead keep the amount for a buy-on-dip strategy to minimise the cost of investment and maximise the rate of returns. And you can use the technical indicators to find such entry and exit points.

Also Read: What are the Best Entry and Exit Indicators in TradingView

Summing-up

Fundamental analysis is more important when considering the fundamentally strong stocks for long-term investment, but technical indicators can help you to pick the stock at the right levels. RSI, Moving averages, Bollinger bands and Fibonacci retracement are the best indicators for long-term investment.

You can use these indicators to know the overbought and oversold conditions and best support and resistance levels of the stock. Using the technical indicators in long-term investment is not necessary, but it can help you to pick stocks at their best levels that will improve your overall return from your investments.

Also Read: Five Best Support and Resistance Indicators in TradingView

However, along with indicators and other tools, you need to follow a long-term investment strategy that suits your investment goals or trading strategy. Here you can choose Moneysukh to make your long-term investment strategy more cost-effective with low brokerage trading facility and a demat account with best online trading platforms like Moneysukh Pro for equity, commodity and currency trading, with TradeRadar, Smart Options and AlgoTest for Algo trading in options and other segments.