What a technical indicator is, and what it isn’t
An indicator is arithmetic performed on price and volume. Everything it knows, you could have worked out yourself with enough time.
A technical indicator is a calculation applied to market data — usually some combination of open, high, low, close, and volume — and drawn on a chart. That is the whole definition. There is no other ingredient.
This matters more than it sounds. An indicator does not add information to a chart. It rearranges information already there into a form a person can read faster. A 20-period moving average tells you the average of the last twenty closes. You could compute that by hand. The indicator's contribution is speed and consistency, not knowledge.
What follows from that
If an indicator's only inputs are past prices, then an indicator cannot know anything that past prices do not contain. It does not know why a move happened. It does not know what a central bank will announce on Wednesday. It does not know that the seller pressing the bid is a fund unwinding a position for reasons that have nothing to do with the chart.
Every claim about what an indicator can do has to survive that constraint. A tool that reads price history can describe how price has behaved. It cannot tell you what price will do next, and any description of an indicator that implies otherwise is describing something the mathematics does not support.
The useful version of the claim. An indicator makes a property of the data visible — how far price has travelled relative to its own recent range, where it has turned before, how quickly it is moving compared with an hour ago. Whether that property matters is a judgement you make, not one the indicator makes for you.
Three things an indicator is not
It is not a forecast. An oscillator reaching an extreme reading is a statement about what has already happened. Extremes can persist for a long time, and often do in exactly the conditions where people expect them to resolve.
It is not a recommendation. A mark on a chart is the output of a rule. Whether that rule is relevant to your account, your timeframe, your risk tolerance, or the instrument you are trading is not something the rule evaluated. It cannot have, because it does not know any of those things.
It is not independent evidence. If you add a second indicator built from the same price series, you have not added a second opinion. This trips up more people than any other error in indicator use, and it has its own article.
Why use one at all
Because reading a chart carefully takes time, and doing it identically across forty instruments takes more time than a session allows. An indicator applies the same measurement the same way every time, without getting tired at 2pm or talking itself into a reading because it wants the trade to work.
That consistency is the product. It is a real advantage over doing the same work by eye, and it is smaller than most marketing suggests. Both things are true.