On-chain indicators make use of data that is stored on publicly accessible blockchains. Unlike the traditional Web2 model whereby data is stored on a private database, on-chain data can be accessed by anyone and does not require a trusted API to be implemented by the service provider for data to be queried in a trusted manner.
For the majority of actions that occurs in DeFi, an event of the transaction will be logged onto the blockchain which can then be publicly queried. Some examples of on-chain data includes DEX swaps, token transfers, addresses holding the token, and many others.
Please refer to On-Chain vs Off-Chain Data for a more in-depth comparison of on-chain vs off-chain data sources.