An indicator guide and method of use is provided for use with an instrument arranged to be guided to a target site within the body of the patient by an electronic tracking system. A sensor is coupled to at least one of the instrument and indicator guide provides a signal to the tracking system which determines the position and orientation of the instrument with respect to the target site and provides output signals indicative thereof. The indicator guide includes a display responsive to the output signals for providing a visual indication of the path the instrument should take to reach the target site and for providing a perceptible indication of the distance to the target site. The display is located on or immediately adjacent the instrument and within the surgical field, whereupon the user can readily see the display while directly viewing and moving the instrument along that path.
