Technical Indicators
Master the most powerful indicators for momentum, trend, and volatility analysis.
Understanding Indicators
Technical indicators are mathematical calculations based on price and volume. They help identify trends, momentum, and potential reversal points.
Key Principle
"Never use indicators in isolation."
Analogy: The Car Dashboard
RSI = Speedometer
Shows if you are going too fast (Overbought) and might need to slow down.
Moving Averages = GPS
Shows the general direction of the road so you don't get lost.
Bollinger Bands = Road Lanes
Shows how wide the road is. If narrow, be careful of a sudden turn.
Relative Strength Index (RSI)
RSI measures the speed and magnitude of recent price changes to evaluate overbought or oversold conditions.
Overbought
Potential sell signal
Neutral Zone
Normal trading range
Oversold
Potential buy signal
RSI Divergence
When price makes new highs but RSI doesn't, it signals potential weakness. The opposite signals potential strength.
Indicator Tips
- • Combine momentum and trend indicators
- • Use divergences to spot reversals early
- • Adjust settings based on timeframe
Common Mistakes
- • Using too many indicators (analysis paralysis)
- • Relying solely on indicator signals
- • Ignoring price action context
Indicator Wisdom
"Indicators confirm what price already shows. Price is the ultimate indicator."