After learning candlestick charts, the
next big step is understanding technical indicators.
These tools help traders answer three critical questions:
- Is the trend strong?
- Is the stock overbought or oversold?
- When should I enter or exit?
Three indicators dominate global
trading screens:
RSI, Moving Averages, and MACD
1. What Is RSI (Relative Strength Index)?
RSI measures price strength on a scale of 0–100.
|
RSI Level |
Meaning |
|
Above 70 |
Overbought (price may fall) |
|
Below 30 |
Oversold (price may rise) |
|
40–60 |
Neutral |
RSI helps traders spot:
- Trend reversals
- Weak momentum
- Fake breakouts
2. What Is a Moving Average?
A moving average shows the average price over time.
The most common ones:
- 50-day MA
- 200-day MA
If price is above MA → Uptrend
If price is below MA →
Downtrend
When shorter MA crosses above longer MA, it is a buy signal.
3. What Is MACD? (Moving Average Convergence Divergence)
MACD shows:
- Trend direction
- Momentum
- Entry and exit timing
It uses:
- Two moving averages
- One signal line
When MACD crosses above signal → Buy
When it crosses below →
Sell
Why Professionals Use These Indicators
These tools:
- Filter market noise
- Confirm trends
- Reduce emotional trading
- Improve probability
They do not predict the future — they measure market behavior.
FAQs – Real Trading Situations
Q1. Which indicator is best for beginners?
Moving averages are the easiest to understand.
Q2. Can RSI be used alone?
Yes, but better results come when combined with trends.
Q3. Is MACD good for intraday trading?
Yes. It works well on short timeframes.
Q4. Do these indicators work in Indian markets?
Yes — NSE, BSE, Forex, Crypto, all.
Q5. Can indicators fail?
Yes. That’s why risk management is essential.
Final Thought
RSI, Moving Averages, and MACD are like
the dashboard of a car.
They don’t drive the market — but they tell you exactly what’s happening.
