What Are Technical Indicators?
Technical indicators are math formulas applied to a stock's price and volume. They help you spot trends, measure how strong a move is, and find possible turning points.
No single indicator tells the whole story. The best approach is to use two or three that work together — for example, one that shows the trend and another that shows momentum.
RSI (Relative Strength Index)
RSI runs from 0 to 100. Above 70 means the stock might be "overbought" — the price went up too fast and could pull back. Below 30 means it might be "oversold" — the price dropped too fast and could bounce.
A special signal called "divergence" is worth watching. If the stock makes a new high but RSI makes a lower high, it warns that the move is running out of steam.
Moving Averages
A moving average smooths out the price over a number of days. The 50-day average shows the medium-term trend. The 200-day average shows the long-term trend. If the price is above the average, the trend is generally up.
Two important signals: the "Golden Cross" happens when the 50-day average crosses above the 200-day average — that's bullish (positive). The "Death Cross" is the opposite — bearish (negative).
MACD
MACD (Moving Average Convergence Divergence) shows the relationship between two moving averages. It has a MACD line, a signal line, and a histogram (bar chart).
When the MACD line crosses above the signal line, it's a buy signal. When it crosses below, it's a sell signal. The histogram bars show how far apart the two lines are — bigger bars mean stronger momentum.
Bollinger Bands and Volume
Bollinger Bands draw a channel around the price. The middle line is the 20-day average. The upper and lower lines sit 2 standard deviations away. When the bands get narrow (a "squeeze"), it means the stock is quiet — and a big move is often coming.
Volume is how many shares traded. Big price moves on high volume are more trustworthy than moves on low volume. If a stock breaks above resistance with heavy buying, that's a much stronger signal than a breakout on thin trading.