📊 Indicators

Technical Indicators — RSI, MACD, Moving Averages & More

Use indicators as confirmation tools — not as primary signals. This guide covers the most powerful indicators with proper usage, settings, and the common mistakes that make them unreliable.

✓ 6 Core Indicators✓ Divergence Signals✓ Entry Confirmation✓ Settings Explained

1. RSI — The Essential Momentum Tool

RSI measures the speed and magnitude of price changes on a scale of 0–100. Readings above 70 suggest overbought; below 30 suggest oversold. The most powerful RSI signals are divergences — when price makes a new high but RSI makes a lower high (bearish divergence).

🔍 Example

EUR/USD makes a new high at 1.0950 but RSI prints 65 (lower than the previous high of 72) → bearish divergence. Strong sell signal when price also shows a bearish candlestick.

✅ Best For

H1 to D1 for divergence signals; M15 for momentum confirmation

2. MACD — Moving Average Convergence Divergence

MACD plots the difference between two EMAs (12 and 26 periods) as a line, with a 9-period signal line. When the MACD line crosses above the signal line, it indicates bullish momentum. MACD divergences are often more powerful than crossover signals.

🔍 Example

GBP/USD in a downtrend. MACD histogram starts making higher lows while price makes lower lows → bullish divergence. When MACD crosses above signal line, enter long.

✅ Best For

H4 and D1 for swing trade confirmation; H1 for entry timing

3. Moving Averages — EMA vs SMA

EMAs weight recent periods more heavily — making them more responsive to current price action. The 20 EMA acts as dynamic support/resistance in trending markets. The 50 and 200 EMAs are watched by institutional traders globally. Golden Cross (50 MA above 200 MA) and Death Cross are major trend signals.

🔍 Example

USD/JPY trending up. Price pulls back to test 20 EMA on H1 with a bullish pin bar. 50 EMA and 200 EMA are both below price and pointing up → buy the retest.

✅ Best For

EMAs for trend-following entries; SMAs for long-term bias

4. Bollinger Bands — Volatility and Mean Reversion

Bollinger Bands consist of a 20-period SMA and two standard deviation bands. When bands contract (squeeze), a significant move is imminent. When price touches the upper band in a trend, it signals strength — not necessarily a reversal.

🔍 Example

EUR/USD Bollinger Bands squeeze for 5 days. Price breaks above the upper band on strong volume → enter long breakout trade. Stop below middle band.

✅ Best For

M15 to H4 for volatility breakouts; H1 for mean-reversion trades

5. ATR — Sizing Stops Correctly

ATR measures the average range of price movement over a set period (typically 14). It is not a directional indicator — it measures volatility. Use ATR to set stop losses that account for normal market movement: 1.5–2× ATR places the stop beyond normal noise.

🔍 Example

EUR/USD daily ATR = 80 pips. Stop loss = 1.5 × 80 = 120 pips from entry. This ensures the stop is not triggered by normal daily volatility.

✅ Best For

Stop loss sizing on all timeframes and instruments

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