Moving averages, RSI, MACD and Bollinger Bands
What the most common indicators measure — and their limitations.
Moving averages (MA & EMA)
A simple moving average (MA) is the average closing price over a set number of periods. An exponential moving average (EMA) weights recent prices more heavily, so it reacts faster.
Crossovers between a short and long average are a popular — but frequently false — trend signal.
RSI
The Relative Strength Index oscillates between 0 and 100 and compares recent gains with recent losses. Readings above 70 are often called overbought and below 30 oversold, though strong trends can stay at extremes for a long time.
MACD
MACD is the difference between a 12-period and 26-period EMA, plotted with a 9-period signal line. The histogram shows the gap between them and is used to gauge momentum.
Bollinger Bands
Bollinger Bands plot a 20-period average with bands two standard deviations above and below. Bands widen as volatility rises and narrow as it falls.
Limitations
Indicators are derived from past prices. They describe what has happened, not what will happen, and should be one input among many — never a guarantee.
This guide is general education, not investment advice. Digital assets are volatile and you can lose money.