Trader indicators: how RSI, MACD and MA work

A chart shows price movement, but it doesn’t always reflect market sentiment. Sometimes the move looks confident even though the market is already losing momentum. In other periods, the growth seems sluggish yet keeps its direction. In such situations, technical analysis indicators help. They translate price and volume data into clear signals that allow you to see movement dynamics better and assess the market’s overall condition.

The main things you’ll learn in this article:

• how the RSI, MACD, and MA indicators work and how they differ from each other;
• how to determine the strength and direction of the trend by their signals;
• how to combine several tools to analyze a chart consciously and without guesswork.

This material continues a series of articles on technical analysis. Previous publications already covered:
Trends and Levels: How to Determine Market Direction
Popular Figures and Patterns: How to Read a Chart Like a Trader.

Technical indicators are mathematical calculations based on price and trading volume data. They help you better understand how the market is developing and refine the entry moment for a trade. Indicators don’t replace watching the chart; they complement it by showing the strength of the trend and the direction of movement. With their help, a trader sees not only the visual price dynamics but also the internal logic of the market.

The main tasks of indicators are:

• determine the general direction of market movement;
• measure the strength of the current momentum;
• show overbought and oversold zones where movement may slow down or reverse.

Technical analysis indicators don’t provide precise forecasts, but they help you make informed decisions. It’s important to consider any signal in the context of the overall market picture to understand how it relates to trend, volumes, and volatility. This approach reduces the likelihood of errors and makes analysis more accurate and systematic.

RSI, or the Relative Strength Index, helps measure the speed and amplitude of price changes. This tool shows how active buyers and sellers are and helps notice when the market is losing energy. The indicator is especially useful for finding zones where movement is slowing and may reverse. However, it’s important to understand that RSI is not an exact forecast. It only shows probability, and in practice signals may differ from what you expect.

Key RSI signals:

• readings above 70 indicate an overbought zone where buyers are excessively active;
• readings below 30 indicate oversold conditions, when selling pressure increases;
• rising RSI shows strengthening momentum, while a decline signals a loss of strength in the move.

In ideal conditions, these signals work clearly, but on the real market everything is more complex. Sometimes RSI shows around 10 on the hourly timeframe while price still doesn’t rise because strong resistance persists in the market or volume is absent. Therefore, the indicator should be used in the context of trend and levels rather than as a standalone signal. RSI divergence (price rises while RSI falls) remains one of the most reliable signs of a reversal, but even it requires confirmation. Experienced traders always analyze RSI together with supports, resistances, and the overall structure of movement to avoid the trap of false signals.

MACD, or Moving Average Convergence Divergence, helps assess the pace and direction of the trend. This indicator shows where movement strengthens and where it starts to slow down. It consists of two lines—the MACD line and the signal line. The former reflects the difference between two exponential moving averages, and the latter smooths sharp fluctuations and makes the picture clearer. Thanks to this, the trader sees not only price direction but also the state of momentum, which is especially important when looking for entry points.

How to read MACD:

• when MACD crosses the signal line from below upward, the probability of growth increases;
• when the crossover happens from above downward, the move often shifts into a decline;
• the histogram shows the distance between the lines and helps determine the strength of the current momentum.

If price makes a new high while the MACD lines diverge and lose amplitude, a MACD divergence appears, warning of a potential weakening of the trend. However, this signal doesn’t always play out perfectly. In volatile markets, the indicator can lag, especially on short timeframes where noise is higher. Therefore, MACD is used as a confirmation tool rather than the main reference point for entry. It helps refine the moment when the trend truly gains strength and filters out false signals that arise during sharp price swings.

Moving averages help you understand the overall trend direction and remove excess market noise. They show how the average price has changed over a selected period and help you see whether an asset is growing or losing strength. This tool is particularly useful when you need to identify a trend change and understand where it’s better to look for an entry or exit from a trade.

What moving averages show:

• the general vector of price movement and the trend phase;
• the average price value over a certain number of candles;
• potential turning points when lines cross.

Main types of moving averages:

• SMA (Simple Moving Average) shows the simple average price over a given period, for example over 50 or 200 candles;
• EMA (Exponential Moving Average) reacts more to recent changes, therefore it better reflects current market fluctuations.

When price holds above the moving average line, it indicates a rising market. If price drops below, the movement gradually shifts into a downtrend. A change in direction often occurs when the short and long moving averages cross. For daily charts, periods of 50, 100, and 200 are used most often; they are considered optimal for trend assessment.

The crossover of EMA-50 and EMA-200 is called a golden cross if the line goes upward, and a death cross if it goes downward. These signals are considered classic trend indicators and help you understand market structure in trading without excess noise.

Combining indicators helps you look at the market from different angles and get more accurate signals. One tool shows the entry timing, another reflects momentum strength, and a third helps define the general direction. When their data align, the probability of a correct decision increases. For example, if RSI indicates overbought and MACD confirms weakening movement, a correction or reversal can be expected. At the same time, the MA moving average shows the overall trend and helps distinguish short-term fluctuations from a real change in direction.

In practice, traders often combine several types of indicators. Oscillators in trading, such as RSI, work well in ranges where price moves sideways. Trend indicators like MA or MACD are better applied when there is a pronounced direction and it’s important to catch a sustainable move. An optimal set usually includes one tool for assessing trend and one for momentum strength. Such a combination helps you see not only the current market state but also its structure, which is especially important when analyzing highly volatile cryptocurrencies.

To make the combination effective, it’s important not to overload the chart. Two or three tools that complement rather than duplicate each other are enough. If you use too many indicators, their signals may contradict and mislead. Good technical analysis is always based on a balance between the amount of data and its quality. Indicators don’t replace common sense and watching the chart, but they help systematize information and make decisions without emotions.

To read indicators on a crypto chart correctly, it’s important to follow a sequence of actions and consider the overall market context. The RSI, MACD, and MA moving averages show different sides of price movement, so they should be analyzed together. Moving averages help determine the trend direction and understand where the market is now. RSI shows which zone the asset is in—overbought or oversold—while MACD helps you see momentum strength and the presence of divergence.

Main steps for indicator analysis:

• determine the trend by the moving average lines and understand whether the market is rising or falling;
• check whether RSI is in the overbought or oversold zone;
• assess whether MACD confirms the direction of movement or signals weakening momentum.

Reading RSI and MACD signals together helps you see not only the current move but also signs of market fatigue. If RSI shows overbought and MACD indicates a slowdown in momentum, there is a likelihood of a correction. It’s important to remember that oscillators like RSI and MACD work more accurately when analyzed in conjunction with market structure and higher timeframes. In strong trends, they can remain in extreme zones for a long time, and this is not always a reversal signal.

Many novice traders make mistakes when using indicators. They often rely on just one tool without analyzing the context or trade against the trend when RSI is overbought. Higher timeframes are often ignored, which leads to hasty decisions. Some also expect precise forecasts, even though indicators work with probabilities, not guarantees. To avoid these mistakes, it’s important to understand how each tool works and use signals within a system where RSI shows strength, MACD confirms direction, and MA helps you see the overall trend. This approach makes analysis consistent and provides a realistic view of the market.

RSI, MACD, and MA indicators, in simple terms, help you analyze a chart consciously and see the real picture of the market. They show momentum strength, trend direction, and areas where price may be overheated or weakened. These tools don’t replace observation, but they make it more precise and help you understand how price movement develops.

For technical analysis indicators to be useful, you need to consider market context and confirm signals using candles, support and resistance levels, or chart patterns. When RSI indicates overbought, MACD shows a slowdown in movement, and MA moving averages confirm the direction, a trader gets a complete view of the situation and can act calmly and confidently.

In the next article of the series, we’ll explain how to combine candles, patterns, and indicators into a unified strategy and build your own trading system that helps you better understand market logic.

Disclaimer: This material is prepared for educational purposes and is not investment advice.