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Market Intelligence › Basic Terminologies
Moving average, RSI, MACD, Bollinger, VWAP, Fibonacci — what each one tells you and when it lies
Published by The Retail Trader · AUG 04, 2026 · Indicators
An indicator is not magic — it is just a formula on price and volume that shows the chart from another angle. Its biggest benefit is that it gives you a number; its biggest danger is the same, because a number feels confident even when it is showing old data.
First, the terms that apply to every indicator:
• Indicator — A calculation applied to price, volume or time, shown in the form of a line or bars.
• Overlay — An indicator drawn right on top of the price chart, such as a moving average or Bollinger Bands.
• Oscillator — An indicator that moves within a range in a separate panel below, such as RSI or stochastic.
• Leading vs Lagging — A leading indicator tries to hint before the move (and is wrong more often); a lagging one confirms after the move (and is late).
• Period / Length — How many candles of data are used. RSI 14 means the previous 14 candles.
• Smoothing — Reducing noise by averaging the data; this is what creates lag.
• Signal — The condition of an indicator that you treat as a trigger for action, such as a crossover or a level cross.
• Divergence — Price doing one thing and the indicator doing another. It is the classic hint of weakening momentum.
• Confluence — Two or three different things saying the same thing in the same place. This is the right way to use indicators.
• Repainting — Some indicators change their signal after the candle closes. In a backtest, this shows false performance.
• Whipsaw Signals — An indicator giving opposite signals again and again in a sideways market.
These tell you what the direction is, not the timing:
• SMA (Simple Moving Average) — The simple average of the closes of the last N candles. The 50 SMA and 200 SMA are the most common.
• EMA (Exponential Moving Average) — The same average, but with more weight on new data. That is why it reacts faster than the SMA.
• Crossover — Two moving averages crossing each other, which is treated as a trend change signal.
• Golden Cross — A short MA (such as 50) moving above a long MA (such as 200) — a popular long-term bullish signal.
• Death Cross — The opposite: the 50 moving below the 200.
• Dynamic Support / Resistance — In an uptrend, price often comes to a moving average and stops, as if it were a moving support.
• Supertrend — A trend-following tool built on ATR that shows a line above or below price and keeps flipping.
• ADX / DMI — Measures the strength of a trend (not its direction). Low ADX means a range, high ADX means a strong trend.
• Parabolic SAR — Dots that shift above and below price; used for the idea of a trailing stop.
• Ichimoku Cloud — A Japanese tool that shows trend, support-resistance and momentum in a single system.
These tell you how much strength is left in the move:
• RSI (Relative Strength Index) — An oscillator between 0 and 100, with a default period of 14. It shows the ratio of recent gains to losses.
• Overbought — RSI above 70. It does not mean 'it will fall' — in a strong trend, RSI can stay above 70 for weeks.
• Oversold — RSI below 30. The same point in reverse: looking cheap and having stopped falling are two different things.
• Bullish Divergence — Price is making a new low but RSI is not making a new low. The strength behind the selling is fading.
• Bearish Divergence — Price is making a new high but RSI has stayed behind.
• MACD — The difference between two EMAs (usually 12 and 26), with a 9-period signal line on top of it.
• MACD Histogram — The gap between the MACD line and the signal line, shown in bars. When the bars start getting smaller, momentum is cooling down.
• Stochastic — Tells you, in percentage, where the close sits within the high-low range of the last N candles.
• CCI (Commodity Channel Index) — Measures price's deviation from its average; despite the name, it is used on every asset.
• Rate of Change (ROC) — Today's percentage change from the price N candles ago.
These tell you how big the move is and how much participation is behind it:
• Bollinger Bands — Bands of 2 standard deviations above and below a 20-period moving average. The bands widen and narrow with price.
• Squeeze — The bands coming very close together, meaning very low volatility — often before a big move.
• ATR (Average True Range) — The average movement of a candle, in points. The most practical tool for deciding the width of a stop loss.
• Standard Deviation — How far price strays from its average, statistically.
• Volume — How much quantity traded in a period. Volume rising with a move adds to that move's credibility.
• Volume Spike — Volume many times higher than average, often on news, a breakout or institutional activity.
• OBV (On Balance Volume) — Adds the volume of up candles and subtracts the volume of down candles, so that accumulation or distribution becomes visible.
• VWAP (Volume Weighted Average Price) — The day's average price weighted by volume. Institutions judge their execution against it.
• MFI (Money Flow Index) — Similar to RSI, but it includes volume as well.
These are less indicators and more level generators:
• Fibonacci Retracement — Drawing a line from a swing low to a high to get the 23.6%, 38.2%, 50%, 61.8% and 78.6% levels, where a pullback is expected to stop.
• Fibonacci Extension — Extending the same ratios forward to create a target zone, such as 127% or 161.8%.
• Pivot Points — A central pivot built from the previous day's high, low and close, with R1-R3 and S1-S3 levels above and below it.
• CPR (Central Pivot Range) — The pivot along with two more lines (TC and BC). A narrow CPR is often linked with a trending day, a wide CPR with a range day.
• Anchored VWAP — A VWAP started from a specific event, such as a result day or a swing low.
• Volume Profile — The distribution of volume against price, which shows at which price the most business was done.
These are not as famous as RSI and MACD, but their names are often heard around charts:
• Keltner Channel — ATR-based bands around a moving average. It looks like Bollinger, but the measure of volatility is different.
• Donchian Channel — The highest high and lowest low of the last N candles. The foundation of breakout systems.
• Williams %R — An oscillator like stochastic, running between 0 and -100.
• CMF (Chaikin Money Flow) — Measures whether money is flowing in or out along with volume.
• Accumulation / Distribution Line — A cousin of OBV, which also weights the position of the close within the candle.
• Awesome Oscillator — The difference of two simple moving averages, shown as a histogram.
• TRIX — The rate of change of a triple-smoothed moving average; very little noise, more lag.
• Aroon — Measures how long ago the last new high or new low was made, to show the freshness of the trend.
• Vortex — Two lines whose crossover is treated as a trend change signal.
• Elder Ray (Bull / Bear Power) — How much control buyers and sellers have relative to their average.
• ZigZag — A drawing tool that removes small moves and shows only the big swings. It repaints, so use it to read structure, not for signals.
• Linear Regression Channel — A best-fit line through price with standard deviation bands around it.
• Supertrend Multiplier — The setting in Supertrend that decides how far the line sits from price.
An indicator is not wrong; its use is wrong. These are the terms that describe that mistake:
• Default Settings — The values that come with the tool (RSI 14, MACD 12-26-9). Their advantage is that the whole world is watching the same ones.
• Optimisation — Searching for the best-performing settings on past data.
• Curve Fitting / Over-Optimisation — Optimising so much that the system works only on old data and never going forward. This is the biggest disease of backtesting.
• Look-Ahead Bias — Accidentally using information in a test that was not actually available at the time.
• Source — The price on which the indicator is calculated: close, open, hl2 (the average of high and low), ohlc4.
• Offset — Shifting the indicator forward or backward. A shifted signal does not turn out the same way in live trading.
• Multi-Timeframe Indicator — Showing a bigger timeframe's indicator on a smaller chart.
• Indicator Alert — Setting a notification on a condition, so you do not need to sit in front of the screen.
• Signal Lag — How much of the move has already gone by the time the signal arrives.
• Indicator Stacking — Applying several indicators that measure the same thing (such as RSI + Stochastic + CCI) and treating their agreement as confirmation. That is not confluence, it is one opinion three times.
• Clean Chart — Keeping only the two or three tools whose rules you can recite from memory. Everything else looks professional but decides nothing.
The right use of an indicator is to confirm or reject your structure-based idea. If there is no level on the chart to begin with, even ten indicators will not give you a trade — only ten opinions.
This journal is for educational purposes only — it is not a buy or sell recommendation. Look at every term on your own chart, because that is the only way it sticks.