Reading charts and indicators

Candles, volume, moving averages, RSI and Bollinger Bands, and their limits. · about 6 min

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General education only. Not financial, tax or legal advice.

Open the desk, pick an asset and switch indicators on while you read this.

Candlesticks

Each candle shows the open, high, low and close for a period (1 minute to 1 week). The body spans open to close; the thin “wicks” show the high and low. Green usually means the close was above the open.

Indicators on the desk

• SMA 20 – the simple average close of the last 20 candles. Smooth but slow.
• EMA 50 – an exponential average that weights recent candles more.
• Bollinger Bands (20, 2) – a 20-period average with bands two standard deviations either side; they widen when prices are more volatile.
• Volume – how much traded in each period (not every feed supplies it).
• RSI 14 – a momentum gauge from 0 to 100. Above 70 is often called “overbought” and below 30 “oversold”.

Limits

Indicators summarise past prices. An RSI above 70 does not mean a fall is due; strong trends can stay “overbought” for a long time. Use indicators to describe conditions, not to predict.

Key points

• A candle shows open, high, low and close for one period.
• Moving averages smooth price; EMAs react faster than SMAs.
• RSI above 70 or below 30 is a description, not a prediction.

Checklist

Tick these off as you practise (saved in this browser).

• I toggled SMA, EMA, Bollinger, volume and RSI on a real asset
• I can point to a candle’s body and wicks
• I know indicators can’t predict the future

Quick quiz

Pass mark: 2 out of 3. You can retry as often as you like.

1. What do a candle’s wicks show?

The volume traded The high and low reached in that period The broker’s fee

2. Compared with an SMA, an EMA:

Weights recent prices more heavily Ignores recent prices Is always more accurate

3. RSI above 70 means:

Price must fall soon Momentum has been strong; it does not guarantee a reversal The asset is a good buy

Check answers