Learn Technical Indicators (MACD, RSI, Bollinger Bands)
Learn how MACD, RSI, Bollinger Bands, and moving averages (SMA/EMA) work with an interactive sample chart, including common buy/sell signal patterns.
How to read moving averages (SMA / EMA)
A Simple Moving Average (SMA) is the plain average of the closing price over the last N periods, while an Exponential Moving Average (EMA) weights recent prices more heavily. Both smooth out the noise in a price chart, making the overall trend direction easier to see.
When price crosses below its moving average, that is often read as a shift toward a downtrend; crossing above suggests a shift toward an uptrend (the basic idea behind "golden cross" and "death cross" signals). Because EMA reacts faster to recent price changes than SMA, short-term traders tend to prefer it.
How to read MACD
MACD is a trend-following indicator made of two lines: the MACD line (short-term EMA minus long-term EMA) and a smoothed signal line derived from it. The difference between the two is plotted as a histogram.
When the MACD line crosses above the signal line (a "golden cross"), it is generally read as a bullish signal; crossing below (a "death cross") is read as bearish. The histogram crossing above or below zero carries the same meaning and is often easier to spot visually.
How to read RSI (Relative Strength Index)
RSI is a 0-100 oscillator calculated from the ratio of average gains to average losses over a lookback period, and it measures how "overbought" or "oversold" a price is. Conventionally, a reading above 70 suggests overbought, and below 30 suggests oversold.
RSI tends to work best in a ranging (sideways) market. During a strong sustained trend, it can stay pinned above 70 or below 30 for long stretches, so it is usually combined with other indicators rather than used on its own.
How to read Bollinger Bands
Bollinger Bands plot an upper and lower band a fixed multiple of the standard deviation away from a moving average (the middle line). Statistically, price is expected to stay within the middle line ± 2 standard deviations most of the time.
When price oscillates tightly within a narrowing band, this is called a "squeeze"; when it hugs the upper or lower band while the bands widen, it is called a "band walk". A squeeze followed by a sudden widening is often watched as an early sign of a large price move.
What technical indicators are
A technical indicator recomputes past price movement into a shape the eye can read. This tool draws four of the best known — **moving averages (SMA and EMA)**, **MACD**, **RSI** and **Bollinger Bands** — over the same sample price series, switched by a selector. Seeing each one respond to identical movement, side by side, is what brings out the difference in their temperaments.
**Everything on the chart is sample data made for study; none of it is real share or currency data. Do not use it to decide a trade.** The 70 and 30 lines on RSI, and the two standard deviations on the Bollinger Bands, are rules of thumb: the level that suits a given instrument or timeframe varies. Every technical indicator is a lagging guide computed from prices already past, and none of them warrants what prices will do next.
Reference figures used in this calculation
The figures below are not set by law. They are reference values used as a guide, and the actual amounts differ from provider to provider.
- Standard parameters of technical indicators (MACD 12/26/9, RSI 14 and others) — Industry convention (a guide based on insurers' own product descriptions) （No unified official dataset exists） Last checked 2026-09-20
How to use the indicator tool
- Choose an indicator Use the selector to pick moving averages, MACD, RSI or Bollinger Bands.
- Read it against the sample price line The chosen indicator is drawn over the same sample price series. Follow how it answered wherever the price moved.
- Check the shapes against the notes Below the chart sit notes on how that indicator is computed and read. Hold the words against the actual shape of the line.
- Switch indicators and compare Looking at the same passage through MACD and then RSI shows how differently a trend-following indicator and an overheat gauge answer.
- Take the threshold numbers with care 70, 30 and two standard deviations are conventions. Read why they are used before you take them on.
Tips for getting more out of it
- Switch between indicators using the selector to compare how each one reacts to the same sample price series.
- MACD and RSI are usually more reliable when read together with the overall price trend and moving averages, rather than in isolation.
- All charts on this page use sample data generated for learning purposes only; they are not real stock or currency prices, so please do not use them to make trading decisions.
- The RSI thresholds of 70/30 and the Bollinger Band width of ±2 standard deviations are common rules of thumb, not fixed rules — the best settings vary by asset and timeframe.
Where the tool helps
When the chart in a brokerage app means nothing to you
You can work out, one at a time and on sample data, what the lines and bars on the trading screen actually compute.
When you know the words but not the shapes
You can see what a golden cross or a band walk looks like once it is an actual line.
When you want to know which to use when
MACD points at the direction of a trend, RSI at how overheated the move is — the difference in purpose shows up on identical movement.
When you have only just begun studying investing
The character and the limits of each indicator can be examined calmly, before any real money moves.
When you want the wider picture of building wealth
For the effect of regular contributions, see the savings and contribution calculator; for the tax-free allowance, the NISA contribution simulator.
Terms about technical indicators
- Simple moving average (SMA)
- The plain average of the closing prices over the last N days. It smooths the jagged edges and makes the direction of a larger trend easier to grasp.
- Exponential moving average (EMA)
- A moving average that gives greater weight to recent values. Being quicker to answer recent change than the SMA, it tends to be preferred for short-term trading.
- MACD
- A trend indicator made of two lines: the MACD line, being a short EMA less a long EMA, and the signal line, which smooths it further.
- Histogram
- The gap between the MACD line and the signal line drawn as bars. Its crossing of zero carries the same meaning as the crossing of the lines themselves.
- RSI (relative strength index)
- An oscillator running from 0 to 100, computed from the ratio of gains to losses over a period. Above 70 is generally read as overbought and below 30 as oversold.
- Bollinger Bands
- Bands drawn above and below a moving average at a set multiple of the price’s standard deviation. The width of the bands itself expresses how dispersed the prices are.
- Band walk
- The state in which the bands open out and the price keeps travelling along the upper or the lower one. It appears while a strong trend is running.
- Golden cross and dead cross
- A short line crossing a long one from below is a golden cross, and from above a dead cross; they are read as indications to buy and to sell respectively.
FAQ
Side Note — The People Behind Technical Indicators
Analyzing price trends with moving averages is often traced back to Charles Dow, who established Dow Theory in the late 19th century, though moving average analysis in its modern form did not become widespread until the mid-20th century. RSI was introduced by J. Welles Wilder in his 1978 book "New Concepts in Technical Trading Systems", the same period in which he also devised other well-known indicators such as the Average True Range (ATR) and the Parabolic SAR.
MACD was developed by Gerald Appel in the 1970s. It combines the trend-following nature of EMAs with an oscillator-like reading of momentum, a simple but effective design that is often cited as a reason it remains widely used by traders around the world today.
Bollinger Bands were devised by John Bollinger in the 1980s. Fixed-width trading bands already existed before then, but the innovation was letting the band width expand and contract automatically based on price volatility (standard deviation) — turning rising or falling volatility itself into something you can see at a glance, which is why the indicator caught on so widely.