Technical indicators for young investors

Learn why people like technical indicators and how to use three of them.

What is chart analysis?

Chart analysis may help you understand stock market moves because:
  • Valuable information can be reflected in price movements.
  • Prices can move in trends.
  • History may repeat itself.

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How to use moving averages

A moving average is the sum of a stock's price over a number of days, divided by the number of days.
  • The moving average can be a level of support when lower than the stock.
  • The moving average can be a level of resistance when higher than the stock.
  • When short and long moving averages cross, it can show a shift in trend.

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How to use the Relative Strength Index

The Relative Strength Index (RSI) is an oscillator indicator—it swings back and forth between upper and lower boundaries.
  • RSI shows when a stock may be overbought or oversold.
  • RSI ranges between 0 and 100.
  • RSI levels over 70 suggest the stock may be overbought.
  • RSI levels under 30 suggest the stock may be oversold.

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What is MACD and how do I use it?

MACD is an indicator that can generate buy or sell signals. It is made up of two lines, MACD and the signal line.
  • MACD and the signal line oscillate around the zero line.
  • When MACD moves up or down over the zero line, it may signal a trend shift.
  • Crossovers with the signal line may also be a sign of a turn.

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