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RSI and MACD

Two momentum indicators and their limits.

RSI and MACD illustration

RSI (Relative Strength Index) measures how fast price has moved on a 0–100 scale. Above 70 is often called overbought, below 30 oversold, but in strong trends it can stay overbought for a long time.

MACD shows the relationship between two moving averages and can highlight momentum changes and divergence.

Indicators are most useful as confirmation of price action, not as stand-alone triggers.

The risk: stacking many indicators creates redundancy and noise. Two or three, understood well, beat eight you do not understand.

Takeaways

  • RSI measures momentum from 0-100; MACD shows relationships between MAs.
  • Indicators confirm price action, they are not stand-alone triggers.
  • Fewer indicators you understand beat many you do not.

Self-check

Can RSI stay 'overbought' for a long time?

Yes, especially in a strong trend; overbought does not automatically mean a reversal.

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