RSI, MACD, moving averages, and Bollinger Bands are among the best-known technical indicators in trading. Each views price from a different angle: relative momentum, trend relationships, average direction, or dispersion around a reference.
A common mistake is turning any indicator into a rule such as “X appeared, therefore price must do Y.”
Indicators do not know the future. They organise data for analysis and rule building.
What is a technical indicator?
A technical indicator is a calculation applied to market data such as price and time.
It can help ask questions such as:
- is there a trend?
- is momentum accelerating?
- is price far from its average?
- is volatility increasing?
- does recent movement look extended?
None provides certainty about future direction.
RSI: Relative Strength Index
RSI is an oscillator usually shown on a 0–100 scale.
It measures the relative strength of recent upward and downward moves.
What do 70 and 30 mean?
Classic references often use:
- above 70: overbought region;
- below 30: oversold region.
Overbought does not mean “price must fall now.” Strong trends can keep RSI extreme for extended periods.
Common RSI uses
- observing momentum;
- identifying extended moves;
- studying divergence;
- complementing mean-reversion filters;
- confirming or challenging other signals.
MACD: Moving Average Convergence Divergence
MACD analyses relationships between exponential moving averages and usually includes:
- MACD line;
- signal line;
- histogram.
It is commonly used to observe momentum and trend relationships.
Crossovers can provide context but may lag or become noisy in sideways conditions.
The histogram visualises the distance between MACD and its signal line.
Moving averages
Moving averages smooth price by calculating an average across a defined number of periods.
SMA
Simple Moving Average gives equal weight to values inside the window.
EMA
Exponential Moving Average gives more weight to recent data and generally reacts faster.
Common uses
- trend visualisation;
- dynamic references;
- crossovers;
- direction filters;
- central means for reversion strategies.
What is a moving-average crossover?
It occurs when a shorter-period average crosses a longer-period average.
It can provide evidence of changing direction, but may appear after part of the move has already happened.
In sideways markets, repeated crossovers can create noise.
Bollinger Bands
Bollinger Bands generally include:
- a central moving average;
- upper band;
- lower band.
The bands expand and contract according to price dispersion/volatility.
What does touching a band mean?
It means price has reached a statistically distant area from the mean according to the selected settings.
It does not guarantee reversal.
During strong trends, price can remain close to an outer band.
What is a Bollinger squeeze?
Narrow bands indicate volatility contraction.
That can precede larger movement, but it does not determine direction.
How can the four indicators complement each other?
A hypothetical system might use:
- moving averages for direction;
- MACD for momentum;
- RSI for relative intensity;
- Bollinger Bands for volatility and distance from the mean.
Different perspectives can add context, but too many conditions can also create delays.
Do more indicators mean more certainty?
No.
Indicators derived from similar data may be redundant.
Complementarity matters more than quantity.
What is confirmation?
Confirmation means requiring multiple conditions to align before acting.
That may filter some weak signals, but can also reduce frequency and delay entries.
Can indicators be used on Synthetic Indices?
They can be applied to price data, and Deriv publishes educational material on technical analysis for Volatility Indices.
Read our Volatility Indices guide.
How does Orby use these indicators?
Orby’s Technical Analysis strategy combines RSI, MACD, moving averages, and Bollinger Bands in one engine, and each indicator can be switched on or off.
Turning them into programmed rules does not eliminate false signals.
RSI and Bollinger Bands in Mean Reversion
These tools often appear in mean-reversion education because they can provide context around extended movement and distance from an average.
How to study indicators responsibly
The same care applies to any strategy — see also what to analyse before you start using a trading strategy.
Change one thing at a time
Do not change periods, market, risk, and strategy simultaneously if you want to understand cause and effect.
Observe different conditions
An indicator can behave differently in trends and ranges.
Avoid cherry-picking
Do not select only examples where the signal worked.
Use Demo to learn
Demo can help you study behaviour without real financial risk during those trades.
Frequently asked questions
Is RSI below 30 a buy signal?
Not automatically.
Is RSI above 70 a sell signal?
Not automatically.
Is MACD a trend indicator?
It is commonly used to analyse momentum and moving-average relationships in a trend context.
Which is better, SMA or EMA?
Neither is universally better. EMA reacts faster; SMA weights the window evenly.
Does touching a Bollinger Band mean reversal?
No.
Can I combine all four indicators?
Yes, if each has a clear role. More indicators do not guarantee better accuracy.
Indicators help you ask better questions
RSI, MACD, moving averages, and Bollinger Bands are not oracles.
They convert price data into structured measures. Use them to build context and rules, not to replace risk awareness.