Indicators

5 Popular Indicators Explained in 5 Minutes (Part 1)

Astron Team · 09/24/2026 · 4 min read

Anyone starting to study technical analysis soon runs into dozens of indicators, each with its own acronym and different formula. The good news is that most experienced traders, in practice, use just a small handful of tools — and understanding those few well pays off more than collecting indicators without knowing what they're for.

In this first part, we'll get straight to the point: what each indicator measures, how to read the signal on the chart, and a short example of each one. In the second part of this guide, you'll find five other complementary indicators.

1. Moving Average

The moving average smooths out the price over a period (for example, 20 or 50 candles) and shows the market's general direction. When the price is above the average and the average is rising, the trend is up; when it's below and the average is falling, the trend is down. Example: if a stock rises from R$ 18.00 to R$ 22.00 while its 50-period average moves from R$ 17.50 to R$ 20.00, the uptrend is confirmed by the average.

2. RSI (Relative Strength Index)

The RSI ranges from 0 to 100 and measures the speed of gains relative to recent losses. Values above 70 usually indicate overbought conditions, and below 30, oversold. Example: if the RSI of a currency pair rises from 55 to 78 within a few candles, the upward move is getting stretched and could lose strength soon, though that doesn't mean an immediate reversal.

3. MACD

The MACD compares two exponential moving averages of different periods and shows the result as a line, a signal line, and a histogram. When the MACD line crosses above the signal line, it's a sign that momentum is turning bullish; a crossover to the downside suggests the opposite. Example: a histogram that goes from -0.05 to +0.03 shows that selling strength is losing ground to buying strength.

4. Bollinger Bands

Formed by a central moving average and two bands based on the price's standard deviation, they show how volatile the market is. Tight bands indicate low volatility, often ahead of a strong move; wide bands show high volatility. Example: if the bands on an asset trading at R$ 50.00 are only R$ 0.60 apart, that signals price consolidation, a period that often precedes breakouts.

5. Stochastic

The stochastic oscillator compares the closing price with the high-low range of a given period, also on a scale of 0 to 100. Above 80 indicates overbought, and below 20, oversold. It reacts faster than the RSI, which makes it useful for shorter-term trades, but it also generates more false signals in highly volatile markets.

Fast or slow: the speed difference between them

A detail that confuses many beginners is noticing that two indicators give different signals at the same time. That happens because each one reacts at a different speed:

• The moving average is the slowest of all: it only confirms a change in direction after the price has already moved quite a bit, which makes it reliable for trend but late for entries.
• The MACD reacts a bit faster than the average, because it compares two averages of different periods against each other.
• The RSI is more agile, useful for catching corrections within an already defined trend.
• The Stochastic is the fastest of the five, which makes it sensitive to small swings — an advantage in calm markets, but a source of false signals on highly volatile days.
• Bollinger Bands don't follow this same speed logic: they describe amplitude, not direction, which is why they work best alongside one of the other four.

Knowing this order helps explain why a fast indicator might give a buy signal while a slower one still shows a downtrend — neither is wrong, they're just looking at different time windows of the same chart.

How to use these five indicators day to day

None of these indicators was designed to be used alone. The most common combination is to use the moving average to define direction, an oscillator (RSI or Stochastic) to find the entry point within that direction, and the MACD or Bollinger Bands to confirm the timing of the move. Start by testing each one in isolation in a demo account, watching how it reacts on the assets you follow, before combining two or three at once.

It's worth remembering that no indicator predicts the future with certainty — all of them describe the price's past behavior, and trading carries a risk of loss even with well-read signals. Tools like Astron's help you visualize these calculations automatically on the chart, but the final decision on entry, stop, and target remains the trader's.