Indicators

5 Popular Technical Indicators and How to Interpret Each One

Astron Team · 09/24/2026 · 4 min read

Technical indicators are calculations applied to price and volume, displayed on the chart to help visualize trend, the strength of the move, and possible reversal points. No indicator predicts the future — all are derived from past price —, but used with judgment they help organize the chart's reading instead of deciding purely on visual impression. Here are five of the most widely used ones and how each is interpreted in practice.

1. Moving averages: smoothing out price noise

The 20-period simple moving average, for example, adds up the closing prices of the last 20 candles and divides by 20, updating this calculation with every new candle. It smooths out short-term swings and helps visualize the move's overall direction. When the price stays consistently above the average, the reading is usually an uptrend; below it, a downtrend. The crossover between two different-period averages — a 9 and a 21, for example — is used by many traders as a trend-change signal.

2. RSI: measuring the relative strength of the move

The Relative Strength Index (RSI) ranges from 0 to 100 and measures the speed and intensity of recent price changes. Values above 70 usually indicate an overbought condition — the asset rose quickly and may be ripe for a pause or correction; values below 30 indicate oversold, the opposite. If a stock rises from R$ 40.00 to R$ 55.00 in a few days and the RSI hits 78, that doesn't necessarily mean it's about to fall — it means the pace of the rally is historically stretched, a data point to consider alongside others, not in isolation.

3. MACD: moving average crossover with a momentum component

The MACD (Moving Average Convergence Divergence) is made up of two lines derived from exponential moving averages and a histogram showing the difference between them. When the MACD line crosses above the signal line, it's read as a signal of growing buying strength; the crossover below, the opposite. The histogram's size indicates the intensity of that momentum — a growing histogram suggests the move is gaining strength, while a shrinking histogram, even if the trend hasn't reversed yet, suggests it's running out of steam.

4. Bollinger Bands: measuring volatility

Bollinger Bands are made up of a central moving average and two bands, above and below, calculated from the price's standard deviation over recent periods. When volatility rises, the bands spread apart; when it falls, they come closer together. A price that repeatedly touches the upper band can indicate continued buying strength, not necessarily a reversal — the common mistake among those starting to use this indicator is assuming that touching the band automatically means "too expensive" or "time to sell".

5. Volume: the fuel behind the move

Volume shows how many units of the asset were traded in a given period. A resistance breakout accompanied by volume well above average tends to be more reliable than the same breakout on weak volume, because it indicates more participants confirming that move. A practical example: if a stock breaks above a R$ 30.00 resistance trading 3 times its average daily volume, that suggests greater conviction behind the move than a breakout with normal or below-average volume.

How to use these indicators without over-relying on them

No indicator works well in isolation — all are derived from the same historical price, and because of that they tend to agree or disagree together. Many traders combine a trend indicator (moving average), a strength one (RSI or MACD), and volume, looking for confirmation among them before deciding on an entry. Using five or six different indicators at once, seeking unanimous agreement, usually stalls the decision more than it helps — the goal is to organize the chart's reading, not replace judgment with an overload of overlapping information.

An example of a combined reading

Imagine a stock in an uptrend, trading above the 20-period moving average, with the MACD crossing upward and the last up candle's volume 50% above average — but with the RSI already at 74. The combined reading suggests an uptrend confirmed by volume and momentum, but with a warning sign: the recent pace may be ripe for a pause. None of the four signals alone would tell this whole story — it's the combination that gives context to the decision, without guaranteeing its outcome.