RSI and MACD: Popular Momentum Indicators
Learn to use RSI and MACD to identify overbought/oversold conditions and momentum shifts.
💡 Key Takeaways
- ✓RSI above 70 = overbought, below 30 = oversold
- ✓Divergences warn of potential reversals
- ✓MACD crossovers signal momentum shifts
- ✓Use multiple indicators for confirmation
RSI (Relative Strength Index) oscillates between 0-100. Above 70 = overbought (potential sell); below 30 = oversold (potential buy).
RSI divergence is powerful: if price makes new highs but RSI makes lower highs, momentum is weakening. Bearish divergence often precedes pullbacks.
MACD (Moving Average Convergence Divergence) shows the relationship between two EMAs. The MACD line crossing above the signal line is bullish.
The MACD histogram shows the difference between MACD and signal lines. Growing histogram = strengthening momentum; shrinking = weakening.
Use RSI and MACD together for confirmation. Both showing bullish signals increases probability; conflicting signals suggest caution.
Summary
- 1RSI above 70 = overbought, below 30 = oversold
- 2Divergences warn of potential reversals
- 3MACD crossovers signal momentum shifts
- 4Use multiple indicators for confirmation
📖 Recommended Reading
Want to dive deeper into this topic? Check out our recommended book to master these concepts.
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Disclaimer: This content is for educational purposes only and should not be considered financial advice. Always do your own research and consult with a qualified professional before making investment decisions.
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