RSI and moving averages, explained simply

Two of the most common technical indicators: what they measure, how traders read them, and where they fail.

Technical indicators turn past prices into numbers that are easier to compare. They describe what happened; they can't see the future.

RSI (Relative Strength Index)

RSI compares the size of recent gains with recent losses, usually over 14 days, and gives a score from 0 to 100.

• Above 70: the price has risen fast; often called overbought.
• Below 30: the price has fallen fast; often called oversold.

Strong trends can keep RSI above 70 or below 30 for a long time, so these levels are warnings, not orders.

Moving averages

A 50-day moving average is the average closing price of the last 50 days. It smooths out daily noise and shows the direction of the trend.

• Price above the 50-day and 200-day averages is usually read as an uptrend.
• When the 50-day average crosses above the 200-day, traders call it a golden cross. The opposite is a death cross.

Where they fail

Indicators lag, because they're built from past prices. In choppy, sideways markets they give many false signals. Most traders use them together with volume, support levels and their own risk limits.