Module 3 of 6 in Technical analysis
Indicators
How moving averages, VWAP, RSI, MACD, Bollinger Bands, ATR, the stochastic oscillator and on-balance volume are calculated, and what each assumes.
8 lessons in this module. Progress is saved in your browser as you go.
An indicator is a formula applied to past prices or volumes. This module calculates each common indicator by hand on a small data set, so you can see exactly what it measures, how much it lags, and the conditions in which it gives misleading readings.
By the end of this module you should be able to
- Calculate simple and exponential moving averages and VWAP and explain their lag.
- Calculate and interpret RSI, MACD and the stochastic oscillator, including their failure modes.
- Explain Bollinger Bands and the average true range as measures of volatility.
- Explain on-balance volume and why volume indicators need context.
Lessons in order
Module test
10 questions, chosen at random from a bank of 32 questions and balanced across this module's learning goals and difficulty levels. Every question comes with an explanation. You need 80% to pass, and you can retake it as often as you like with a fresh set of questions.
This module builds on
- Trends and market structure: Moving averages are used to describe trends, explained there.
- Averages, spread and volatility: A moving average is the ordinary average applied to a sliding window of prices.
- Trading volume and liquidity on charts: VWAP weights each price by the volume traded at it.
- Open, high, low and close: True range is calculated from the high, low and previous close.