Technical analysis foundations · Lesson 2 of 3
Indicators and their limitations
Learn how RSI and moving averages summarise past prices.
8 minute read
Indicators are derived from data
RSI summarises recent gains and losses, while moving averages smooth prices across a rolling window. Both are based on historical observations and therefore lag the market to some degree.
Indicators can remain overbought or oversold during strong trends and can give false signals in sideways conditions. Avoid treating a single reading as a guaranteed entry signal.
Key takeaway
Use these concepts to understand the market, not to assume a particular outcome. Always define uncertainty and risk before making a decision.