Indicators & Their Limits
Indicators summarize past price — they do not predict the future.
In Simple Words
Technical indicators are math applied to past prices. A moving average (MA) smooths price to show trend. RSI measures how fast and far price has moved (overbought/oversold). MACD compares two MAs to spot momentum shifts. ATR measures volatility. VWAP is the average price weighted by volume. None predict the future.
Why It Matters
Indicators help organize price information, but relying on any one alone leads to false confidence.
Key Terms
The average of past prices over a set period; smooths noise.
Relative Strength Index — a 0–100 measure of price speed and extent.
Compares two MAs to reveal momentum shifts.
Average True Range — measures how much price typically moves.
Volume-Weighted Average Price — average price weighted by volume.
How to Interpret It
RSI above 70 is often called 'overbought' and below 30 'oversold' — but strong trends can stay overbought/oversold for a long time. Indicators are clues, not commands.
Beginner Mistakes
- Treating RSI overbought as a certain sell signal.
- Stacking many indicators and assuming more is better.
Try It Yourself
Open a chart in Warifin with one MA and RSI. Describe what each tells you about the current trend — and what it does NOT tell you.
Key Takeaway
Indicators summarize the past. They inform — they do not predict.
Open the real tool to practice.
Knowledge Check
Choose an answer, then check.1. RSI overbought means…
2. Indicators are based on…
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