Section 2 ยท Module 2.2
Technical Indicators
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Moving Averages (SMA vs. EMA)
SMA gives equal weight to all periods; EMA weights recent prices more heavily and reacts faster to trend shifts.
Price consistently above a rising 50- or 200-day EMA confirms an uptrend โ a core filter for swing traders.
RSI โ Momentum Oscillator
RSI (0โ100) measures velocity of price change:
- Above 70: Overbought โ trend strong but extended.
- Below 30: Oversold โ bounce possible.
- Swing filter: In uptrends, pullbacks to RSI 40โ50 often offer entries.
Bollinger Bands
20-period SMA with upper/lower bands at ยฑ2 standard deviations. A tight squeeze signals low volatility and often precedes an explosive breakout.
Knowledge check
20-period Bollinger Bands contract to their tightest width in six months. What does this predict?