Technical indicators
Technical indicators are formulas applied to price history. They say nothing about what a business is worth, but they are useful for timing index purchases and for understanding rules-based strategies. Each page explains the formula, how traders read it, and where it fails.
Relative Strength Index (RSI)
What the RSI indicator measures, how the 14-day RSI is calculated, what overbought and oversold readings mean, and the limits of using it alone.
Simple moving average (SMA)
What a simple moving average is, how to calculate it, the common 50-day and 200-day averages, and how investors use them to read a trend.
Exponential moving average (EMA)
How the exponential moving average weights recent prices more heavily than a simple average, how to calculate it, and when traders prefer it.
MACD indicator
How the MACD indicator is built from two exponential moving averages, what the signal line and histogram show, and how crossovers are read.
Momentum investing
What price momentum is, the evidence that recent winners tend to keep winning for a while, how momentum is measured, and its crash risk.
Mean reversion
What mean reversion is, how prices and valuations tend to return toward an average, how traders use it, and why it fails when fundamentals change.