S3 E4 : WHAT IS VOLUME, RSI, MACD, MOVING AVERAGES
“How to Read the Market’s Secret Signals (Like Traffic Clues)”
🛣️ Imagine You're Driving on a Busy Road...
You want to know:
- Is the road crowded? (Volume)
- Are we going too fast? (RSI)
- Is a curve coming? (MACD)
- What’s the usual path? (Moving Average)
That’s what technical indicators do in trading — they’re your GPS and traffic tools on the stock market highway.
Let’s break it down.
🔊 1. VOLUME — “How Many Cars Are on the Road?”
Volume tells us how many shares were bought and sold.
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High Volume = Lot of people trading
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Low Volume = Not much interest
👀 Why It Matters:
If a stock price jumps 🚀 with high volume, it’s more reliable.
If it moves with low volume, it might be fake.
🧠 Think: “Are others also seeing what I see?”
🧱 2. RSI (Relative Strength Index)
“How Tired Is the Market?”
RSI tells us if a stock is overbought (too many buyers) or oversold (too many sellers).
Scale: 0 to 100
- Above 70 = Too many buyers → May fall soon
- Below 30 = Too many sellers → May rise soon
🔄 Like a Spring:
If stretched too much, it bounces back.
🧲 3. MACD (Moving Average Convergence Divergence)
“Is a U-turn coming?”
MACD helps spot trend reversals — when a stock may change direction.
It uses:
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Fast line
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Slow line
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A histogram (bar chart)
🔄 When fast line crosses slow line:
- Upward = Buy signal
- Downward = Sell signal
Think of it like two cars: when the fast car overtakes the slow one, something’s happening.
📈 4. Moving Averages — “What’s the Normal Route?”
Moving Averages show the average stock price over a time (like 20 days or 50 days).
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Simple Moving Average (SMA) = Clean average
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Exponential Moving Average (EMA) = Gives more weight to recent days
🧠 Why Use It?
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To smooth out noise
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To spot trends
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To set support/resistance levels
Think of it like the usual road traffic — helps you compare today’s crowd with the average.
🏢 Real Example: Reliance
Let’s say Reliance price jumps from ₹2,500 to ₹2,650 in one day.
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Volume = Very high
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RSI = 85 (overbought)
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MACD = Shows upward momentum
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Moving Average = Far below current price
You’d say:
“Everyone’s rushing in. But it’s too hot now. I’ll wait for a better entry.”
That’s smart trading.
🧠 Recap:
✅ Volume = How many people are trading
✅ RSI = Is the stock overbought or oversold
✅ MACD = Is a trend change coming
✅ Moving Averages = What’s the normal trend
✅ Use these tools like driving assistants — they don’t control the car, you do