Trading Classroom Lesson 3: Indicators Every Trader Must Master

📘 Introduction

While charting shows the story of price action, indicators help confirm that story. They provide mathematical insights into momentum, volatility, and potential reversals.

In this lesson of our Trading Classroom, we’ll explore the most important trading indicators: moving averages, Bollinger Bands, RSI, stochastic oscillator (SGA), and divergence.

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📈 Moving Averages (MA)

A moving average smooths out price action, showing the overall direction.

• Simple Moving Average (SMA): The average price over a chosen period.

• Exponential Moving Average (EMA): Gives more weight to recent prices, making it more responsive.

✅ Uses:

• Identify trend direction (above MA = uptrend, below = downtrend).

• Act as dynamic support and resistance.

• Generate signals when short-term MAs cross long-term MAs (e.g., Golden Cross, Death Cross).

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📊 Bollinger Bands

Bollinger Bands measure volatility. They consist of a moving average and two bands that expand or contract based on market activity.

✅ Uses:

• Overbought/Oversold: Price touching the upper band = potentially overbought, lower band = oversold.

• Volatility Breakouts: Tight bands often signal a big move is coming.

• Trend Confirmation: Price riding the bands often means strong momentum.

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⚡ Relative Strength Index (RSI)

RSI is a momentum oscillator that measures overbought and oversold conditions on a scale of 0–100.

✅ Uses:

• RSI above 70 = overbought (potential pullback).

• RSI below 30 = oversold (potential bounce).

• RSI crossing 50 = trend confirmation.

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🔄 Stochastic Oscillator (SGA)

The stochastic oscillator (often called Stoch or SGA) compares a closing price to its price range over time.

✅ Uses:

• Values above 80 = overbought.

• Values below 20 = oversold.

• Crossovers of %K and %D lines = trade signals.

It is often used in choppy/ranging markets to catch reversals.

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🔎 Divergence

Divergence occurs when price moves in one direction but an indicator (like RSI or MACD) moves in the opposite direction.

✅ Types:

• Bullish Divergence: Price makes lower lows, but RSI/SGA makes higher lows → potential reversal upward.

• Bearish Divergence: Price makes higher highs, but RSI/SGA makes lower highs → potential reversal downward.

This is one of the most powerful early warning signals in trading.

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📌 Indicators + HKAN.trade

Indicators are strongest when combined with price action and charting. Platforms like HKAN.trade provide:
✅ Candlestick charts
✅ Real-time indicators
✅ Price history
✅ AI-powered predictions

This allows traders to confirm signals with data-driven insights.

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🎯 Conclusion

Indicators help traders confirm trends, spot reversals, and manage risk.
In this lesson, you learned:

• Moving Averages → identify trend direction.

• Bollinger Bands → measure volatility.

• RSI → momentum and overbought/oversold levels.

• Stochastic (SGA) → reversal signals.

• Divergence → hidden opportunities before the market turns.

Use indicators alongside charting and price action for better accuracy.

👉 In Lesson 4 of the Trading Classroom, we’ll combine indicators with trading strategies to build a winning edge.