Important Reminder
These indicators do not predict the future. They help you read what the market is doing right now. Always practice with demo accounts first. Never trade with money you cannot afford to lose.
What You'll Learn in This Lesson
- Add and configure EMA 50 and EMA 200 to identify trend direction
- Add RSI (14) to measure momentum and spot overbought/oversold conditions
- Add MACD (12-26-9) to detect momentum shifts and potential trend changes
- Add Volume bars to confirm price moves with market participation
- Understand how these five tools work together to give you a complete market picture
Introduction: Your Trading Dashboard
Welcome back! In Lesson 5.1, you learned how to set up your TradingView account, open your first chart, read candlesticks, and change timeframes. Now you have a clean workspace, but it's missing something important: indicators.
Think of indicators like dashboard instruments in a car. Your speedometer tells you how fast you're going. Your fuel gauge tells you how much gas you have left. Your temperature gauge warns you if the engine is overheating. Each instrument gives you one piece of information, and together, they help you drive safely and make smart decisions.
Indicators work the same way in trading. Each one gives you a different piece of information about what's happening in the market.
Moving Averages
Show trend direction and act as dynamic support/resistance levels
RSI
Measure momentum strength and identify overbought/oversold zones
MACD
Spot momentum shifts and potential trend changes through crossovers
Volume
Confirm price moves with market participation data
Moving Averages – Trend Direction
EMA 50 & EMA 200
What is a Moving Average?
A Moving Average is a line on your chart that smooths out price action over a certain number of periods (like hours, days, or weeks). It helps you see the overall direction—the trend—without getting distracted by small, random ups and downs.
Imagine you're standing in the ocean. The waves go up and down constantly, but underneath all those waves, the tide is moving in one direction. The Moving Average is like the tide—it shows you the bigger movement beneath the noise.
Two Types of Moving Averages
SMA (Simple Moving Average)
Treats all price periods equally. Adds up closing prices over a set number of periods and divides by that number. Smooth but slow to react.
EMA (Exponential Moving Average)
Gives more weight to recent prices, so it reacts faster to new price movements. If the market suddenly changes direction, the EMA reflects that change sooner. We'll use EMAs for this course.
The Two EMAs We'll Use
EMA 50
The Faster Moving Average
Looks at the last 50 periods. Reacts quickly to recent price changes. Good for spotting short-term trend shifts.
EMA 200
The Slower Moving Average
Looks at the last 200 periods. Shows long-term trend. Many traders consider this a key level for trend direction.
What to Look For
- Uptrend: Price is above both EMAs, and EMA 50 is above EMA 200 (bullish alignment)
- Downtrend: Price is below both EMAs, and EMA 50 is below EMA 200 (bearish alignment)
- Golden Cross: When EMA 50 crosses above EMA 200—potential signal of a new uptrend starting
- Death Cross: When EMA 50 crosses below EMA 200—potential signal of a new downtrend starting
Important Concept
During strong trends, price often bounces off the EMAs when it pulls back. In an uptrend, the EMAs act like a floor (support). In a downtrend, they act like a ceiling (resistance). This makes them useful for spotting potential entry points.
How to Add Moving Averages to Your Chart
At the top of your TradingView chart, look for the Indicators button. It might say "Indicators," "fx," or show a chart icon. Click it.
Type "Moving Average Exponential" or just "EMA" in the search box.
Click on "Moving Average Exponential" from the results. It will appear on your chart (usually set to 9 or 20 by default).
Click the settings icon (gear/cog) next to the EMA name, or right-click the line. Change the Length to 50. Change the color to blue. Click OK.
Repeat the process: Click Indicators → Search EMA → Add it → Change Length to 200 → Change color to orange or red.
Pro Tip
You can also increase the line thickness in the settings if the EMAs are too thin to see clearly. Look for a "Style" or "Line Width" option.
RSI – Momentum Strength
RSI (14)
What is RSI?
RSI stands for Relative Strength Index. It's a momentum indicator that measures the speed and strength of price movements. RSI tells you if the market is moving strongly in one direction, or if it's losing steam.
Think of it like a car's RPM gauge. If the RPMs are high, the engine is working hard and the car is accelerating. If the RPMs are low, the engine is idling or slowing down. RSI works the same way—it tells you how "hot" the market is.
How RSI Works
RSI is displayed in a separate window below your main price chart. It ranges from 0 to 100:
- RSI above 70: Market may be overbought. Price has risen quickly; might see a pullback soon.
- RSI below 30: Market may be oversold. Price has fallen quickly; might see a bounce soon.
- RSI around 50: Neutral momentum. Market is balanced—not too hot, not too cold.
Important: Context Matters
RSI levels are guides, not guarantees. In a strong uptrend, RSI can stay above 70 for days or weeks. In a strong downtrend, RSI can stay below 30 for extended periods. Don't make decisions based on RSI alone—always check Moving Averages, MACD, and Volume first.
What We Watch For
If price is above EMAs (uptrend) and RSI is climbing from 40 → 60 → 70, momentum is building. Buyers are getting stronger.
If price is below EMAs (downtrend) and RSI is dropping from 60 → 40 → 30, selling momentum is increasing. Sellers are in control.
Advanced Concept: Divergence
Bearish Divergence: Price makes a new high, but RSI makes a lower high. Warning that uptrend may be losing strength.
Bullish Divergence: Price makes a new low, but RSI makes a higher low. Warning that downtrend may be losing strength.
Don't worry about this yet—it's an advanced concept you'll learn with practice.
How to Add RSI to Your Chart
Click the Indicators button at the top of your chart.
Type "Relative Strength Index" or just "RSI" in the search box.
Click on "Relative Strength Index" (usually first result). It will appear in a separate panel below your main chart.
The default length is usually 14—keep it at 14. TradingView usually includes horizontal lines at 70 and 30 by default.
MACD – Momentum Shifts
MACD (12-26-9)
What is MACD?
MACD stands for Moving Average Convergence Divergence. It's a tool that shows the relationship between two moving averages—specifically, the 12-period EMA and the 26-period EMA. It helps you see momentum shifts and potential trend changes.
MACD is like a combination of trend and momentum in one tool. It tells you not just where the market is going, but also how fast it's getting there and if that speed is increasing or decreasing.
How MACD Works
MACD is displayed in a separate window below your chart (similar to RSI). It has three parts:
MACD Line (Blue)
The difference between the 12-EMA and 26-EMA. Positive = bullish, Negative = bearish.
Signal Line (Red)
A 9-period EMA of the MACD line. Smooths it out and helps spot crossovers.
Histogram (Bars)
Shows distance between MACD and Signal line. Growing bars = increasing momentum.
How to Read MACD
- Bullish Crossover: MACD line crosses above Signal line—upward momentum building
- Bearish Crossover: MACD line crosses below Signal line—downward momentum building
- Histogram Expanding: Bars getting taller—momentum increasing
- Histogram Shrinking: Bars getting shorter—momentum weakening
- Zero Line Cross: MACD crosses above/below zero—potential trend change
MACD is Not Perfect
Just like RSI, MACD can give false signals, especially in choppy or sideways markets. Sometimes you'll see a bullish crossover but price doesn't go up. That's why we use MACD together with Moving Averages, RSI, and Volume—we're building a complete picture, not relying on one tool.
How to Add MACD to Your Chart
Click the Indicators button at the top of your chart.
Type "MACD" in the search box.
Click on "MACD" or "Moving Average Convergence Divergence" from the results. It will appear below your chart (or below RSI if you added RSI first).
The default settings are usually 12, 26, 9—keep these. You can adjust colors if you prefer (blue MACD line, red Signal line).
Volume – Market Participation
Volume
What is Volume?
Volume shows how many units of an asset were traded during a specific time period. In forex, volume shows the number of lots traded. In crypto, it shows the number of coins or tokens traded.
Think of volume like a crowd at a concert. If the stadium is packed and everyone is cheering, you know the band is popular and the energy is high. But if the stadium is half-empty and quiet, something's off—maybe people aren't that interested.
Green bars = bullish candles | Red bars = bearish candles
Why Volume Matters
Volume is one of the most important tools in trading because it confirms or questions what you see on the price chart.
The Key Principle
Strong interest. Many traders participating. The breakout is more likely to continue.
Weak interest. Few traders participating. The breakout may fail (false breakout).
Example 1: Strong Breakout
BTCUSDT has been stuck in a range between $40,000 and $42,000 for days. Suddenly, it breaks above $42,000, and volume spikes—double or triple the recent average. This high volume tells you that many traders believe in this breakout. There's conviction behind the move. It's more likely to continue.
Example 2: Weak Breakout (False Signal)
Same scenario, but when BTCUSDT breaks above $42,000, volume is low—actually lower than the recent average. This is a red flag. The breakout happened, but nobody really cares. There's no participation. It's likely a false breakout, and price may fall back into the range.
How to Read Volume
- Compare recent bars: Look at the last 10-20 volume bars. What's the average height? If current bar is much taller, that's high volume.
- Volume during trends: In a healthy uptrend, higher volume on up days (green) and lower volume on down days (red) = buyers in control.
- Volume during reversals: If price has been falling and suddenly spikes up with high volume, that can signal a reversal starting.
- Volume during consolidation: When price moves sideways in a range, volume is usually low. Traders are waiting for a breakout.
How to Add Volume to Your Chart
Click the Indicators button at the top of your chart.
Type "Volume" in the search box.
Click on "Volume" (usually first result). It will appear at the bottom of your main chart as a series of bars.
No special settings are needed—just leave it as is. Start paying attention to bar heights whenever price makes a big move.
Putting It All Together
Congratulations! You now have all five essential tools on your chart. Let's review what each tool tells you and how they work together.
| Tool | What It Shows |
|---|---|
| EMA 50 & 200 | Trend direction and dynamic support/resistance levels |
| RSI (14) | Momentum strength; overbought/oversold zones (context-dependent) |
| MACD (12-26-9) | Momentum shifts and trend changes through crossovers and histogram |
| Volume | Market participation and breakout confirmation |
| Candlesticks | Price action story (Open, High, Low, Close)—what happened during each period |
How They Work Together
Think of these tools as a team. Each member has a different job, but together, they give you a complete picture of the market.
Example Scenario: Spotting a Potential Uptrend
Moving Averages: Price crosses above EMA 50 and EMA 200. EMA 50 is starting to slope upward. Trend may be shifting from down to up.
RSI: RSI is climbing from 40 to 55. Not overbought yet, so there's still room for the uptrend to continue.
MACD: MACD line crosses above Signal line (bullish crossover). Histogram is expanding. Momentum is building.
Volume: Volume spikes on the breakout above the EMAs. High volume confirms traders are interested and participating.
Candlesticks: Recent candles are mostly green (bullish) with small wicks, showing buyers are in control.
Conclusion: All five tools are pointing in the same direction—up. This is called confluence, and it's what we look for before entering a trade. When multiple tools agree, probability of success increases.
Remember: No Guarantees
These tools do not predict the future. They help you read what the market is doing right now. They can lag behind price, give false signals, or contradict each other. Sometimes you'll see a bullish crossover on MACD, but RSI is already overbought and volume is weak. What do you do then? You wait. You don't force a trade. That's why we always practice on paper first, and that's why we use all five tools together instead of relying on just one.
Key Takeaways
Common Mistakes to Avoid
No single tool is perfect. If you only use RSI, you'll miss trend information. If you only use Moving Averages, you'll miss momentum shifts. Use all five tools together to build a clearer picture.
Context matters. In a strong uptrend, RSI can stay above 70 for days or weeks. Don't sell just because RSI hits 70. Check the Moving Averages, MACD, and Volume first.
Volume is often the forgotten tool, but it's one of the most important. A breakout with weak volume is risky and often fails. Always check volume before making a decision.
Stick with the standard settings (EMA 50/200, RSI 14, MACD 12-26-9) while you're learning. Advanced traders sometimes adjust these, but beginners should master the basics first. Changing settings randomly can make your analysis worse, not better.
Even with all five tools, you will still see false signals. You will still make mistakes. That's normal and okay. What matters is that you practice, review your trades, and improve over time.
Practice Task (Hands-On)
Now it's your turn to practice! Open your TradingView chart and complete the following steps:
-
1
Open Your Chart Open your EURUSD or BTCUSDT chart (whichever you're focusing on).
-
2
Add EMA 50 and EMA 200 Go to Indicators → Search "Moving Average Exponential" → Add it twice → Set first to Length 50 (blue color) → Set second to Length 200 (orange color)
-
3
Add RSI (14) Go to Indicators → Search "Relative Strength Index" → Add it → Keep default length at 14
-
4
Add MACD (12-26-9) Go to Indicators → Search "MACD" → Add it → Keep default settings
-
5
Add Volume Go to Indicators → Search "Volume" → Add it
-
6
Observe Your Chart Look at your chart and answer: Is price above or below the EMAs? What's the RSI level? Has MACD crossed recently? Is volume high or low compared to recent bars?
This practice task should take about 15–20 minutes. Take your time adding each indicator and make sure you understand what each one shows.
What's Next?
Excellent work! You've completed Lesson 5.2. Your chart is now fully equipped with the five essential tools that traders use all over the world. In Lesson 5.3, we're going to teach you a simple 7-step checklist for reading your chart and analyzing market conditions. Remember: Trading is high risk. This is education only. Never trade with money you cannot afford to lose.