Level 6
Momentum oscillators: RSI and MACD
By the end of this level you will know what RSI and MACD actually measure, what a divergence tells you, and how these tools mislead in trending markets.
In this level
- The concept of momentumMomentum is the speed of a price move: not which way price is going, but how much FORCE is behind it. The car analogy helps — a car can still be moving forward while it is slowing…
- RSI: the relative strength indexRSI (Relative Strength Index) compares the strength of recent gains against recent losses and converts it into a value between 0 and 100; the common setting is 14 periods. When…
- DivergenceA divergence is price and the oscillator telling different stories. The classic example: price prints a new high, but RSI prints a lower high than its previous one. Price says…
- MACDMACD (Moving Average Convergence Divergence) is built on the EMAs you met in level 5: in its standard setting, the 26-period EMA is subtracted from the 12-period EMA to produce…