Essential cookies only. Login, session and security. No tracking, ever.
Free guides to technical indicators, market concepts and strategy mechanics. Each indicator page carries an interactive chart — move the sliders and watch the calculation respond.
Most tutorials describe what an indicator shows when it works. These also describe when it misleads, because that is the half that costs money.
How each one is calculated, how to read it, and — the part most tutorials skip — what it cannot tell you. Every indicator page has an interactive chart.
A simple moving average is the arithmetic mean of the last N closing prices, recalculated at every new bar. It smooths a price series so the broader direction is easier to see than it is on raw candles.
An exponential moving average is a weighted average of past closes in which recent prices carry more weight than older ones. It responds to new information faster than a simple average of the same length.
The Relative Strength Index compares the size of recent gains to the size of recent losses and expresses the result on a scale from 0 to 100. It is a momentum oscillator: it describes how one-sided recent movement has been.
MACD measures the distance between a fast and a slow exponential moving average. A signal line — an EMA of that distance — and a histogram of the gap between them are plotted alongside it.
Bollinger Bands plot a moving average with an upper and lower band placed a chosen number of standard deviations away. The bands widen when recent price variability rises and narrow when it falls.
Average True Range measures typical movement per bar. True range is the largest of three distances — high minus low, high minus previous close, and low minus previous close — and ATR is the average of that value over N bars.
The stochastic oscillator expresses where the current close sits within the high-to-low range of the last N bars, on a scale from 0 to 100. A reading of 80 means the close is 80% of the way up that recent range.
ADX measures how directional recent movement has been, on a scale from 0 to 100. It is explicitly non-directional: a high reading occurs in sustained declines exactly as it does in sustained advances.
VWAP is the average price of an instrument over a period, weighted by the volume traded at each price. Because it weights by volume, prices where more trading occurred influence it more than thinly traded prices.
Supertrend plots a single line that sits below price or above it, switching sides when price closes through the band. The band distance is set by ATR, so it widens when movement is large and narrows when it is small.
Ichimoku Kinko Hyo is a system of five lines derived from midpoints of past high-low ranges. Two of them are plotted forward in time, forming the shaded area known as the cloud.
The ideas underneath the tools. Why lag is unavoidable, why context changes what an indicator means, and what volatility does and does not measure.
A lagging indicator is computed from prices that have already printed and therefore confirms movement after it happens. A leading indicator is claimed to change before price does — a much stronger claim, and one that deserves scrutiny.
A trending market makes progressive highs or lows over time; a ranging market oscillates within boundaries without net progress. The same indicator produces very different behaviour in each, which is why context matters more than the tool.
Volatility measures how much price moves, not which way. Historical volatility is computed from past price variability; implied volatility is derived from option prices and reflects the movement the market is currently pricing in.
Support and resistance describe price areas where movement has previously slowed, stalled or reversed. They are observations about past behaviour at particular price areas, not physical barriers.
Momentum describes the tendency for recent movement to continue over some horizon. It is measured by comparing current price to price some number of bars earlier, or through oscillators such as RSI that scale recent gains against recent losses.
A breakout describes price moving beyond an area where it had previously stalled. A retest describes price returning to that area afterwards. Both are labels applied to movement that has already happened.
A failed breakout describes price moving beyond an area and then returning back inside it. Like every pattern name, it can only be applied once the return has already happened.
A gap is a discontinuity between one bar and the next — price opens away from the previous close with no trading in between. The conventional classification names four kinds by where they appear within a larger move.
A trendline is a straight line drawn along a series of highs or lows to summarise the direction of movement. It is a drawing tool applied by the observer, not a property of the price series itself.
A channel is formed by two parallel lines drawn so that price movement sits between them — one along the lows, one along the highs. It summarises both the direction and the approximate width of recent movement.
Trend structure describes a market through the sequence of its swing points. Successively higher highs and higher lows describe an uptrend; successively lower highs and lower lows describe a downtrend.
Consolidation describes a period where price moves within a relatively contained area rather than making sustained progress in either direction. A range is the area itself, bounded roughly by the highs and lows of that period.
Fibonacci retracement divides the distance between a chosen low and high into proportions — commonly 23.6%, 38.2%, 50%, 61.8% and 78.6% — and draws horizontal lines at those prices.
Volume profile displays how much volume traded at each price level over a chosen period, drawn as a horizontal histogram. It answers where trading occurred, rather than when.
An order type specifies how an instruction reaches the exchange. The central trade-off is between certainty of execution and certainty of price — no order type provides both.
Slippage is the difference between the price you expected and the price you actually received. It arises because the book moves between the moment an order is sent and the moment it fills.
Liquidity describes how readily an instrument can be traded without moving its price. The bid-ask spread — the gap between the highest buy order and the lowest sell order — is the most visible measure of it.
A candlestick summarises four numbers for one time period: the open, the high, the low and the close. The body spans open to close; the wicks extend to the extremes reached during the period.
A doji is a candle whose open and close are at or very near the same price, producing a very small body. The wicks may be long or short.
A hammer is a candle with a small body near the top of its range and a long lower wick. The hanging man is the same shape — the two names differ only by where the candle appears in a prior move.
An engulfing pattern is a two-candle shape where the second candle’s body fully covers the first candle’s body and closes on the opposite side. Bullish and bearish versions are mirror images.
These three names describe candles by the relationship between body and wicks. A spinning top has a small body with wicks on both sides; a marubozu has a long body with almost no wicks; a harami is a small candle contained within the previous one.
The Greeks measure how a theoretical option price responds to changes in one input at a time — the underlying price, volatility, time and interest rates. They are outputs of a pricing model, not observed properties of the contract.
Delta measures how much a theoretical option price changes for a one-unit move in the underlying. A call with a Delta of 0.45 gains roughly 0.45 in value if the underlying rises by 1, holding everything else constant.
Theta measures how much a theoretical option price changes as one day passes, with everything else held constant. For a long option it is typically negative: time passing reduces value.
Vega measures sensitivity to implied volatility; Gamma measures how fast Delta changes as the underlying moves. Gamma is second-order — it describes the rate of change of another Greek rather than of price directly.
Expiry is the last day a derivative contract exists. Positions still open at the close are settled against a final settlement price rather than at the last traded price, and the contract ceases to exist.
Cash settlement transfers only the profit or loss in money. Physical settlement transfers the underlying itself — shares change hands and the full contract value must be funded.
When an option is sold in the market, STT applies to the premium. When an in-the-money option is instead allowed to expire and is exercised, the charge is computed on the settlement value of the contract rather than on the premium — a very different base.
Weekly contracts expire each week; monthly contracts run to the monthly expiry date. The difference is remaining time, which changes how premium behaves rather than changing the instrument itself.
Margin is the amount a broker requires you to hold against an open derivative position. It is a deposit securing potential losses, not a payment — it is not spent, but it is not available for anything else either.
Leverage means controlling a position larger than the capital posted against it. In derivatives it arises because margin is a fraction of contract value rather than the full amount.
Mark to market revalues open positions at the end of each day and settles the difference in cash. A margin call arises when the balance falls below the required margin after that settlement.
Open interest is the number of derivative contracts currently outstanding — positions opened and not yet closed. It counts contracts in existence, not contracts traded.
The put-call ratio divides put activity by call activity. It can be computed on volume or on open interest, and the two produce different numbers with different meanings.
Max pain is the strike price at which the total value of outstanding options expiring worthless would be greatest — equivalently, where option buyers collectively lose most. It is computed from open interest across strikes.
A spread combines two or more option legs into a single position. Combining legs changes the payoff shape — capping loss, capping gain, or targeting movement rather than direction.
Rolling means closing a position in an expiring contract and opening the equivalent in a later one. It is two transactions, not a continuation. Cost of carry describes why a future trades at a different price from its underlying.
A corporate action such as a split, bonus issue or dividend changes the share count or value. Derivative contracts are adjusted so the economic value of an open position is preserved across the event.
Drawdown is the decline from a peak in account value to a subsequent trough, expressed as a percentage. Maximum drawdown is the largest such decline over a period.
Expectancy is the average outcome per trade, combining how often a method wins with how much it wins and loses. Win rate alone is not informative without the size of each outcome.
Overfitting is tuning a strategy so closely to historical data that it captures the noise in that particular sample rather than any durable relationship. Performance on the data used for tuning systematically overstates what follows.
A circuit limit is a price band beyond which a security cannot trade in a session. Market-wide circuit breakers halt trading across the exchange when a benchmark index moves beyond defined thresholds.
A chart type is a choice about how to display price. Each type keeps some information and discards other information, and the ones that look cleanest are generally the ones discarding most.
Heikin Ashi is a candlestick variant where each candle is calculated from averages of the current and previous periods rather than from raw open, high, low and close. The result is a smoother sequence with fewer colour changes.
A Renko chart plots bricks of a fixed price size, adding a new brick only when price moves by that amount. Time is not an axis: a quiet hour and an active hour occupy the same space if they produced the same movement.
Pivot points are levels calculated from the previous period’s high, low and close. The central pivot and several support and resistance levels are derived by simple arithmetic and are fixed for the following session.
Multi-timeframe analysis means examining the same instrument across several chart intervals. The practice recognises that structure is timeframe-dependent — a market can be rising on one interval and falling on another simultaneously without contradiction.
The order book lists resting buy and sell orders at each price with the quantity available. Market depth is the view of that book, commonly shown as five levels on each side in Indian retail platforms.
Indian tax law treats different trading activities as different kinds of income. F&O is generally treated as non-speculative business income, intraday equity as speculative business income, and delivery-based equity as capital gains. The classification determines the reporting route.
Mechanics of common approaches, including their documented failure modes. Descriptions of how something works, never a recommendation to trade it.
A moving average crossover compares a faster average to a slower one and marks the points where they cross. It is among the oldest and simplest mechanical constructions in technical analysis, which is why it is used so often to illustrate mechanics.
Position sizing determines how much to trade, derived from the capital at risk and the distance to the stop-loss. It is arithmetic rather than opinion, and it operates independently of whether any particular trade is a good idea.
The risk-reward ratio compares the distance from entry to target against the distance from entry to stop. A 1:2 ratio means the target sits twice as far away as the stop.
Educational use only
This page is educational material about how a technical tool is calculated and read. It is not investment advice, not a recommendation to buy or sell anything, and not a signal service. No indicator predicts future prices. CernoQuant is a trading journal and analytics platform, not a SEBI-registered investment adviser. Trading decisions and their outcomes are yours alone.