Once you know how to read charts, the next level is using indicators. But not all indicators are created equal. Many are just noise. This lesson focuses on the few indicators that actually work, and how to apply them without cluttering your chart.

1. Use Indicators That Show Up in Real Price Movement

● Most indicators are derivatives of price.

● Good indicators confirm what the price is already showing.

● Avoid: Loading up with 5–10 indicators and waiting for perfect alignment.

● ​Focus: Choose a small number of reliable indicators and combine them with price action.

2. The Key Indicators That Work

A. Moving Averages

● Show you where the price is in relation to recent movement.

● Help define the trend.

1. 10 EMA (Exponential Moving Average)

● Responsive, tracks short-term price action.

● Great for fast-moving momentum trades.

2. 20 EMA

● Slightly slower, good for trend confirmation.

3. 50 EMA

● Slower trend filter, great for identifying bigger picture directions.

Tip: Use these moving averages to spot pullbacks or breakouts.

B. RSI (Relative Strength Index)

● Shows whether a stock is overbought or oversold.

● Uses a 0–100 scale.

○ Over 70 = overbought
○ Under 30 = oversold

● Can help identify turning points.

Tip: RSI divergence (price going up while RSI goes down) can signal weakness.

C. ATR (Average True Range)

● Measures how much a stock moves on average per candle.

● Use Case: Determines stop loss placement.

● Example: If ATR = $1.50, the stock typically moves $1.50 per candle.
​ You may want your stop at least 1x ATR away from your entry.

3. Combine, Don’t Clutter

● Too many indicators = analysis paralysis.

● Stick to 2–3 at most.

● Combine them with price action for confirmation.

Example Setup:

● Price above 10 EMA
● RSI rising, not yet overbought
● ATR used to size stop

4. Indicators Confirm Price, Not Predict It

● Don’t rely on indicators to tell you what to do.

● Watch how price behaves around indicators.

● Use them as tools to filter setups, not generate them.

This wraps up Lesson 4. You now know how to use moving averages, RSI, and ATR in a clean and purposeful way, without overloading your screen. In the next lesson, you'll learn how to spot actual trends and apply the OVTLYR Buy Signal as part of your system.