What do I look for when using RSI?
Using RSI, you can get a framework of when to get into a trade or not.
In my experience, this strategy works more than half of the time. So if you are using the proper risk, this strategy should be profitable. In this particular example, the strategy actually worked 100% of the time. Past performance does not guarantee future results.
1. Look for RSI to be reach an oversold level..the furthest below 30 the better.
2. It may be tempting to 'buy the bottom', but not yet! Instead, watch for divergence on a subsequent low. THERE is where you want to get in.... the second oversold RSI reading that is equal to or greater than the first RSI reading. Also, the price obviously must be much lower on the second RSI reading, than the prior lower RSI reading.
3. Set your target... Many times, the corrective bounce travels 1 - 2.618 times the price difference between the corresponding RSI lows.
For example: May 8 - RSI 26.6 and price $417
May 11 - RSI 28 and price $378
417-378 = 39
May 14 - RSI 65 and price $444
444-378 = 66 ..... 66/39 = 1.69
Also, as you can see, the 100 MA is a pretty good place to target.
AND RSI getting over 60 is a good indication is has run its course.
4. Repeat.
This is the 3 hour time frame, but I find this works in most time frames, it just depends on how long you want to stay in trades. It can also be applied counter trend bullish and bearish. When I see this divergence flipped, I use it to know to close a trade or reduce positions.
Hope I explained it well enough. Any questions or comments, please have at it. And a like and/or follow is much appreciated. My timing has been pretty good with these lately, but not many people are actually seeing the charts...
Thanks for viewing.
Travis
JMJ - UIOGD