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Oscillators

The Basics of MACD: An Introduction to the IndicatorThe Moving Average Convergence Divergence (MACD) indicator is one of the most popular technical analysis tools in use by traders today. It is a momentum indicator that helps traders to identify changes in the strength, direction, and momentum of a security's price action. The MACD indicator is widely used in technical analysis and can be applied to all asset classes, including stocks, bonds, currencies, and commodities. In this blog post, we will cover the basics of the MACD indicator, including how it is calculated and its basic interpretation. The MACD Indicator Calculation The MACD indicator is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. The result is a line that oscillates above and below the zero line. This line is known as the MACD line. The 9-period EMA is then plotted on top of the MACD line. This line is known as the signal line. The MACD histogram is created by subtracting the signal line from the MACD line. The MACD histogram fluctuates above and below the zero line and provides an indication of the momentum of the price action. The MACD Interpretation The MACD indicator provides traders with several signals to assist in their trading decisions. The most common signals are the MACD line crossover signal, the signal line crossover signal, and the divergence signal. The MACD Line Crossover Signal When the MACD line crosses above the signal line, it is considered a bullish signal. This is an indication that the momentum of the price action is turning positive, and traders may want to consider buying the security. Conversely, when the MACD line crosses below the signal line, it is considered a bearish signal. This is an indication that the momentum of the price action is turning negative, and traders may want to consider selling the security. The Signal Line Crossover Signal Another common signal generated by the MACD indicator is the signal line crossover signal. When the MACD line crosses above the signal line, it is considered a bullish signal. Conversely, when the MACD line crosses below the signal line, it is considered a bearish signal. The Divergence Signal The MACD indicator can also provide traders with a divergence signal. This signal occurs when the MACD histogram diverges from the price action. If the price action is making higher highs, but the MACD histogram is making lower highs, it is considered a bearish divergence signal. This is an indication that the momentum of the price action is weakening, and traders may want to consider selling the security. Conversely, if the price action is making lower lows, but the MACD histogram is making higher lows, it is considered a bullish divergence signal. This is an indication that the momentum of the price action is strengthening, and traders may want to consider buying the security. Conclusion In conclusion, the Moving Average Convergence Divergence (MACD) indicator is a popular technical analysis tool used by traders to identify changes in the strength, direction, and momentum of a security's price action. The MACD indicator is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA, and the result is a line that oscillates above and below the zero line. The MACD indicator provides traders with several signals to assist in their trading decisions, including the MACD line crossover signal, the signal line crossover signal, and the divergence signal. It is important to note that the MACD indicator is just one tool that traders can use to analyze the markets, and it should be used in conjunction with other technical analysis tools, such as trendlines, moving averages, and support and resistance levels. Additionally, traders should use proper risk management techniques, such as stop-loss orders and position sizing, to manage their trades and protect themselves against potential losses. Traders should also be aware that the MACD indicator is not infallible and can generate false signals, particularly in choppy or sideways markets. Therefore, it is important to confirm MACD signals with other technical indicators and fundamental analysis, such as news events and economic data. Additionally, traders should always be cognizant of the overall trend of the asset they are trading and adjust their strategies accordingly. In conclusion, the MACD indicator is a versatile and widely used tool in technical analysis. By understanding its calculation and interpretation, traders can use it to identify potential entry and exit points in the markets. However, traders should use the MACD indicator in conjunction with other technical analysis tools and practice proper risk management techniques to improve their trading success.
SKILLING:SOYBEANEducation
by LeafAlgo
QQETSBB Screener: A Powerful Tool for Monitoring Multiple SymbolQQETSBB Screener: A Powerful Tool for Monitoring Multiple Symbols Introduction In the world of trading, having the ability to monitor multiple symbols simultaneously is crucial for making informed decisions. The QQETSBB Screener is a powerful tool that allows traders to keep track of various symbols at once, providing essential information regarding price, volatility, and sentiment. In this blog post, we will explore the strategy implemented by the QQETSBB Screener and explain the table. Strategy The QQETSBB Screener uses a combination of mathematical calculations and technical indicators to generate a comprehensive analysis of multiple symbols. It utilizes the following indicators: QQE, SMA, EMA, WMA, RSI, MACD, Stochastic, CCI, MFI, and others. By combining these various indicators, the screener provides a sentiment score and a directional score for each symbol, allowing traders to quickly assess the market conditions for a specific asset. In-Depth Exploration of the QQETSBB Screener Strategy The QQETSBB Screener strategy is designed to provide traders with a comprehensive understanding of various symbols at once. This is achieved through a combination of mathematical calculations and technical indicators, which are applied to each symbol being monitored. In this section, we will delve deeper into the strategy, exploring the individual components that contribute to its effectiveness. 1. QQE (Quantitative Qualitative Estimation): The QQE is a volatility-based indicator that measures the difference between the price and a moving average. It is considered a leading indicator, as it can provide early signals of potential price movements. The QQE is used as the primary moving average in the QQETSBB Screener when selected by the user. 2. SMA (Simple Moving Average): The SMA is a widely used technical indicator that calculates the average price of a security over a specified period. It is used to smooth out price fluctuations and identify trends. The QQETSBB Screener incorporates the SMA as an alternative moving average option for users. 3. EMA (Exponential Moving Average): Similar to the SMA, the EMA is a type of moving average that places greater weight on more recent data points. This allows it to react more quickly to recent price movements. The EMA is another alternative moving average option available in the QQETSBB Screener. 4. WMA (Weighted Moving Average): The WMA is another type of moving average that places more emphasis on recent price data. It assigns weights to each data point, which decrease linearly as the data points get older. The WMA is the final alternative moving average option in the QQETSBB Screener. The QQETSBB Screener strategy utilizes a combination of these moving averages, along with other popular technical indicators, to generate a sentiment score and a directional score for each symbol. These scores provide valuable insights into the overall market conditions for each asset, allowing traders to make informed decisions. The additional technical indicators used in the QQETSBB Screener strategy include: 5. RSI (Relative Strength Index): The RSI is a momentum oscillator that measures the speed and change of price movements. It is used to identify overbought or oversold conditions in a market. The RSI is incorporated into the sentiment score calculation in the QQETSBB Screener. 6. MACD (Moving Average Convergence Divergence): The MACD is a trend-following indicator that shows the relationship between two moving averages of a security's price. It is used to identify potential trend reversals and is incorporated into the sentiment score calculation in the QQETSBB Screener. 7. Stochastic: The Stochastic is a momentum indicator that compares a security's closing price to its price range over a specific period. It is used to identify potential trend reversals and is also incorporated into the sentiment score calculation in the QQETSBB Screener. 8. CCI (Commodity Channel Index): The CCI is a versatile indicator that measures the difference between a security's price change and its average price change. It is used to identify potential trend reversals and is included in the sentiment score calculation in the QQETSBB Screener. 9. MFI (Money Flow Index): The MFI is a momentum indicator that combines price and volume data to measure the strength of money flowing in and out of a security. It is used to identify potential trend reversals and is incorporated into the sentiment score calculation in the QQETSBB Screener. 10. Haiken Ashi: The Haiken Ashi is a charting technique that uses modified candlestick data to identify trends more easily. The QQETSBB Screener uses the Haiken Ashi method to calculate the overall trend of the symbol, contributing to the sentiment score. By combining these various indicators, the QQETSBB Screener strategy provides traders with a comprehensive understanding of each symbol's current market conditions. The sentiment and directional scores generated by the screener allow traders to quickly assess the potential opportunities and risks associated with each asset, making it an invaluable tool for enhancing trading strategies and decision-making processes. Table Explanation The QQETSBB Screener displays information in a table format, which is divided into several columns: 1. Symbol: Displays the symbol for each asset being monitored. 2. Price: Displays the current price of each asset. 3. Band Spread: Represents the volatility range as a percentage. A larger band spread indicates higher volatility in the asset's price. 4. Segment Spread: Represents 1/4th of the volatility range as a percentage. This helps to identify the specific segment of the volatility range that the asset's price is currently in. 5. Level: Indicates the quarter of the band the price is currently at. This ranges from 0 to 5, with 0 being the lowest and 5 being the highest. 6. Sentiment: Provides a score based on a combination of popular indicators such as RSI, MACD, Stochastic, CCI, MFI, and others. A higher score indicates a more overbought condition, while a lower score indicates an oversold condition. 7. Direction: Displays the direction in which the asset's price is moving, using arrows to indicate an upward (↑), downward (↓), or sideways (→) trend. Conclusion In conclusion, the QQETSBB Screener strategy is a powerful and versatile tool that offers traders a comprehensive overview of multiple symbols simultaneously. Its combination of mathematical calculations and technical indicators provides valuable insights into price, volatility, sentiment, and direction, enabling traders to make informed decisions and stay ahead of the market. Whether you are a beginner or a seasoned trader, the QQETSBB Screener can help you navigate the complex world of trading and maximize your potential for success.
Education
by The_Peaceful_Lizard
2
What is the True Range Osc?Introducing the True Range Oscillator: A Smoother and More Accurate Alternative to RSI Introduction: Technical analysis plays a crucial role in the decision-making process of traders and investors. One of the most popular technical indicators is the Relative Strength Index (RSI), which measures the speed and change of price movements. However, the RSI has some limitations, such as losing signal strength when increasing the lookback period. This article introduces the True Range Oscillator, a new technical indicator that provides a smoother and more accurate alternative to the RSI, even when increasing the lookback period. True Range Oscillator: An Overview The True Range Oscillator is designed to be a more accurate and smoother alternative to the RSI. It is based on the concept of True Range, which considers the high, low, open, and close prices of an asset. By incorporating the True Range into its calculation, the True Range Oscillator can maintain signal strength even when the lookback period is increased. The main advantage of using the True Range Oscillator is that it can provide more accurate and smoother signals compared to the RSI. When set to a lookback period of 14, the True Range Oscillator is similar to the RSI, but with a smoother curve. As the lookback period is increased, the True Range Oscillator maintains its signal strength and accuracy, unlike the RSI, which tends to lose its signal strength. Mathematical Explanation: The True Range Oscillator is calculated using the following steps: 1. Calculate the True Range: True Range is calculated as the average of the following values: (High - Low), (High - Close), and (Low - Close). This provides a more accurate representation of the price movements compared to the RSI, which only considers the close prices. 2. Calculate the Average True Range (ATR): The ATR is calculated using an exponential moving average (EMA) of the True Range values over the specified lookback period. 3. Calculate the Z-Score: The Z-Score is calculated as (Close Price - EMA of Close Prices) / ATR. This standardizes the price movements, making it easier to compare them across different timeframes. 4. Apply Smoothing: The Z-Score is smoothed using a simple moving average (SMA) with the specified smoothing period. 5. Calculate the Min-Max: The Min-Max function is used to normalize the smoothed Z-Score to a range of 0 to 100. This is done by subtracting the minimum value from the Z-Score and dividing it by the difference between the maximum and minimum values. Normalized Price Oscillators: Normalized price oscillators are a class of technical indicators that measure the strength or weakness of a financial instrument's price movement by normalizing its price data. This normalization typically involves converting the price information into a more standardized format, such as a percentage or an index, which makes it easier to compare and analyze price movements across different timeframes and financial instruments. Normalized price oscillators are particularly useful for identifying overbought and oversold market conditions, as well as potential trend reversals. By analyzing and comparing the normalized price data, traders can make more informed decisions and better understand the underlying market dynamics. True Range Oscillator and RSI as Normalized Price Oscillators: Both the True Range Oscillator and the Relative Strength Index (RSI) are normalized price oscillators. They convert the raw price data into a standardized format, making it easier to analyze and compare price movements. In the case of the RSI, the price data is normalized using the Relative Strength (RS) calculation, which results in an index value ranging from 0 to 100. This index value provides a clear indication of the overall strength or weakness of the price movement and helps traders identify overbought or oversold market conditions. The True Range Oscillator, on the other hand, is normalized through the Min-Max function, which also results in an index value ranging from 0 to 100. This normalization process takes into account the high, low, open, and close prices, providing a more comprehensive and accurate representation of the price movements. Why the True Range Oscillator is a Good Normalized Price Oscillator: The True Range Oscillator stands out as a superior normalized price oscillator for several reasons: 1. Comprehensive Price Data: By incorporating the high, low, open, and close prices, the True Range Oscillator provides a more accurate representation of the price movements, leading to better decision-making. 2. Maintaining Signal Strength: The True Range Oscillator maintains its signal strength and accuracy even when the lookback period is increased, making it a more reliable tool for longer-term analysis. 3. Smoother Indicator: The True Range Oscillator produces a smoother curve compared to the RSI, making it easier to identify trends and reversals, and reducing the noise created by price fluctuations. 4. Minimizing False Signals: The True Range Oscillator can better filter out false signals caused by sudden price movements, thanks to its incorporation of the True Range into its calculation. 5. Customizable Outlier Level: The True Range Oscillator allows users to set a customizable outlier level, which helps to further filter out extreme price movements and reduce false signals. To better understand the advantages of the True Range Oscillator, it is essential to delve into the history and workings of its predecessor, the Relative Strength Index (RSI). History of RSI: The Relative Strength Index (RSI) was developed by J. Welles Wilder Jr. and introduced in his 1978 book, "New Concepts in Technical Trading Systems." The indicator quickly gained popularity among traders and investors due to its simplicity and effectiveness in identifying overbought and oversold market conditions. The RSI is a momentum oscillator that measures the speed and change of price movements by comparing the magnitude of recent gains to recent losses. How RSI Works: The RSI is calculated using the following steps: 1. Calculate the average gains and losses over a specified lookback period, typically 14 days. 2. Calculate the Relative Strength (RS) as the ratio of the average gains to the average losses. 3. Normalize the RS to a range of 0 to 100 using the formula: RSI = 100 - (100 / (1 + RS)) Despite its popularity and widespread use, the RSI has some limitations that the True Range Oscillator aims to address. Why the True Range Oscillator is Better: 1. Comprehensive Price Data: While the RSI only considers the closing prices, the True Range Oscillator takes into account the high, low, open, and close prices. This provides a more accurate representation of the price movements and helps to prevent false signals caused by sudden price fluctuations. 2. Maintaining Signal Strength: A significant drawback of the RSI is its loss of signal strength when the lookback period is increased. In contrast, the True Range Oscillator maintains its signal strength and accuracy even with an extended lookback period. This makes it a more reliable tool for longer-term analysis. 3. Smoother Indicator: The True Range Oscillator produces a smoother curve compared to the RSI, making it easier to identify trends and reversals. This can help traders make more informed decisions by reducing the noise created by price fluctuations. 4. Minimizing False Signals: By incorporating the True Range into its calculation, the True Range Oscillator can better filter out false signals caused by sudden price movements. This can help traders avoid making hasty decisions based on misleading signals. 5. Customizable Outlier Level: The True Range Oscillator allows users to set a customizable outlier level, which helps to further filter out extreme price movements and reduce false signals. Conclusion: In conclusion, the True Range Oscillator is an excellent example of a normalized price oscillator that offers enhanced accuracy and reliability compared to the conventional RSI. By considering a broader range of price data, maintaining signal strength over longer lookback periods, and providing a smoother curve, the True Range Oscillator provides a more comprehensive analysis of price movements. This makes it an ideal tool for traders and investors looking to improve their technical analysis and make more informed decisions in the ever-changing financial markets. The True Range Oscillator's ability to minimize false signals and offer customizable outlier levels further adds to its value, making it a valuable addition to any trader's toolkit.
Education
by The_Peaceful_Lizard
Trading with RSI Part 4: Positive and Negative ReversalsRSI (Relative Strength Index) is a widely used technical indicator in trading and investing. It measures the magnitude of recent price changes to evaluate overbought or oversold conditions in an asset. RSI is often used in conjunction with other technical indicators and chart patterns to identify potential reversals in price movements. In this article, we will explore RSI reversals, both positive and negative. Positive RSI Reversal A positive RSI reversal occurs when the RSI indicator forms a higher low while the price of the asset forms a lower low. This indicates that the price of the asset is losing momentum to the downside, while the RSI is gaining momentum to the upside. It is a bullish signal that suggests a potential reversal in the asset's price movement. Traders and investors often look for positive RSI reversals to identify buying opportunities. When the RSI forms a higher low and crosses above its 30 level from oversold territory, it confirms the bullish reversal signal. Traders often wait for a confirmation of the reversal by looking for the price of the asset to break above a resistance level. For example, let's consider a scenario where the price of a stock has been in a downtrend, forming lower lows and lower highs. However, the RSI indicator forms a higher low, indicating that the momentum is shifting to the upside. As the RSI crosses above its 30 level, it confirms the positive RSI reversal signal. Traders may consider buying the stock as a potential reversal in price movement. Negative RSI Reversal A negative RSI reversal occurs when the RSI indicator forms a lower high while the price of the asset forms a higher high. This indicates that the price of the asset is gaining momentum to the upside, while the RSI is losing momentum to the downside. It is a bearish signal that suggests a potential reversal in the asset's price movement. Traders and investors often look for negative RSI reversals to identify selling opportunities. When the RSI forms a lower high and crosses below its 70 level from overbought territory, it confirms the bearish reversal signal. Traders often wait for a confirmation of the reversal by looking for the price of the asset to break below a support level. For example, let's consider a scenario where the price of a stock has been in an uptrend, forming higher highs and higher lows. However, the RSI indicator forms a lower high, indicating that the momentum is shifting to the downside. As the RSI crosses below its 70 level, it confirms the negative RSI reversal signal. Traders may consider selling the stock as a potential reversal in price movement. Conclusion RSI reversals can be powerful signals for traders and investors. A positive RSI reversal indicates a potential bullish reversal in the asset's price movement, while a negative RSI reversal indicates a potential bearish reversal. However, it is important to note that RSI is not a standalone indicator and should be used in conjunction with other technical indicators and chart patterns. Traders and investors should also consider other factors such as fundamental analysis and market sentiment before making trading decisions based on RSI reversals.
NASDAQ:AAPLEducation
by LeafAlgo
Stochastic RSI in detail and how to use it.The Stoch RSI (Stochastic Relative Strength Index) is a technical analysis indicator used to identify overbought or oversold conditions in financial markets. It is a combination of two popular indicators: the Stochastic Oscillator and the Relative Strength Index (RSI). The Stoch RSI applies the Stochastic Oscillator formula to the RSI values, aiming to provide a more sensitive and faster signal for potential trend reversal. The Stoch RSI is calculated as follows: Choose the time period for which you want to calculate the Stoch RSI. The most common period is 14 . Calculate the RSI: (Detailed post on this in the link below) Determine the highest and lowest RSI values: Identify the highest and lowest RSI values over the same time period (e.g., 14 days). Calculate the Stoch RSI: Use the following formula to calculate the Stoch RSI: Stoch RSI = (Current RSI - Lowest RSI) / (Highest RSI - Lowest RSI) The resulting Stoch RSI value will range from 0 to 1 (or 0% to 100%). A value above 0.8 (or 80%) typically indicates an overbought condition, suggesting a potential price correction or reversal, while a value below 0.2 (or 20%) indicates an oversold condition, which may represent a buying opportunity. What does Stoch RSI tell us ? Stoch RSI is a measure of how fast the RSI is changing. As an analogy. Imagine you are driving your car and have foot on the accelerator which will cause increase in the speed of your cat at every moment, now the rate at which your car's speed increases is acceleration. The bigger the more powerful engine your car has the more acceleration you get and the faster you get to the top speed of your car. So, in this analogy speed of your car at any instant is RSI , acceleration is Stoch RSI and top speed of your car is overbought condition of an asset. RSI measures who is relatively more aggressive among buyers and sellers at a given instant. Stoch RSI measures how aggressive the buyers or sellers are at a given instant. So just like in a fight if someone is too aggressive, they are going to spend themselves too quickly and even though they want to fight more they won't be able to until they ease up and relax a bit, this is similar to Stoch RSI of an asset getting to overbought condition and then asset either retraces or takes a pause as buyers are exhausted and need to regain strength by taking profits which turns them into sellers and the asset starts moving in opposite direction. Why is 80 considered overbought? The number 80 is chosen based on empirical evidence, suggesting that when the Stoch RSI reaches these extreme values, there is a higher probability of a price reversal or correction. When the Stoch RSI is above 80, it indicates that the asset's price has risen significantly over a short period and could be overextended. In this situation, the asset may be overvalued, and traders may consider selling or taking profits as the price could reverse or correct. How to use Stoch RSI to enter a trade? How to enter a Long Trade: ======================= Step 1. Always use Stoch RSI along with RSI to make a decision: Step 2. Use it on mid to high term time frame (4h and higher). Step 3. Make sure both RSI and Stoch RSI are in oversold zone. Step 4. Make sure the asset is resting on a key support level and holding it. Step 5. Fearlessly enter the trade. How to enter a Short Trade: ======================= Step 1. Always use Stoch RSI along with RSI to make a decision: Step 2. Use it on mid to high term time frame (4h and higher). Step 3. Make sure both RSI and Stoch RSI are in overbought zone. Step 4. Make sure the asset is rejected from a key resistance level and is not able to breach it. Step 5. Fearlessly enter the trade. What happens if Support or Resistance is broken in Step 3 above: ======================================================= That's where divergences come into play. What is a divergence? =================== Divergence is a technical analysis concept that occurs when the price of an asset and RSI/Stoch RSI indicator move in opposite directions, indicating a potential trend reversal. There are two types of divergences: bullish divergence and bearish divergence. Bullish divergence occurs when the price of an asset makes a new low while the RSI/Stoch RSI indicator makes a higher low. Remember from explanation provided in sections above, this suggests that even though the price is going lower there are more buying activities than selling and the assets are becoming stronger, and a potential trend reversal may be imminent. Bearish divergence, on the other hand, occurs when the price of an asset makes a new high while the RSI/Stoch RSI indicator makes a lower high. I have highlighted bullish divergence in chart with purple line. Shown in Red line is bullish Divergence in Stoch RSI, when RSI is not fully oversold, this can happen when a new support is being formed on the chart due to changes in fundamentals of the underlying asset or some news events. Bullish and Bearish Divergences are even more powerful signals for taking trades, but we must make sure price is holding a support or rejecting from a resistance before taking the trades, otherwise divergences can easily disappear. Why do traders fail to effectively use RSI? The primary reason is lack of experience in trading. Which leads to impatient behavior. Not knowing how to mark key support/resistance levels. No risk management skills. (Taking too much risk) Lack of trust in self when taking trades, (Keep stopping losses too tight which knocks them out of the trades). I have shown several instances where RSI generated long signals and all of them were successful, the only reason a trader would not be able to use RSI effectively is because of the above reasons.
SP:SPXEducation
by zakoraio
Trading With RSI Part 3: Trendlines, Channels, and PatternsThe Relative Strength Index (RSI) is a popular technical analysis indicator used to measure the strength of a security's price action. In addition to its overbought and oversold levels, the RSI can also be used to identify channels, trendlines, and chart patterns within the indicator itself. This can provide traders with additional insights into the security's price action and potential trading opportunities. Channels can be identified within the RSI by drawing horizontal lines at the overbought and oversold levels. When the RSI moves between these two levels, it is considered to be trading within a channel. Traders can use this information to set buy and sell signals when the RSI breaks out of the channel. For example, if the RSI breaks above the overbought level, it may indicate a potential uptrend, and traders may look to enter long positions. Trendlines can also be drawn within the RSI to identify potential trend reversals. These trendlines are drawn by connecting the highs or lows of the RSI over a period of time. When the RSI breaks above or below a trendline, it may indicate a potential trend reversal. Traders can use this information to set buy or sell signals based on the direction of the breakout. For example, if the RSI breaks above a downtrend line, it may indicate a potential uptrend, and traders may look to enter long positions. Chart patterns can also be identified within the RSI, such as triangles, head and shoulders patterns, and double bottoms or tops. These chart patterns can provide traders with additional insights into the security's price action and potential trading opportunities. For example, a double bottom pattern within the RSI may indicate a potential bullish reversal, and traders may look to enter long positions when the RSI breaks above the neckline of the pattern. In addition to channels, trendlines, and chart patterns, traders can also use the RSI in conjunction with other technical analysis indicators, such as moving averages and Fibonacci retracements. For example, traders may use a moving average crossover strategy with the RSI, where a long position is entered when the RSI crosses above the moving average and a short position is entered when the RSI crosses below the moving average. Traders should also consider the timeframe of their trades when using channels, trendlines, and chart patterns within the RSI. For example, a long-term trader may use a longer period RSI to identify channels and trendlines on a weekly or monthly chart, while a short-term trader may use a shorter period RSI to identify patterns on an intraday chart. It's important to note that while channels, trendlines, and chart patterns within the RSI can provide traders with additional insights into the security's price action, they are not always accurate. Traders should always use risk management techniques such as stop-loss orders to minimize their losses.
Education
by LeafAlgo
RSI in detail and how to effectively use itWhat is RSI? RSI stands for Relative Strength Index; The RSI measures the strength of asset's price action by comparing the magnitude of its recent gains to the magnitude of its recent losses. The RSI is calculated using the average gain and average loss over a specified period, typically 14. The formula for the RSI is: RSI = 100 - (100 / (1 + RS)) where RS = Average Gain / Average Loss. To calculate the average gain, add up the gains over the specified period and divide by the number of periods. Average Gain = Sum of Gains over N periods / N To calculate the average loss, add up the losses over the specified period and divide by the number of periods. Average Loss = Sum of Losses over N periods / N In simple terms : To determine the average gain/loss for the closing price of the asset for each period in the selected time. Calculate the difference between the closing price of the current period and the closing price of the previous period. If the current closing price is higher than the previous closing price, the difference is considered a gain. If the current closing price is lower than the previous closing price, the difference is considered a loss. Then calculate the average loss by summing up all the losses over the specified time period and dividing them by the number of periods in the timeframe. What does RSI tell you? To understand RSI we must understand the term Relative Strength which refers to the ratio of the average gain to the average loss over a specified period. It is used to compare the strength of the stock or asset price gains to its price losses over a certain timeperiod. For example, let's say we want to calculate the relative strength of a stock over the past 14 trading days. We first need to calculate the average gain and average loss over that period. Suppose the average gain is USD 2 per share, and the average loss is USD 1 per share. To calculate the Relative Strength (RS), we divide the average gain by the average loss: RS = Average Gain / Average Loss = USD2 /USD 1 = 2 RS value greater than 1 indicates that the stock has experienced more gains than losses over the specified time period. In this case, the RS value of 2 indicates that the stock has had twice as many gains as losses over the past 14 trading days. The higher value of relative strength indicates Buyers have been relatively stronger than sellers over a period of the time and vice-versa of the relative strength is below 1, which indicates sellers have been stronger compared to buyers over a period of time. When the RS remains above 1 over an extended period of time the RSI plot will keep rising, it can have a maximum value of 100. Any value higher than 70 for RSI is considered overbought and an RSI value below 30 is considered oversold. What is overbought and oversold? Overbought is a zone in time and the price of an asset that has risen in price rapidly and is now considered to be trading at a higher value than its true worth or fair value. When an asset becomes overbought, it means that there are more buyers in the market than sellers, causing the price to increase rapidly. This can occur when investors become overly optimistic about the asset's future prospects or when there is a surge in demand for the asset. However, an overbought asset is not necessarily a signal to sell. In fact, some traders and investors may view an overbought asset as an opportunity to profit from further price gains. Nevertheless, an overbought asset is often seen as a warning sign that the price may be due for a correction or pullback, as it may have become detached from its underlying fundamentals or economic conditions. Oversold conditions are simply the opposite of overbought. Why is RSI above 70 considered overbought? The reason a reading above 70 is considered overbought in RSI is because it is a widely used and accepted threshold. The value of 70 is not based on any specific mathematical or statistical calculation, but rather it is a commonly used level that has been found to be effective over time. Now because it's a commonly used threshold it becomes self-fulfilling prophecy, where everyone starts acting on it and start selling the asset or at least being to anticipate coming pull back, which leads to slowdown in buying and increased selling, which causes RSI to start going down in oversold territory and the cycle is repeats. How to effectively use RSI? For a long trade: Step 1: Use it on mid to high term timeframe ideally 4h and above. Step 2: Wait for the RSI to come to the oversold zone. Step 3: To make sure RSI oversold conditions are to be trusted for entering a trade, the Price must be a key support level and holding it. Step 4: If all above conditions are met, then fearlessly enter a trade. For a Short trade: Step 1: Use it on mid to high term timeframe ideally 4h and above. Step 2: Wait for the RSI to come to the overbought zone. Step 3: To make sure RSI overbought conditions are to be trusted for entering a trade, the Price must be a key resistance level and rejecting it. Step 4: If all above conditions are met, then fearlessly enter a trade. What happens if Price fails to hold Support or Breaches Resistance in step 3 above? That's where divergences come into play. What is a divergence? Divergence is a technical analysis concept that occurs when the price of an asset and its RSI indicator move in opposite directions, indicating a potential trend reversal. There are two types of RSI divergences: bullish divergence and bearish divergence. Bullish divergence occurs when the price of an asset makes a new low while the RSI indicator makes a higher low. Remember from explanation provided in sections above, this suggests that even though the price is going lower there are more buying activities than selling and the assets are becoming stronger, and a potential trend reversal may be imminent. Bearish divergence, on the other hand, occurs when the price of an asset makes a new high while the RSI indicator makes a lower high. I have highlighted bullish divergence in chart with purple line. Bullish and Bearish Divergences are even more powerful signals for taking trades, but we must make sure price is holding a support or rejecting from a resistance before taking the trades, otherwise divergences can easily disappear. Why do traders fail to effectively use RSI? The primary reason is lack of experience in trading. Which leads to impatient behavior. No risk management skills. (Taking too much risk) Lack of trust in self when taking trades, (Keep stopping losses too tight which knocks them out of the trades). I have show several instances where RSI generated long signals and all of them were successful , the only reason a trader would not be able to use RSI effectively is because of above reasons.
OANDA:SPX500USDEducation
by zakoraio
Trading With RSI Part 2: Failure SwingsRelative Strength Index (RSI) failure swings, also known as RSI divergences, are a popular trading signal used by technical analysts to identify potential trend reversals. A failure swing occurs when the RSI fails to confirm a new high or new low in the price, indicating that the trend may be weakening. There are two types of failure swings: bullish and bearish. A bullish failure swing occurs when the RSI forms a lower low, while the price forms a higher low. This is a sign that the price may be about to reverse higher. Conversely, a bearish failure swing occurs when the RSI forms a higher high, while the price forms a lower high. This is a sign that the price may be about to reverse lower. To confirm a failure swing, traders can use a trendline to connect the highs or lows on the RSI indicator. If the trendline is broken, it can indicate that the failure swing has been confirmed and that a trend reversal may be underway. Traders can use failure swings to set entry and exit points for their trades. For example, if a bullish failure swing is confirmed, a trader may enter a long position with a stop-loss order below the recent low. Conversely, if a bearish failure swing is confirmed, a trader may enter a short position with a stop-loss order above the recent high. It's important to note that while failure swings can be a useful trading signal, they are not always accurate. Traders should always use risk management techniques such as stop-loss orders to minimize their losses. Traders can also use the RSI to identify failure swings in different timeframes. For example, a trader may use a longer-term RSI to identify failure swings on a daily chart, while using a shorter-term RSI to identify failure swings on an intraday chart. In addition to failure swings, traders can also use the RSI to identify other trading signals such as divergences and trendline breaks. Divergences occur when the RSI and the price chart move in opposite directions, indicating a potential trend reversal. Trendline breaks occur when the RSI breaks a trendline, indicating a potential change in trend direction. In summary, RSI failure swings are a popular trading signal used by technical analysts to identify potential trend reversals. Traders can use bullish and bearish failure swings to set entry and exit points for their trades, and can confirm the signals using trendlines. However, traders should always use risk management techniques to minimize their losses, as failure swings are not always accurate.
MEducation
by LeafAlgo
Trading With RSI Part 1: Tops & Bottoms, Support & ResistanceRelative Strength Index (RSI) is a popular technical indicator used by traders to identify overbought and oversold market conditions. It oscillates between 0 and 100, with readings above 70 indicating an overbought market and readings below 30 indicating an oversold market. Trading using the tops and bottoms of RSI is a popular strategy that involves identifying key levels of resistance and support. In technical analysis, support and resistance are key concepts used to identify potential buying and selling opportunities. Support levels are areas where the price tends to find support as it falls, while resistance levels are areas where the price tends to find resistance as it rises. The Relative Strength Index (RSI) can be used to identify support and resistance levels by analyzing the overbought and oversold readings on the indicator. The first step in using RSI to trade is to identify the trend. A trader can do this by analyzing the price chart and looking for higher highs and higher lows in an uptrend or lower highs and lower lows in a downtrend. Once the trend has been identified, the trader can look for key levels of resistance and support on the RSI indicator. When the RSI is in overbought territory (above 70), it indicates that the market may be due for a correction. A trader can look for a bearish divergence between the RSI and the price chart to confirm this. This occurs when the RSI forms a lower high while the price chart forms a higher high. This is a signal that the upward momentum is weakening, and a reversal may be imminent. Conversely, when the RSI is in oversold territory (below 30), it indicates that the market may be due for a rebound. A trader can look for a bullish divergence between the RSI and the price chart to confirm this. This occurs when the RSI forms a higher low while the price chart forms a lower low. This is a signal that the downward momentum is weakening, and a reversal may be imminent. Traders can use the tops and bottoms of RSI to set entry and exit points for their trades. For example, a trader may enter a short position when the RSI reaches 70 and exit when it falls to 30. Conversely, a trader may enter a long position when the RSI reaches 30 and exit when it rises to 70. It's important to remember that no strategy is foolproof, and traders should always use risk management techniques such as stop-loss orders to minimize their losses. In addition to using the overbought and oversold readings and divergences, traders can also use the RSI to identify key levels of support and resistance by analyzing the chart patterns. For example, if the RSI forms a double top or double bottom, it may indicate a potential reversal. If the RSI forms a trendline, it can be used to identify potential support and resistance levels. In summary, trading using the tops and bottoms of RSI is a popular strategy for identifying key levels of resistance and support in the market. Traders can use these levels to set entry and exit points for their trades, and can confirm their signals by looking for divergences between the RSI and the price chart. As with any strategy, traders should always use risk management techniques to minimize their losses.
MEducation
by LeafAlgo
RSI vs. Stochastic OscillatorRecently, I was asked to write an article about the differences between two popular technical indicators, the Relative Strength Index (RSI) and the Stochastic Oscillator. As someone who has utilized both indicators in my trading journey, I was excited to share my insights and help others better understand these powerful tools. In this article, we will delve into the purposes, advantages, and disadvantages of the RSI and Stochastic Oscillator, as well as explore their effectiveness on different instruments and how they can be combined with other indicators for optimal trading results. Let's dive in! 1. Calculation method: a. RSI: The RSI is calculated using the average gain and average loss over a specified period (usually 14). The formula is RSI = 100 - (100 / (1 + (Average Gain / Average Loss))). The RSI ranges from 0 to 100, with 30 and 70 as common thresholds for oversold and overbought levels, respectively. b. Stochastic Oscillator: The Stochastic Oscillator compares the current closing price to the price range over a specified period (usually 14). It consists of two lines, %K and %D, with %K representing the raw Stochastic value and %D being a moving average of %K. The formula for %K is: %K = (Current Close - Lowest Low) / (Highest High - Lowest Low) x 100. The Stochastic Oscillator also ranges from 0 to 100, with 20 and 80 as common thresholds for oversold and overbought levels, respectively. 2. Sensitivity: a. RSI: The RSI is generally less sensitive to price fluctuations, which can result in fewer false signals. However, it may not react as quickly to price changes as the Stochastic Oscillator. b. Stochastic Oscillator: The Stochastic Oscillator is more sensitive to price fluctuations, which can provide earlier signals but also result in more false signals. Traders often use additional filtering techniques to reduce false signals, such as waiting for %D line crossovers or using other indicators for confirmation. 3. Performance in different market conditions: a. RSI: The RSI works well in trending markets, as it can help identify potential trend reversals. However, it may produce false signals in range-bound markets or during strong trends. b. Stochastic Oscillator: The Stochastic Oscillator performs well in both trending and range-bound markets, as it considers the price range in its calculation. This makes it more adaptable to different market conditions, although it may require additional confirmation from other indicators due to its sensitivity. 4. Application in trading strategies: a. RSI: Traders often use the RSI as a standalone indicator or in combination with other indicators such as moving averages, Bollinger Bands, or MACD. The RSI can also be used to spot divergence, where the price makes new highs or lows, but the RSI fails to confirm them, signaling a potential trend reversal. b. Stochastic Oscillator: The Stochastic Oscillator is often used with other indicators such as moving averages, MACD, or ADX to provide confirmation of trade signals. In addition, it can be used to spot divergence, similar to the RSI, as well as identify potential trend reversals through crossovers of the %K and %D lines. In summary, while both the RSI and Stochastic Oscillator are used to identify overbought and oversold conditions, they differ in terms of calculation, sensitivity, performance in different market conditions, and application in trading strategies. Understanding these differences can help traders choose the most suitable indicator for their specific trading style and market conditions.
NASDAQ:AAPLEducation
by Julien_Eche
Understanding the Parabolic Stop and Reverse (SAR) IndicatorThe Parabolic Stop and Reverse (PSAR) indicator is a technical analysis tool that helps traders identify potential reversals in price movements. It is represented by a series of dots that appear above or below the price chart. When the dots are below the price, it indicates a bullish trend potential, and when the dots are above the price, it signals a bearish trend potential. The indicator is calculated based on the price and time, and it adjusts its position as the price moves. When the price crosses the SAR, it signals a potential reversal. The indicator should be used in combination with other technical indicators to confirm trading signals. One strategy for entries using the PSAR indicator is using it with another technical indicator, such as the Relative Strength Index (RSI). When using this strategy, traders can look for oversold conditions on the RSI and then wait for a buy signal from the PSAR indicator. This can help identify potential entry points for long positions. On the other hand, traders can look for overbought conditions on the RSI and then wait for a sell signal from the PSAR to identify potential entry points for short positions. However, it's important to keep in mind that no trading strategy is foolproof, and risk management should always be a top priority. The PSAR indicator can also be used as a stop loss by traders. One way is to use it as a trailing stop loss, whereby the stop loss price is adjusted upwards as the price of the asset increases. Price crossing over the PSAR against the trade direction would signal the trader to close their position. This helps to lock in profits or limit potential losses. This can help to minimize losses and protect capital. Overall, the SAR indicator can be a useful tool for traders when used in combination with other technical indicators and risk management strategies.
Education
by LeafAlgo
Cutting Through Market Noise With Renko ChartsRenko charts are a non-traditional type of chart used in technical analysis to represent price movements. Unlike other charts, Renko charts are based solely on price movements and do not consider time. A Renko chart consists of bricks or blocks that represent a fixed price movement. A new brick is only added to the chart when the price movement reaches the fixed value. For example, if the brick value is 1, a new brick will be added to the chart if the price move by HKEX:1 or more. If the price moves less than HKEX:1 , no brick will be added. This allows traders to focus on the price trend and filter out the noise created by small price movements. Renko charts are primarily used in technical analysis to help traders identify trends and filter out market noise. By plotting price movements based solely on price action and not time, Renko charts can help traders identify key support and resistance levels, and potential entry and exit points. Traders can adjust the size of the bricks or blocks on the chart to reflect the desired price movement, allowing them to customize the chart to suit their trading style. Additionally, Renko charts can be used in conjunction with other technical indicators to confirm or refute trading signals. When combined with other technical indicators like RSI and moving averages, traders can gain a better perspective on the underlying trend and potential entry and exit points. For example, Renko charts can be effectively used with the Relative Strength Index (RSI) and two moving averages to improve analysis, identify profitable trades, and manage risk. RSI is a momentum oscillator that measures the speed and change of price movements and can be used to identify overbought or oversold conditions in the market. The moving averages can help identify the trend direction and potential support and resistance levels. When using Renko charts with RSI and moving averages, traders can look for buy or sell signals at the intersection of the moving averages and when the RSI reaches overbought or oversold levels. For example, a buy signal can be generated when the price crosses above the moving averages and the RSI is oversold. Conversely, a sell signal can be generated when the price crosses below the moving averages and the RSI is overbought. This combination of indicators can help traders make more informed trading decisions and improve their overall profitability. By using Renko charts with RSI and moving averages, traders can improve their analysis, identify profitable trades, and manage risk more effectively. Overall, Renko charts are a popular tool among technical traders for their ability to simplify price action and highlight important trend information.
Education
by LeafAlgo
Learn 7 Classic Free Indicators For Technical Traders ◻️MACD(Moving Average Convergence/Divergence) Traders use MACD to identify changes in the direction or strength of the asset’s price trend. MACD can seem complicated at first glance, because it relies on additional statistical concepts such as the exponential moving average (EMA). But fundamentally, MACD helps traders detect when the recent momentum in an asset’s price may signal a change in its underlying trend. This can help traders decide when to enter, add to, or exit a position.MACD is a lagging indicator. After all, all the data used in MACD is based on the historical price action of the asset. Because it is based on historical data, it must necessarily lag the price. However, some traders use MACD histograms to predict when a change in trend will occur. ◻️VWAP(Volume-Weighted Average Price) The volume-weighted average price (VWAP) is a measurement that shows the average price of a security, adjusted for its volume. It is calculated during a specific trading session by taking the total dollar value of trading in the security and dividing it by the volume of trades. The formula for calculating VWAP is cumulative typical price x volume divided by cumulative volume. VWAP gives traders a smoothed-out indication of a security’s price (adjusted for volume) over time. It is used by institutional traders to ensure that their trades do not move the price of the security they are trying to buy or sell too extremely. ◻️EMA(Exponential Moving Average) An exponential moving average (EMA) is a type of moving average (MA) that places a greater weight and significance on the most recent data points. The exponential moving average is also referred to as the exponentially weighted moving average. An exponentially weighted moving average reacts more significantly to recent price changes than a simple moving average simple moving average (SMA), which applies an equal weight to all observations in the period. ◻️THE FOUR TYPES OF EMA: ▪️9-EMA is use for short term trading ▪️21-EMA is used for day trading ▪️50-EMA is used for analysis ▪️200-EMA is used for long term view ◻️RSI(Relative Strength Index) The relative strength index (RSI) is a momentum indicator used in technical analysis. RSI measures the speed and magnitude of a security's recent price changes to evaluate overvalued or undervalued conditions in the price of that security. The RSI is displayed as an oscillator (a line graph) on a scale of zero to 100.Generally, when the RSI indicator crosses 30 on the RSI chart, it is a bullish sign and when it crosses 70, it is a bearish sign. Put another way, one can interpret that RSI values of 70 or above indicate that a security is becoming overbought or overvalued. It may be primed for a trend reversal or corrective price pullback. An RSI reading of 30 or below indicates an oversold or undervalued condition. Overbought refers to a security that trades at a price level above its true (or intrinsic) value. That means that it's priced above where it should be, according to practitioners of either technical analysis or fundamental analysis. Traders who see indications that a security is overbought may expect a price correction or trend reversal. Therefore, they may sell the security. Thanks for reading bro, you are the best☺️ Like, comment and subscribe to boost your trading! Hey traders, let me know what subject do you want to dive in in the next post?
OANDA:XAUUSDEducation
by TopTradingSignals
8
Lazyluchi Talks Relative Strength IndexNow I've been TRADING trend continuation for 180 days now and I had something come to me on WEDNESDAY. The market being in an over bought or sold situation can affect our TRADES. I'll be making use of the RSI to aid my setups (that is: where my SLs and TPs even entries will be). Here are rules that can guide you after watching the video. RULES OF THE RSI 1. Above 50% is BULLISH Below is BEARISH 2. When taking TRADES be sure to know where the 50% is. 3. Don't TRADE counter 4. Know thy 20% and 80% 5. Always draw three lines (80,50, and 20) Then know the dominating structure, and take that TRADE 6. In an UPTREND, know thy 20 and 50 (wait for it to break above the 50 to BUY) 7. In a DOWNTREND, know they 80 and 50 wait for it to break below to SELL) 8. STRATEGY: trend following with breakouts 9. The RSI helps to avoid overbought and sold situations Some abbreviations I'll be using would all make sense when I start. I'll be labelling the 80%,50% and 20% levels. 80 and 50 for the BEARS, 20 and 50 for the BULLS. The DIVERGENCE and STRUCTURES will still be in the works. Stay tuned for them RSI trades. Enjoy!
OANDA:NAS100USDEducation
0
by lazyluchi
1
How to Trade With Relative Strength Index (RSI) Indicator Hey traders, Relative strength index is a classic technical indicator. It is frequently applied to spot a market reversal. RSI divergence is considered to be a quite reliable signal of a coming trend violation and change. Though newbie traders think that the application of the divergence is quite complicated, in practice, you can easily identify it with the following tips: 💠First of all, let's start with the settings. For the input, we will take 7/close. For the levels, we will take 80/20. Then about the preconditions: 1️⃣ Firstly, the market must trade in a trend ( bullish or bearish ) with a sequence of lower lows / lower highs ( bearish trend ) or higher highs / higher lows ( bullish trend ). 2️⃣ Secondly, RSI must reach the overbought/oversold condition (80/20 levels) with one of the higher highs/higher lows. 3️⃣ Thirdly, with a consequent market higher high / lower low, RSI must show the lower high / higher low instead. ➡️ Once all these conditions are met, you spotted RSI Divergence. A strong counter-trend movement will be expected. Also, I should say something about a time frame selection. Personally, I prefer to apply it on a daily time frame, however, I know that scalpers apply divergence on intraday time frames as well. ❗️Remember, that it is preferable to trade the divergence in a combination with some price action pattern or some other reversal signal. Let me know, traders, what do you want to learn in the next educational post?
Education
by VasilyTrader
10
Relative Strength Index (RSI) | Technical Indicator You Must Kno ✳️What is the RSI Indicator What is the RSI Indicator? The relative strength index is a market indicator that signals when the asset is over-bought or over-sold. This is a momentum-following indicator that measures how fast the price is moving and changing. The RSI uses different types of averages, but its primary purpose is to show whether a trend is strong or weak within a series of prices. In general, a strong trend is indicated by values close to 100 while a bearish trend is often indicated by a value near 0. ✳️RSI Indicator Settings The RSI has the standard setting. When you activate the indicator in any platform the defualt setting are 3 values. They are 6, 14 and 24. These are averages. The 30 and 70 value lines are calculated based on the lower and upper values and the middle lines is the oscillar which is a 14 period average. When the 14 period oscillator is above the 24 period is overbought and when the 14 period is below the 6 period is oversold. ✳️Opening Positions on RSI Signals The main signal the RSI oscillator generates allows defining overbought and oversold price ranges. Although it is frequently used as a filter in systems where the main indicator is a trend one, it might be possible to try trading using RSI signals only. When indicator’s line goes above the level 70 or below the level 30, it signals that market is overbought/oversold, and it is necessary to wait for the next signal confirming a trend reversal. ✳️RSI Trendlines Contrary to popular belief, the Relative Strength Index (RSI) is a leading indicator. This quality can be observed by using trendlines on the RSI chart and trading its break. When the RSI is rising, an upward trendline is drawn by connecting two or more lows and projecting the line into the future. Similarly, when the RSI is falling, a downward trendline is drawn by connecting two or more highs and projecting the line into the future. A break of an RSI trendline precedes an actual price reversal or continuation in the market. For instance, if the asset price breaks above a downward trendline, it is a signal that the price is about to edge upwards, either as a continuation of an uptrend or as a reversal of an existing downtrend in the market. ✳️RSI and Chart Patterns The Relative Strength Index is one of the best technical indicators to complement raw price action signals delivered by candlestick patterns or line chart patterns. For instance, when a bullish candlestick, such as a pin bar, or a price chart pattern, such as a double bottom, occurs in a downtrend, a buy position can be opened when the RSI displays a reading of below 30 to imply oversold conditions. ✳️RSI Divergence The Relative Strength Index also delivers divergence signals that could be a viable trading opportunity. A divergence occurs when the asset price and RSI do not move in the same direction. A positive (bullish) divergence occurs when the price is drifting lower, but the RSI is edging higher. This is a signal that the price may be heading towards a bottom and an upward reversal is about to happen. On the other hand, a negative (bearish) divergence occurs when the price is drifting higher, but the RSI is going lower. This is a signal that price may be heading towards a top and a downward reversal is about to happen. ✳️RSI and RVI Both the RSI and the RVI(Relative Vigor Index) are oscillators, but their different qualities can help traders to pick out high-quality RSI trading opportunities in the market. Whereas the RSI focuses on price extremes (high and low), the computation of RVI seeks to relate closing prices to open prices. This means that the RVI has both positive and negative numbers, with the centreline being 0. The RVI gives information on the strength of price movement, with positive values indicating increasing momentum, whereas negative values denote decreasing momentum. The RSI is the best indicator to complement or qualify the signals delivered by the RVI, especially in trending markets. For instance, if the market is in an uptrend and the RVI delivers a bearish divergence signal (prices go higher whereas RVI goes lower). In this case, a retracement or a trend reversal will be confirmed if the RSI reading is above 70, which implies overbought trading conditions. ✳️Here is the list, though now at all exhausting of the ways to use RSI in your trading. I will add that I use it myself, even though you don’t see it on my charts for aesthetic reasons. Like, comment and subscribe to boost your trading! Hey traders, let me know what subject do you want to dive in in the next post?
OANDA:XAUUSDEducation
by TopTradingSignals
21
What if RSI and EMA produce similar results?█ What if RSI and EMA produce similar results? In the world of trading , technical indicators play a crucial role in making informed decisions. One such indicator is the Relative Strength Index (RSI), and another is the Exponential Moving Average (EMA). Both of these indicators have been widely used by traders to analyze market trends and make predictions about future price movements. However, it has long been a topic of debate among traders as to which of these two indicators is better. █ What if RSI and EMA produce similar results? We wanted to determine the relationship* between the RSI and the EMA, specifically examining the hypothesis that when the RSI crosses above the value of 50, it returns similar results as when the price crosses above a certain length of an EMA. Similarly, when the RSI crosses below the value of 50, it returns similar results as when the price crosses below a certain length of an EMA. Our goal was to determine whether the RSI and EMA were related* in any way. █ Our Simulations We designed a series of simulations to compare the accuracy of the RSI and EMA in predicting market trends. The simulations were designed to test the assumption that the RSI and EMA were equal* in terms of accuracy in predicting price movements. █ Our definition of "predict price movements." If RSI crosses above the value of 50, there is a higher likelihood of a bullish move. If RSI crosses below the value of 50, there is a higher likelihood of a bearish move. █ Our assumption for this study When the RSI crosses above the value 50, it is equal* to when the price crosses above a certain EMA length, and when the RSI crosses below the value 50, it is equal* to when the price crosses below a certain EMA length. This assumption had never been tested until our team decided to put it to the test. █ Results To our surprise, we found a strong relationship* between the RSI and the EMA. We discovered that when the RSI crosses above the value of 50, it returns similar* results as when the price crosses above a certain length of an EMA. Conversely, when the RSI crosses below the value of 50, it returns similar* results as when the price crosses below a certain length of an EMA. The assumption was accurate and that the correlation* between the RSI and EMA was 1, indicating that the results of both indicators were highly consistent. This means that there is an EMA length that performs exactly* the same as the RSI in terms of predicting market trends. Validity Checks We stored crossover values for both RSI and EMA in 2 different arrays, and by running the following tests, we could conclude our findings. Correlation Check The correlation between RSI and EMA provides insights into the relationship between the two arrays. Array Size Checks The "diff" tells us how different the sizes of the two arrays are. If the size of both arrays is the same, "diff" would be 0, indicating that the two arrays have the same number of elements. Percentage Check The percentage difference between RSI and EMA is a measure of the similarity between the two arrays. A percentage difference of 0 indicates that the two arrays are the same size, while a higher percentage difference indicates that the two arrays are different in size. Ratio Check The ratio represents the relationship between the two arrays, in terms of the sum of their elements. If the ratio is equal to 1, it means that the sum of the elements in the two arrays is the same. The higher the ratio, the more the elements in RSIa are relative to the elements in EMA. The lower the ratio, the less the elements in RSI are relative to the elements in EMA. █ What is the exact relationship between the two indicators? After further testing and analysis, we discovered that the length of the EMA that returns results similar* to the RSI is given by the formula: "2* RSI Period - 1". This formula provides traders with a clear, scientific method for determining the length of an EMA that will return results similar* to the RSI. █ What does it mean for Traders? The study has provided valuable insights into the accuracy of RSI and EMA. It has shown that both indicators are approximately equal in terms of accuracy and that traders can use either one without having to sacrifice accuracy. This means that traders can choose RSI or EMA, depending on their personal preferences and trading style. █ Conclusion Our study has shown that when the RSI crosses above the value of 50, it returns similar* results as when the price crosses above a certain length of an EMA. Similarly, when the RSI crosses below the value of 50, it returns similar* results as when the price crosses below a certain length of an EMA. Furthermore, we have discovered the exact* relationship between the RSI and EMA, given by the formula "2 * RSI Period - 1". These findings provide valuable insights for traders and demonstrate the potential for data-driven approaches in trading. We showed that the RSI and EMA were highly correlated*, indicating that the results of both indicators were highly consistent*. This knowledge can save traders time and effort, as they can use one indicator to validate the results of the other. ----------------- Disclaimer *Our results are approximate. We encourage you to test the assumption yourself. We do not guarantee that you will get the same results. This is an educational study for entertainment purposes only. The findings/results may or may not be true. The information contained in my Scripts/Indicators/Ideas/Algos/Systems does not constitute financial advice or a solicitation to buy or sell any securities of any type. I will not accept liability for any loss or damage, including without limitation any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, backtest, or individual's trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on an evaluation of their financial circumstances, investment objectives, risk tolerance, and liquidity needs. My Scripts/Indicators/Ideas/Algos/Systems are only for educational purposes!
OANDA:DE30EUREducation
by Zeiierman
20
🔥TOP FIVE INDICATORS FOR BEGINNERS🔥 📊ON-BALANCE VOLUME(OVB) IS: On-balance volume (OBV) is a technical trading momentum indicator that uses volume flow to predict changes in the price.The theory behind OBV is based on the distinction between smart money – namely, institutional investors – and less sophisticated retail investors. As mutual funds and pension funds begin to buy into an issue that retail investors are selling, volume may increase even as the price remains relatively level. Eventually, volume drives the price upward. At that point, larger investors begin to sell, and smaller investors begin buying. 📊MOVING AVERAGE IS: A moving average helps cut down the amount of noise on a price chart. Look at the direction of the moving average to get a basic idea of which way the price is moving. If it is angled up, the price is moving up (or was recently) overall; angled down, and the price is moving down overall; moving sideways, and the price is likely in a range.A moving average can also act as support or resistance 📊RELATIVE STRENGTH INDEX IS: The relative strength index (RSI) is a momentum indicator used in technical analysis. RSI measures the speed and magnitude of the pair’s recent price changes to evaluate overvalued or undervalued conditions in the price of that pair. It can also indicate pairs that may be primed for a trend reversal or corrective pullback in price. It can signal when to buy and sell. The RSI is displayed as an oscillator (a line graph) on a scale of zero to 100Traditionally, an RSI reading of 70 or above indicates an overbought situation. A reading of 30 or below indicates an oversold condition. 📊BOLLINGER BANDS ARE: Bollinger Bands are a form of technical analysis that traders use to plot trend lines that are two standard deviations away from the simple moving average price of a security. The goal is to help a trader know when to enter or exit a position by identifying when an asset has been overbought or oversold. Bollinger Bands were designed by John Bollinger. Bollinger Bands help by signaling changes in volatility. For generally steady ranges of a security, such as many currency pairs, Bollinger Bands act as relatively clear signals for buying and selling 📊MOVING AVERAGE CONVERGENCE DIVERGENCE(MACD) IS: The concept behind the MACD is fairly straightforward. Essentially, it calculates the difference between an instrument's 26-day and 12-day exponential moving averages (EMA). In calculating their values, both moving averages use the closing prices of whatever period is measured. On the MACD chart, a nine-period EMA of the MACD itself is also plotted. This line is called the signal line, which acts as a trigger for buy and sell decisions. The MACD is considered the "faster" line because the points plotted move more than the signal line, which is regarded as the "slower" line. I Hope you guys learned something new today✅ Wish you all Best Of Luck👍 😇And may the odds be always in your favor😇 Do you like this post? Do you want more articles like that?
Education
by ProSignalsFx
11
Educational (divergence + volume)Hi guys, in order to spot a divergence you should be careful which timeframe you're looking at. for example in the left picture, the daily timeframe is showing higher highs in price (at each candle) and lower highs in RSI (at each candle). but note that these are not highs and lows and as long as you can't find signs of accumulation and distribution in highs and lows (as long as there's no valid consolidation) you can't name them as highs and lows. so there's no divergence. but in the lower time frame (what is shown is 4h) you can see it more clearer that for every candle in the daily time frame, you have a specific trend in the 4H timeframe. so you can name them as highs and lows and yes, there is a divergence now. also, keep in mind that in the lower timeframe. every time you're making a new high in rsi, you should expect it to be more volatile and be more sensitive in a way that in the next new rsi high, you have less time spent in the overbought area. The next part is about the volume profile. you have less resistance in front of the price movement where there is less volume traded in the past. BUT NOT ALWAYS! less trades made in the past in an area means two things: 1- you can expect the price to move faster and sharper and take less time in that area 2- if the price wants to make a low or high or a pattern, it's less predictable and there's more chance of wrong analysis and fake patterns. Feel free to leave any comments and ask questions!
Education
by Finnovin
Why you should only think about charts when looking at chartsHello? Traders, welcome. If you "Follow", you can always get new information quickly. Please also click "Boost". Have a nice day. ------------------------------------- When looking at the investment market, the first thing to do is to analyze the chart, and I wanted to say that the most important thing is how to create a trading strategy that suits your investment style with that chart. ------------------------------------------------- Most people try to predict the movement of the investment market by looking at the announcement of various economic indicators and the contents of global issues (war, corona, etc.). A big issue must be something that can cause great volatility in the investment market, but it is also clear that when such an issue accumulates, it can no longer create volatility. So, you should be careful that trying to predict the movement of the investment market with such issues can make a wrong prediction. Sudden big issues For example, in the case of a global shock due to an issue such as the 9/11 terrorist attack, it may cause great volatility without time to respond. Other than these issues, most of the chart's price movement will react first. In order to see this pre-reflection in advance, you need to look at the chart without reflecting factors that can change your psychological state, such as the announcement of various economic indicators or global issues. I don't think this kind of work is a big deal, but it is a very important factor that occupies a fairly important part of investing. We need to think a lot about how to figure out the trend only with the movement of the chart, away from the announcement of various economic indicators and thoughts about global issues. As it rises above the indicator called Low, which was created on June 19, 2022, we can see that it is splitting the flow of the chart in half. A change in the -100 indicator has always completed a low. Although it is currently showing a different look than before, it will form a low as long as the -100 indicator is created. The +100 indicator is an indicator that starts generating when a high is formed. Therefore, a rise above the +100 indicator means that the uptrend to break the high is likely. Therefore, in order to show a full-fledged uptrend from the current price position, it must rise above 38K. The high point has been holding for a long time now. However, the low point has not yet formed a clear point due to the change of the -100 indicator. However, as the -100 point is moved near the current price range, the possibility of forming a low is very high. This shows that we are facing a new trend. Keeping the price above 17941.69 is most important from a short-term perspective to create this new trend. The next most important thing is to keep the price above 20552.75. Then, it completes the appearance of a trough (a phenomenon in which the price drops more before making a bigger rise) before showing an uptrend. The StochRSI indicator is showing a fairly rapid decline. We will verify what we said above by looking at where the Stoch RSI indicator finds support and resistance when it turns upside down. This change in support and resistance points can tell you which direction the movement of the current chart is about to head. You may think my explanation is inconclusive, but the conclusion has already been drawn. We live in a flood of information. It is quite difficult to infer an objective conclusion by synthesizing such a large amount of information. Therefore, it is necessary to objectify all information using objectified tools and indicators. Many celebrities' chart analysis methods and trading methods are introduced on the Internet or in books. In order to make the contents of these people my own, it can only be acquired through numerous transactions and numerous experiences. Over time, trends change and all patterns change and evolve. In order to read the chart in line with these changes, I think it is better to use a simpler and faster way to analyze. This is because you can keep up with the ever-changing trends. It is more important to make your own mental state stable due to volatility by investing more time in the trading strategy than the time used for analysis. What do you guys think? -------------------------------------------------- ------------------------------------------- ** All descriptions are for reference only and do not guarantee profit or loss in investment. ** If you share this chart, you can use the indicators normally. ** The MRHAB-T indicator includes indicators that indicate points of support and resistance. ** Check the formulas for the MS-Signal, HA-Low, and HA-High indicators at (). ** SR_R_C indicators are displayed as StochRSI (line), RSI (columns), and CCI (bgcolor). ** The CCI indicator is displayed in the overbought section (CCI > +100) and oversold section (CCI < -100). (Short-term Stop Loss can be said to be a point where profit or loss can be preserved or additional entry can be made by split trading. This is a short-term investment perspective.) ---------------------------------
INDEX:BTCUSDEducation
by readCrypto
10
The Momentum of MomentumUtilizing oscillators to confirm trend continuations and reversals is a momentum traders’ bread and butter. You most likely have the RSI or MACD saved to your favorites, but have you ever considered analyzing the momentum of an oscillator itself? You would be surprised at what insights the momentum of an oscillator can show you. In this article, we will look at how the momentum of an oscillator can help parse out false signals and give you an edge in your decision-making. Below is the BTC/USDT 15-minute chart, the True Momentum Oscillator (TMO), and a 50-day EMA. We have highlighted what appears to be a short-term double top, with a weakening oscillator momentum that failed to reach or exceed the previous level. The price consistently bounced around the 50-period EMA and had cleanly broken through with a retrace imminent. Whether you aim to trade the break of the EMA or the retrace and rejection, this appears to be set up for a potential short trade. Now we take the momentum of the TMO and its signal line and plot those lines (purple and white). Another layer to this story suddenly unfolds. We can now see from the new momentum lines that this move to the downside weakened almost as soon as it began. There is now a clear divergence between the oscillator and its momentum lines. What seemed to be a solid short setup now has upside potential. We must now question our next move. A few bars later, the price broke above the 50-EMA and quickly touched it one last time and is followed by a robust move to the upside. In the current market, it is easy to lean short. Eager traders might have taken the short only to be burned by the strong move against the desired trade. Adding the layer of the momentum of our oscillator helped us read between the noise. We had a better idea of where the next chapter could take us, or at the very least, we could avoid a risky trade. This is just one example of how the momentum of oscillators can be another valuable tool in our technical analysis tool belt. This momentum offers a unique visual aid for making quick decisions when trading.
Education
by LeafAlgo
Heiken Ashi Algo and the Mass Effect Moving Average: Almost HereWell ladies and gentlemen I think I have created a monster and I'm really happy to call it the heiken Ashi algo and the Mass Effect moving average combination. Don't worry I have not been leaving you hanging. It's just been very busy and I want to make sure that this thing works beautifully for you. So what is the heiken Ashi algo oscillator? it is an oscillator much like the original heikin-ashi RSI with a ton more features. As you know a little while ago I came out with the CoffeeShop Crypto HARSI, Update to the original HARSI. And as development on that oscillator continued I had to change the name to the algo because now the oscillator actually speaks to you while trading is taking place. But as you know you should never use a single indicator by itself to enter and exit trades and understand what's happening on your chart. you should always use something as a secondary Confluence or even a tertiary confluence. Because the more confluences you have the better right? So with that I continued development on the Mass Effect moving average and you can use them beautifully in combination. In this video I don't want to get into the technical Aspect of all the details on how the oscillator and the moving average work but I do want to show you the parts that have been developed and what they mean. feel free to leave your suggestions below and I will make adjustments if needed. I'm probably going to need one more week before fully releasing both of these together and until then I'd love to communicate with you on anything to make it more fluid. With that let's take a look at my chart and see the breakdown. The Heiken Ashi Algo Double Stochastic - Uses a mean regression calculation for pullback notifications but it also adds support to knowing when a trend is in full swing. This happens when you see both stochastic ribbons touch each other while they are the same color Green touching green is a move to the upside. It matters most When it's above or below the 50 level. the other thing you can see here is when they touch and when they touch again as the same color is a clear sign of a Divergence. IBXL - Inside Bar Calculation. This will be moved to the Mass Effect MA as well Resistance / Support / are dynamic levels which change over time Bull Key level - Are Significant price or Price action levels which almost never change over longer periods of time. when I get a key level alert I Market on my chart with a thick line and I lock it in place. These are the major areas of supply and demand Zone on your chart and you want to watch them closely when price gets near these levels Pull Back - Helps you draw out targets to your trend lines. Now let's talk real quick about the mass effect moving average and what it will include. this uses a mean regression strategy so that you can swing trade- And get your confluences of when prices going to move up or down so doesn't matter if you are in an uptrend or a downtrend . Stop lost Trend color - Is this really a stop loss line which will follow your price action and depending on its color will tell you if you should be using a stop loss of a guy or a stop loss of a sell. Obviously if it's red you should be selling and if it's green you should be buying. do not use it incorrectly. Just because it changes to Green doesn't mean you by and just because it changes to Red doesn't mean you cell. It only means you are in an area where you should be buying or selling. The EMA's - it includes four different exponential moving averages which you can set appropriately to your style. The VWAP - Included in this is a VWAP Moving average. Even though the VWAP is used as a moving average against the RSI in the oscillator below, I included the VWAP in the Mass Effect moving average because once you switch to a daily chart The VWAP in the oscillator disappears but you can still have it on your chart in the Mass Effect moving average. So switching to a daily chart you will still be able to see your VWAP. The V-CROSS - This indication shows up so that you can see when the V WAP is crossing over your price level. This helps you know from point to point if you are above or below a support or resistance level and where is your price in relation to your VWAP. This will also help you notice when price is overbought or oversold. Fractals - Show you pivot points in market structure. I use them to find exit points for trades when there is no immediate swing low or high to be seen. Usually i look further left and use one of these points to exit. But they have even more application which I'll get into in another video. The Trend Ribbon - Is a bullish and or bearish colored ribbon to show you the trend that works in Confluence with your stop loss line which also changes from red to Green. when they are both the same color you are in a trend in that direction of up or down. The good thing about the trend ribbon is it's always seeking the same level as the VWAP and when it finally catches up to it that's when the trend usually goes flat and then reverses.
Education
by CoffeeshopCrypto
29