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Relative Strength Index (RSI)

Quick tip: Add a signal line to your indicator, no coding!Want to make your RSI smoother and easier to track and follow its signals? You can add a moving average signal line to it. Let me share how to do this quickly without coding. This is a very neat and easy trick you can do - thanks to TradingView :) - using the feature "Indicator-on-indicator" Quick Steps: add RSI to your chart if its not already there, hover on the RSI indicator label, click the "..." ellipsis, choose the option to "Add Indicator/Strategy on RSI" - it will be the second command from the top on the shortcut menu, and choose your favorite moving average from the indicator library - adjust the MA settings to your preference - and you're done! No coding needed. maybe, like me, you are experimenting with my recently-published RSS_WMA - aka the Lazy Line 😎 - will add a link below - you can add it to your RSI like i did in the example chart above. The RSI with the new signal line looks a lot easier to use and trade on, right? The MA Line not only makes RSI more visually appealing, but also makes it easy to follow the RSI movements into OB/OS zones, or crossing the middle line. for "visual folks" like me, this is an improvement that makes a big difference in my trading. * You can use this same trick with any other indicator / combo of indicators - that would make sense to combine with this approach - in your charts. Get creative. * Indicator-on-Indicator is an awesome feature - just wanted to share a quick reminder of this trick, as i also forget about it most of the time. * for more details, there's a comprehensive guide to this feature in TradingView's Help Center www.tradingview.com trade safely and good luck!
NASDAQ:QQQEducation
by RedKTrader
15
EURUSD Recent Price Action| Identifying a break of a key levelEvening Traders, In this educational post I will analyse how a price action level breaks and puts in a retest. Assessing the chart, we have a clear Resistance on the left that was breached with an impulse break. The level was retested and confirmed as support with an S/R Flip Retest. This shows strength in the price action; however volume was not evident, leading to a bearish expansion back below the level. EURUSD eventually retraced and broke the resistance again with a strong impulse and is currently trading above the level. For this breakout to be valid on the retest, we need to see an increase in the volume profile. This will signify a true break as incoming volume will lead to an expansion. I hope this educational peace helped, Thank you for following my work!
Education
by The_Alchemist_Trader_
2
📉 Your Ultimate Guide to RSI Divergence (Settings & Tips) 📈 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 tip s: 💠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. ❤️Please, support this idea with a like and comment!❤️
Education
by VasilyTrader
30
📉 Your Ultimate Guide to RSI Divergence (Settings & Tips) 📈 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 tip s: 💠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. ❤️Please, support this idea with a like and comment!❤️
Education
by VasilyTrader
17
How to use RSI and MACD In trading?Hi every one *Definition of RSI: This indicator Is momentum base indicator. The biggest difference with momentum is that there are two line which indicate that: Is the price in the oversold or overbought area or not? We can easily compare the tops and bottoms of every instrument that we like! There is not much difference between RSI and Stochastic oscillator only that there is one line in RSI! Remember every Indicators shows the future of the market! **Full explanation of MACD: Moving average convergence divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of a security’s price. The MACD is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA. The result of that calculation is the MACD line. A nine-day EMA of the MACD called the "signal line," is then plotted on top of the MACD line, which can function as a trigger for buy and sell signals. you may buy the security when the MACD crosses above its signal line and sell—or short—the security when the MACD crosses below the signal line. Moving average convergence divergence (MACD) indicators can be interpreted in several ways, but the more common methods are crossovers, divergences, and rapid rises/falls. Moving average convergence divergence (MACD) is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA. MACD triggers technical signals when it crosses above (to buy) or below (to sell) its signal line. The speed of crossovers is also taken as a signal of a market is overbought or oversold. MACD helps investors understand whether the bullish or bearish movement in the price is strengthening or weakening. The MACD has a positive value (shown as the blue line) whenever the 12-period EMA (indicated by the red line) is above the 26-period EMA (the blue line) and a negative value when the 12-period EMA is below the 26-period EMA. The more distant the MACD is above or below its baseline indicates that the distance between the two EMAs is growing. The MACD has a positive value (shown as the blue line) whenever the 12-period EMA (indicated by the red line) is above the 26-period EMA (the blue line ) and a negative value when the 12-period EMA is below the 26-period EMA. The more distant the MACD is above or below its baseline indicates that the distance between the two EMAs is growing. MACD is often displayed with a histogram which graphs the distance between the MACD and its signal line. If the MACD is above the signal line, the histogram will be above the MACD’s baseline. If the MACD is below its signal line, the histogram will be below the MACD’s baseline. Traders use the MACD’s histogram to identify when bullish or bearish momentum is high. ***RSI VS MACD: The relative strength indicator (RSI) aims to signal whether a market is considered to be overbought or oversold in relation to recent price levels. The RSI is an oscillator that calculates average price gains and losses over a given period of time. The default time period is 14 periods with values bounded from 0 to 100. MACD measures the relationship between two EMAs, while the RSI measures price change in relation to recent price highs and lows. These two indicators are often used together to provide analysts a more complete technical picture of a market. These indicators both measure momentum in a market, but, because they measure different factors, they sometimes give contrary indications. For example, the RSI may show a reading above 70 for a sustained period of time, indicating a market is overextended to the buy side in relation to recent prices, while the MACD indicates the market is still increasing in buying momentum. Either indicator may signal an upcoming trend change by showing divergence from price (price continues higher while the indicator turns lower, or the other way around. The DEFINITION of Divergences! We hope that you've learn something with this post . Have a nice day and Good luck.
COINBASE:BTCUSDEducation
by CobraVanguard
10
Using the Relative Strength Index (RSI)Using the Relative Strength Index The Relative Strength Index (RSI) is a very popular and often used indicator that can be used effectively in many different ways. My personal favorite two are: 1. As a tool to indicate a reversal. This is the most popular way. 2. As a momentum indicator. This is what it was designed for. Below we will discuss how to read the RSI, and how to set it properly depending on market conditions. What the numbers mean Before we discuss what to do with the information that the RSI gives us, we should learn what the numbers mean. The RSI is a line graph that moves from 0 to 100. When the RSI is 70 or over, we consider our crypto to be overbought (people bidding up the price). Then when the RSI is 30 or below, we consider our crypto to be oversold (people bidding down the price). Overbought means that the crypto might be overvalued. Oversold is the reverse. The crypto might be undervalued. The actual number is calculated using the average gain or loss over a set period of time. The default time period is 14 (minutes, hours, days, based on how the chart you are currently looking at is set). You could also set your period length to a lower number, I use 10 sometimes, so that the RSI is more sensitive to recent moves. This is good to do in markets that are highly volatile (crypto for example). The actual RSI number will increase as there are more and more positive closes within your time period, and will fall as there are more and more negative closes within your time period. As with every trading indicator, the RSI should not be used as the sole reason for a trading decision. It helps paint a picture of the market of the particular crypto you’re looking at. Nor are the default values always to be used. We’ve discussed time changes, but you could also change the upper and lower bands. In a bull market you may want to change the upper band to reflect the general trend of the market (more on that later). Trend Reversal Now, let’s about how to actually use the RSI. The first way to use it is as a way to spot a possible trend reversal. Put simply, the RSI can help us see if we have, in the last few candles, changed from an up-trend to a down-trend, or from a down-trend to an up-trend. When the RSI is below 30 and crosses up, we consider this a bullish move. When the RSI is above 70 and crosses down, we consider this a bearish move. Just to reiterate: A bullish cross up is not an automatic buy, just as a bearish cross down is not an automatic sell. As you can see below. But it is pretty accurate. Nothing in TA is 100%, but the closer you get to 100% the better trader you will be. One other thing to note based on the above picture is that there was no time that the RSI dipped below 30. In a crypto bull market (which we are currently in) it is more common to see cryptos that are overbought as opposed to oversold. You can compensate for this by changing the oversold line to 40. Additionally, as the crypto moves up in price, you can see the RSI making consistent higher lows. Divergence One thing to look for when you are trying to spot trend reversals is what is called a Bullish Divergence. This means that the price of your crypto is in a downtrend and making lower lows. At the same time, the RSI is oversold and is making higher lows. When you spot this, it can be a very powerful indicator that the trend is reversing to the upside. A bearish divergence is the same thing but in reverse. The price of the crypto is getting higher and higher while the RSI is overbought and making lower highs. RSI as a momentum indicator Another way to effectively use the RSI is by using it for its intended use as a momentum indicator. As we talked about before, the RSI rises as we have more and more positive closes in our time window. It rises more (faster) when the price movements are more extreme to the upside. The reverse is true for the downside. So, if we are oversold that means there is momentum to the upside, and if we are overbought that means there is momentum to the downside. Generally, it is better to trade with the momentum than against it. Unless we spot the reversal signals that we discussed above; crossing back down, or crossing up. It is also better to go long in bull-markets and short in bear markets when using the RSI in this way. Let’s take a look at the chart below: In a bull market the 50-60 range of the RSI acts as support and the RSI usually stays above 40. I like to set my upper band to 60 in a bull market so I can trade with the bullish momentum and spot potential reversals in the 50-60 range. As you can see it is necessary to use the RSI differently in different market conditions. Final thoughts As you can see there are different ways of successfully using the RSI. I hope I’ve made at least two of those ways clear in this beginner guide. Please let me know if you have any questions and if you like it, please hit the thumbs up and be sure to follow for more! Thanks for reading!
Education
by zsamochin
63
Popular Trading Indicators (Simply) ExplainedEvery full-time trader knows that rule number 1 in this business isn't to make money; rule number 1 is: don't lose money. Hence, any successful, long term trading strategy must inherently focus on managing risk. I know that lately the word risk carries next to no meaning, and that's because the more risk you take, the more you're rewarded, while those who manage their risk, and are potentilly risk averse in general, pay the price (in purchasing power terms). Having said that, in this context, trading with risk in mind is critical to following rule number 1, and it's essential to managing your risk exposure, and creating a sustainable, successful trading strategy. Moving averages (MA): Sifting through dozens of mathematical functions to help understand, and predict price action can be very challenging. But, having an understanding of why we use certain indicators is a great place to start. Let's begin by talking about MAs. The name is self-explanitory, of course, and it's not much more complicated than that. When we're looking at a MA, what we're seeing is an average of the price over a specified period of time. Now, you could say that using a 20 day simple MA is better than using a 21 day exponential MA (which places more emphasis on recent PA). But, this is a moot conversation, because we don't actually know what they mean until we explore what the MAs reveal for the timeframe being analyzed. By knowing and focusing on industry standard MAs, we can see what larger institutional desks might be seeing, and those MAs include the 20 day MA (20DMA), 50 day MA (50DMA), 100 day MA (100DMA), and the 200 day MA (200DMA). When we apply these MAs across multiple timeframes to derive a thesis on price action, it all starts to make sense, and you can see these industry benchmarks being respected on the longer time frames, clearly. However, when you look at price action post 2008, it's almost as if the intraday MAs are seemingly ignored completely. The HFT EFT flows are so heavy and they distort price so drastically, imo it's a losing battle trying to day trade based on intraday MAs. Relative Strength Index (RSI): The relative strength index (RSI) is a great momentum indicator used to gauge whether or not a financial instrument is overbought or oversold. It's analyzed as a line graph with a range of 0 to 1, the latter being the top of the range, with overbought conditions identified at a value of greater than 0.70, and oversold conditions being observed with a value of 0.30 or lower. These polar extremes often indicate that a reversal is about to occur. Fibonacci Retracement (Fib): The Fib is a very popular and is used to gauge the magnitude of a price retracement. For example, if a stock falls 25%, and then bounces hard on high demand, we could apply a Fib to benchmark the move against previous, similar moves. How the Fib works, is it uses a mathematical formula which adds the previous two number together to get the next. For example, starting at 0, the Fibonacci sequence is as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, etc.. Within the Fib indicator, there are 5 key levels to watch after you've applied the 0 and 1 ranges to your price move, which includes the 0.236, 0.382, 0.5 (not officially included but useful), the 0.618, and finally the 0.786. Typically, I divide the asset price by the money supply (M2), to find tradable Fib levels (a lot of price distortion currently as I mentioned). Volume: When the price of an underlying security changes, what we're witnessing is the demand and supply (discovery) process. While this does tell us a lot, volume tells us the power of the move, and hence also the weakness of a move. For example, when we're seeing price rise as volume falls, the power of the move is diminishing, therefore it tells us that the move/trend could be nearing exhaustion. Placed together with other indicators that may also be flashing "red" could help us make better, and more informed decisions. In forex, however, volume points to the number of price changes which occured within the specified time interval. This is a bit different than stock or bond price volume, but essentially speaks to the depth of the market as well as the participation rate, just as it's peer does.
AMEX:SPYEducation
by Hedge_Of_The_World
4
EURUSD 1D MEAN REVERSION TRADING STRATEGYBest Mean Reversion Strategy: Before we get to that point, first and foremost, let’s see what tools we need to use for this strategy. The best mean reversion indicator that works 85% of the time is the RSI indicator. So, you will need the RSI oscillator on your charts. Now, there is one more important thing that needs to be done. The RSI settings must be changed from the default 14-period to 2-period RSI. So, we’re having not just any type of RSI, but a very fast RSI. Levels are 10 & 90. The other technical indicators we’re going to deploy on the charts are: 10-period simple moving average. 200-period moving average. Note* Another thing to keep in mind is the recommended time frame is the daily chart. Intraday charts won’t work because the fast-period RSI will generate a lot of false signals on lower time frames. Now, let’s see how we can combine the 3 indicators into a profitable mean reversion strategy. The first obvious question is when to buy and sell currency. To answer this question the mean reversion trading strategy needs to satisfy 3 triggers: The price needs to be above the 200-day EMA. This means that the overall price is in an uptrend so, we’re only going to look for buy signals in bull markets. Second, we look for the price to below the 10-day SMA, which shows a deviation from its mean. Last but not least, we look at the RSI to overshoot below 10, which signals that we’re in oversold territory. Note* For sell signals use the same trading rules but in reverse. Once all 3 conditions are satisfied we enter a trade at the open of the following day. Once we’re in a trade we also need, we also need to know when to exit the market. This is where the 10-period simple moving average comes into play again. What we’re looking for is for the price to reverse back to the 10-period SMA strategy. More often than not the price will overshoot to the upside and break above the 10-period SMA. So, to fully capitalize on the entire move we use multiple take profit targets: The first profit target is to cash half of the position once we touch the 10-period SMA. The second portion of your position is left until we break and close above the 10-period SMA. Based on our backtesting result, on average your trades should reach the second target within 1-3 days. The longer you keep your position open, the lower the chances of the trade to succeed. As a general rule, you should cash out of your entire position within the first 3 trading days. Now, we have left out for last the most important part, which is managing risk. When it comes to the protective stop loss we’re advising not to place a stop loss right away, but instead, use a time stop. Let me explain… Based on our backtesting results we have found that a lot of the times the market will do a false breakout below the previous day low (high) and hurt our position. So, to avoid this scenario we have found a great trick to move around it. Our rule is very simple: If by the first half of the day our position shows a loss, we close that trade and call it a day. This is a risky play but we have the edge on our side to play this kind of trick. After all, trading is a risky game and everyone needs to decide for themselves how to manage risk. Final Words – Best Mean Reversion Strategy In summary, the most alluring thing about mean reversion trading is the high win-loss ratio and the simplicity behind it. One thing to keep in mind is that the mean reversion strategy tends to perform poorly when the market is in a hard-mode trend. But that shouldn’t be much of a big deal since the market is ranging 75% of the time. The key takeaways from the mean reversion trading strategy are as follow: Mean reversion can be used with all asset classes (stocks, commodities, currencies or cryptocurrencies). Range trading and overbought/oversold signals work the best with this method. Adjust the RSI settings to a fast-period. You can generate quick profits – short holding time periods. A trading tip – use a time stop instead of a price stop. Thank you for reading! Mean Reversion Trading Strategy with a Sneaky Secret. In this guide, you’ll learn a mean reversion trading strategy with some trading secrets that will assist you to limit the downside. The first part of the guide will highlight what is mean reversion trading, while in the second part we’ll reveal the mean reversion strategy and how you can fine-tune it to fit your personality. If this is your first time on our website, our team at Trading Strategy Guides welcomes you. Make sure you hit the subscribe button, so you get your Free Trading Strategy every week directly into your email box. The mean reversion trading systems are more appealing to a lot of traders because it tends to have a higher win rate as opposed to the trend following strategies. Even when the markets are in well-established trends, mean reversion happens quite often. So, there are more opportunities to profit from mean reversion trading. Let’s kick the ball rolling and start with the basic by first explaining what is mean reversion in trading and then we’re going to reveal 5 trading principles that can be used with the mean reversion strategy. Table of Contents 1 What is Mean Reversion Trading? 2 How Mean Reversion Trading Works? 3 Why the Mean Reversion Strategy Works? 4 Mean Reversion Trading Strategy 5 Final Words – Best Mean Reversion Strategy What is Mean Reversion Trading? Put it simply; mean reversion trading assumes that over time the prices of any asset (stock, commodity, FX currency or cryptocurrency) in time will revert back to the mean or average price. In other words, reversion to the mean trading comes down to the old saying: “What goes up must come down.” The mean reversion theory is at the foundation of many trading strategies that involve buying and selling of those asset class prices that have deviated from their historical averages. The idea is that in the long-term prices will return back to their previous average prices and normal pattern. Example of mean reversion trading strategies includes: Reversals. Pullback trading. Retracement. Range trading system. Overbought and oversold strategies. Our best mean reversion strategy is to trade those price ranges that occur after a severe price markup or markdown. In this case, reversion to the mean implies trading around the middle of the range as our average price. In essence, mean reversion is playing around a central value be it the middle of the range, or a moving average, or however you wish to express it. The reversion to mean trading system tends to produce a higher win rate in those instances where we can notice extreme changes in the price. We can measure extreme price changes relative to the time frame used. Obviously, there is also a probability that the price will not revert back to its mean. This can indicate that there is a real shift in the market sentiment and we’re in a new paradigm. Now that we know what is mean reversion trading, let’s see how the mean reversion regression works. How Mean Reversion Trading Works? With mean reversion, we’re looking to trade against the heard. A lot of the times when you’re doing mean reversion trading, you’ll be quick in-and-out of a trade. That’s why day trading mean reversion strategy works better. There are other different ways to trade with the mean reversion strategy, including: Price stretch from a simple moving average strategy. A break outside the Bollinger Bands strategy and a return back to the mean. A test of support and resistance strategy while the price is consolidating. The linear regression is clearly slopping upwards and it’s acting as a magnet to the price. Each time the price deviates from the average price line it snaps back to it outlining the reversion to the mean concept. The main advantages of the mean reversion strategy include: Effective exit strategy – the take profit target is always the average price. High win rate – the shorter the mean reversion time frame used the higher the win rate. Good risk-adjusted returns. All trading strategies have their own pros and cons. The biggest flaw is that once you’re in a trade you’ll often see first a loss before you see a profit. The main components of the mean reversion strategy should include: 1. Entry signal after the price has moved away from its average price. You can simply calculate how far away percentage-wise are from the mean or use an ATR strategy multiple declines or simply use a volume oscillator to gauge oversold/overbought readings. 2. Exit signal gives you a way out once you get into a trade. 3. Broad market timing. Why the Mean Reversion Strategy Works? Mean reversion is a key element part of how all financial markets work. Mean reversion happens because the prices have a tendency to overshoot and undershoot their intrinsic value. These “price anomalies” happens because the impact of new information that hits the market takes time to be digested by the market. The market participants will take some time to understand the new information as the information is filtered slowly. Additionally, it takes time for the market to establish a fair value. Secondly, mean reversion trading also works because prices also move based on collective emotions. What this means for traders is that the price tends to overshoot to the downside a bit more than they overshoot to the upside. This is true because fear tends to be a bigger emotion than greed. Let’s put the puzzle pieces together and construct our reversion to the mean trading strategy.
Education
by Tradingstrategyguides
3
Trend following - a different way.As folk who follow my posts know, I don't keep any secrets. I explain some of my methodology in this chart. It is bespoke. To be 100% clear, this will not work 'for you'. No methodology works 'for you'. You work the methodology through experience to create your advantages. I'm not saying that people should change to this way. I do not interfere at all with what traders want to do in their favoured methodology. There is no one road to the promised land. Controlling loss is the highest priority. The markets are there to 'eat you alive'. Price action is an important part of all this. As well, it is important to understand your particular market and learn its ways. Oh yes - with time you can come to figure out certain probabilities that may not be shown in the 'technicals'. What you see in this chart can be done on any time frame from 3 min to 1-day. I can't explain everything in one chart. I've done videos on this before. Note carefully: I do not sell anything. I do not do trainings or take anybody's money. I do not sign up to any services. I do not provide evidence of winnings or losses. Disclaimers : This is not advice or encouragement to trade securities on live accounts. Chart positions shown are not suggestions. No predictions and no guarantees supplied or implied. Heavy losses can be expected if trading live accounts. Any previous advantageous performance shown in other scenarios, is not indicative of future performance. If you make decisions based on opinion expressed here or on my profile and you lose your money, kindly sue yourself.
FOREXCOM:US30Education
by Captain_Walker
EDUCATION: Hidden Bullish DivergenceToday we consider very powerful technical analysis tool - the Divergence. Definition The divergence is a situation when the price change is not supported by the oscillator. There are four types of divergences: 1)Regular bullish - the price shows lower highs, while the oscillator shows higher lows 2)Hidden bullish - the price shows higher lows, while the oscillator shows lower lows (you can see on the chart) 3)Regular bearish - the price shows higher highs, while the oscillator shows the lower highs 4)Hidden bearish - the price shows lower highs, while the oscillator shows the higher highs Divergence Trading Rules Let's consider the market uptrend situation. If there is the hidden bullish divergence it means the uptrend continuation. In case of regular bearish divergence there is a high probability of trend reverse from uptrend to downtrend. Another situation is when the market is in downtrend. The regular bullish divergence in this situation can be the evidence of trend reverse in the future. In case of hidden bearish divergence the downtrend will continue with high probability. Indicators You can search the divergences not only with Stochastic RSI. Other oscillators are also suites great here. For example, CCI, RSI, Volume oscillator, MACD and other.
Education
by Skyrexio
1
My favorite indicatorsIndicators. They make us feel good, they comfort us, we love to expect too much from them then call them useless when they fail to predict the future. Or at least some people do. I myself find indicators comforting, or should I say they bring me relief. They can make every thing smoother, they throw numbers at us. The number is either above our threshold or below, the answer is binary. They give us certainty which is something we all crave in this seemingly random continuous dynamic flow of prices. I am going to start with the indicators I always use, and then present a few of my favorite ones and describe what they do and what I think of them. 1- Fibonacci Sometimes it gets called an indicator, sometimes it does not. Indicator or not there is not 1 buy or sell I do that does not involve a retracement, extension, or at least the measuring tool. I trust my eyes alot, but if I was to trust them to know if we are at 50%, more, or less, my judgements would be all over the place. The definition of a fib retracement that is given is a tool that allows analysts to find areas of support. It helps me see where we are and where to enter a trend. 23,6% and below is too early for me, 38,2% is often a nice one. Fib extensions let me see how far we really have gone, and helps with finding targets, or when to look for reversal. Depends on the context on various timeframes, this includes alot of things, depends my goals, and the pair or commodity. 2- Average True Range (ATR) I use this one all the time. This indicator measures how much the price has been moving in the past specified number of candles, including gaps. "It was created to allow traders to more accurately measure the daily volatility of an asset by using simple calculations." I want to know how volatile the market is to help find out how "active" the pair is and other things, and to help define stop loss, entry, target. If I am looking at a trend on the H4 and D1 timeframes and I want to ride it I will not want to buy a pullback of 1 H1 ATR. And target more than this too. It can also be used to note how expensive - in spreads - a pair is: if the spread is 20% of the daily ATR, it will be pretty hard to day trade it. Now, the ones I do not use often. a- Moving Averages Moving averages are indicators that go on the chart and show what the average price for a certain period & timeframe is over time. The smooth out noise, and provide indications to determine what the direction of the trend is. There are several types of moving averages: Simple, Exponential, Smoothed. I do not use them. First of all my eyes are trained to detect trends and find what I want to see in the price quickly. Second, I am interested in vertical moves, both for going with or against the trend, am I so picky that the price clearly is past MAS. Third, once I identified something I like I will do a full analysis of it, very detailled, precise, using MAS would be ridiculous. b- Relative Strength Index, MACD, and Stoch Ah one of scammy "vip educators laptop on the beach lifestyle" & novice investors favorite. Those momentum indicators show strength, with alot of lag, and poor precision, the MACD also has additional info I will not get into. Some bad unprofitable market participants use it for "oversold" readings, meaning they will consistently buy in downtrends. I look at them sometimes mainly because I think they look good. They look "professional", and they can be conforting, seeing divergence triggers the rewarding center. But I would not seriously incorporate them in my activities. c- The Commitment of Traders It is a report that shows the open interest of participants in the futures market. A simplified version such as in the example below can help make decisions to buy long or short contracts. While imperfect (a big hedger with a small speculative position has all counted as "commercial") and general, it can help with one's study of a commodity. For example, gold was over-shorted at the bottom in August 2018. d- Average Directional Movement (ADX) This indicator that was designed for commodity daily charts can be used for about everything, and it shows the strength of a trend. It does so by measuring the amount of price movement in a single direction. Wilder suggests that a strong trend is present when ADX is above 25 and no trend is present when below 20. I think it is better than the RSI or worse Stoch & MACD. In particular in the following example with the smoothed version (25 DI length), otherwise it can be all over the place. I see how it could be used with an alert (when value > 25) to warn an investor a trend might be happening. Also to help filter consolidations many want to avoid, if the eyes are not trained yet to a naked chart, or if the investor is not disciplined. e- STDEV & Implied Volatility Standard Deviation is a statistical calculation used to measure the variability. Implied volatility is a metric that captures the market's view of the likelihood of changes in a given security's price. The VIX is a market index that tries to project the expected volatility (downwards because that's all they care about) in the stock market. I do not care much about those values. ATR + Fib + Measuring tool etc are better. f- Bollinger Bands These bands envelop the price using a moving average (20SMA) and standard deviations away from it. "When the bands tighten during a period of low volatility, it raises the likelihood of a sharp price move in either direction." It is supposed to help visualise tight periods before a big move. And the price often stays between the bands (that's not very helpful). Sometimes when the price really gets tight with BB it really hits the eyes (Bitcoin), the small range and then the massively expanding one. I do not really see the use for it. Bollinger Band users blind much? I have no use for them but they sure look pretty. g- Volume for Stocks & Crypto Good luck using volume with Forex. Volume tells us how much activity has happened. Did the price go up with only a few buyers? Or were there a whole lot of them? Is a support strong: Many participants are watching it? Or only a few = not that strong. There is a whole lot you can deduce with volume, but it is not the holy grail either. I rarely use it because the Forex market is OTC and we do not have that data, and with futures, it is rarely that useful. h- On Balance Volume (OBV) OBV rises when volume on up down is bigger than volume on down days. Its creator thought that volume precedes price. It was designed to help detect bottoms with divergence, and spot smart money (big institutions) buying while dumb money (retail) was selling. I doubt it will make the dumb money (that all think they are this special wonderboy) outsmart the dumb money. Retail investors are likely to call bottoms every 2 weeks and chase bottoms and get giga rekt in the biggest bear market ever. Maybe a good idea to go short when there are bullish signals in the future? I can already picture greedy and overexcited "investors" chasing every single "signal" they see. There will be many pullbacks in the big downtrend.
Education
by MrRenev
1
ETHUSD 4H RSI 80-20 TRADING STRATEGY SHORT TRADERSI 80-20 TRADING STRATEGY SHORT TRADE RULES 1 - Find Highest candle in the last current 50 bars. 2 - That High candle coupled with RSI above 80 level. 3 - Wait for a new Swing HIgh but RSI is lower - DIVERGENCE. 4 - ENTER on breakout candle close below 1st candle's low. 5 - Stop Loss above new swing high. 6 - EXIT with a 1 to 3 risk reward Take Profit. Add RSI to chart Adjustments: 14 period, to 8. 70 and 30 lines, to 80 and 20. This indicator comes standard on most trading platforms. You’ll just need to make the adjustments above. Step 1 - Find the currency pair that is showing a high the last 50 candlesticks. (OR low depending on the trade) The 80-20 Trading strategy can be used for any period. This is because there are reversals of trends in every period. This can be a swing trade, day trade, or a scalping trade. As long as it follows the rules, it is a valid trade. We also have training for building a foundation before a forex strategy matters. In this step, we only need to ensure it is the low or the high of the last 50 candles. Step 2 - Using the RSI Trading Indicator: When we find 50 candle high, it needs to be coupled with RSI reading 80 or higher. (If it’s low it needs to be combined with the RSI reading 20 or lower.). We have a reading that hit the 80 line on the RSI and was the high the last 50 candles. Once we see that we had a high, the last 50 candles, and the RSI is ABOVE 80, we can move to the next step. Remember that this strategy is a reversal strategy. It is going to break the current trend and move the other direction. Step 3 - Wait for a second price (high candle) to close after the first one that we already identified. The second price high must be above the first high. Although, the RSI Trading indicator must provide a lower signal than the first. Remember that divergence can be seen by comparing price action and the movement of an indicator. If the price is making higher highs, the oscillator should also be making higher highs. If the price is making lower lows, the oscillator should also be making lower lows. If they are not, that means price and the oscillator are diverging from each other. Which is why it’s called “divergence.” Just because you see a bullish or bearish divergence, doesn’t mean you should automatically jump in with a position. We have rules in place that will capitalize on this divergence so that we can make a significant profit. Keep in mind, that this step may take time to develop. It is very important to wait for this second high because it gets you in a better trade making position. Price goes up/RSI goes down. That is the Divergence. Remember that our example is a current uptrend looking to break to the downside. If this was a 50 candle low, we would be looking at the exact opposite of this step. Step 4 - How to Enter the Trade with the RSI Trading Strategy. The way you enter a trade is very simple. You wait for the price to head in the direction of the trade and wait for a candle to close below the first candle that you identified that was previously 50 candle high. Step 5 - Once you make your entry, place a stop loss. To place your stop, bump back 1 to 3 time periods and find a reasonable, logical level to put your stop. You are looking for prior resistance or support. We placed our stop below this support area. That way if the trend continued and did not break, it could hit this level and bounce back up in our direction. Step 6 - I recommend you follow at least a 1 to 3 profit vs. risk level. This will ensure that you are maximizing your potential to get the most out of the strategy. You can adjust as you wish. Keep in mind that most successful strategies that identify breaks of a trend use a 1 to 3 profit vs. risk level.
COINBASE:ETHUSDEducation
by Tradingstrategyguides
Overbought to Oversold - Keep It Simple, Stupid!After exploring the depths of profit taker heaven and stop loss hell, after combining many different indicators, finding correlations with momentum, trend, volatility, you name it... After trying to adjust the strategies to different assets, asset classes, market conditions... After finding out that each of these steps are way more difficult than I thought and will require much more rigor and a start from scratch... I remembered the golden rule of strategy... "Keep it simple, stupid!" When others are buying like rabid dogs, you sell... When others are selling like mad monkeys, you buy... When others are greedy, you are fearful... When others are fearful, you are greedy... So, we trade from overbought to oversold. No profit takers, no stop losses, no optimization for a specific stock or time frame or asset class, no correlation with other indicators... Just overbought to oversold. Win rate of 90+%, profit factor of over 5.0, compared to holding the stock indefinitely with a loss of 80%. Happy trading!
AEducation
by ralphschraven
4
EURUSD 1H RENKO CHART STRATEGY #2The second simple Renko Trading Strategy system is an indicator based strategy that uses price-momentum divergence to identify trend reversals. Renko Trading Strategy #2 For this Renko trading strategy, we only need to use the RSI indicator. We can use a 14- period or a 20-period RSI indicator. So, use the same period as the ATR 14 or 20 Renko brick size. After we spot the momentum divergence an entry signal is triggered once we get a reversal. On the Renko chart, a trend reversal is set in motion once the brick changes color. In this case, when we spot a bearish divergence, enter a short position after the brick turns red. For bullish divergence, wait for the brick to turn green. We exit our profitable trade once another reversal pattern is formed in the opposite direction of our trade. As a method to protect our account balance and not lose too much, you can place your SL above and below the swing point developed after your entry. A lot of the noise inherent in regular time-based charts are eradicated. So, if you trade with Renko charts, spotting divergence and trend reversals are a lot easier. The RSI is the best indicator to use with Renko. Read the previous Renko Chart post to learn about Renko chart system.
Education
by Tradingstrategyguides
1
HOW TO FIND CHEAP ENTRY SIGNAL FOR RISKRETURN LIKE 1:10 AND MOREHI BIG PLAYERS, in this tutorial I want educate you my experience, how to find really cheap entry for trading. In this example it was possible to take part on a 1:10 trade. It means for 1 USD investment you could take 10 USD return (Risk-Return-Ratio => RRR). ///////////////////////////////////////////////////// E X A M P L E F O R A B U L L I S H T R E N D ///////////////////////////////////////////////////// At the beginning we are looking for an oscillator, that shows us an oversold area and in the same time a bullish trend with higher and faster EMA than a slower EMA on the chart. This is possible with a slow EMA(close, 200) and a fast EMA(close, 50) and a RSI(close, 14).... => this is for example my way to find it on the Forex Screener from TradingView at fast as possible. I developed a similar structure with more quality signals with my candle oscillator indicator. Named: CO 'I. This indicator allows to see the candle between a range und works at well like the RSI oscillator with 30% and 70% oversold and overbought area. The most positive on this indicator, you don't only see the closing relating price - you see almost more: open, high and low. Furthermore, I found out that if the body of a candle goes into the range between 30-70% and this is the same trenddirection in the chart, then it was to 90% the lowest/highest bar or 3+ bars nearby them. So back to my education: My main view starts on 4H Chart. In this example I found on EUR/JPY a bullish trendfilter with the EMA's and a oversold area on my OC 'I (the wick of the candle was touching the 30% line) - it's only necessary that a touching of the candle is true. NEXT STEP: After this bullish signal it is necessary to zoom in the lower timeframe. Here I choosed the 1H Chart and had to wait till the body of the OC 'I also touched the 30% line and of course wait till the candle is finished. It don't depend how much the body touch the 30% line - but it's necessary that the body is touching. In addition, a bullish divergence was built (looking to blue lines). After the first touching I go into a lower timeframe again. The 15H-Chart was choosed for this example. Hereby the same game: waiting till the body is touching the 30% line. NOTE: furthermore, if I going into the lower timeframe and the body is already touching - then you don't need to wait for the relase into the range and back to touching again the 30% line. The 15MIN Chart is the last timeframe. Now we wait till the body goes up and don't touch any line. This is my signal to buy. My exit depends always how the market flow are: in this case it was a big uptrend and a adapting correction wave (this is mostly the time for divergence and this why I set a takeprofit on this high). With this approuch it was possible to catch a 1:10 trade. Kind regards NXT2017
Education
by NXT2017