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.
Oscillators
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.
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.
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.
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.
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☺️
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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!
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?
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.
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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!
🔥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😇
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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!
Why you should only think about charts when looking at chartsHello?
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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.
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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?
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** 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.)
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How to be a Mean Reversion ScalperIn this video I go over how I trade with my custom mean-reversion histogram and overlay indicator, explaining the logic behind my entires and profit-taking levels. This example is taken from $SPY on the 1-minute chart, and I examine all four of the alerts that the indicator gave today. Comment below with any questions!
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.
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.
Relative Strength IndexThe Relative Strength Index is one of the most widely used tools in traders handset. The RSI is an oscillating indicator which shows when an asset might be overbought or oversold by comparing the magnitude of the assets recent gains to its recent losses. A common misconception is that the RSI draws a comparison between one security and another, but what it actually does is to measure the assets strength relative to its own price history, not that of the market.
The Relative Strength Index is useful for generating signals to time entry and exit points by determining when a trend might be coming to an end or a new trend may be forming. It weighs the prices upward versus downward momentum over a certain period of time, most often 14 periods, thus showing if the asset has moved unsustainably high or low.
The RSI is visualized with a single line and is bound in a range between 1 and 100, with the level of 50 being considered as a key point distinguishing an uptrend from a downtrend. You can see how the RSI is plotted on a chart on the following screenshot.
J. Welles Wilder, the inventor of the Relative Strength Index, has determined also two other fundamental points of interest. He considered that an RSI above 70 indicates that the asset is overbought, while an RSI below 30 suggests an oversold situation. These levels however are not strictly set and can be manually switched, according to each traders unique trading system. Trading platforms allow you to choose any other value as overbought/oversold boundary apart from the conventional levels.
How is RSI calculated?
The formula is as follows:
RSI = 100 –
Where the RS (Relative Strength) is the division between the upward movement and the downward movement, which means that:
RS = UPS / DOWNS
UPS = (Sum of gains over N periods) / N
DOWNS = (Sum of losses over N periods) / N
As for the period used for tracking back data, Wilders original calculations included a 14-day period, which continues to be used most often even today. It however can also be a subject to change, according to each traders unique preferences.
After the estimation of the first period (in our case the default 14 days), further calculations must be made in order to determine the RSI after a new closing price has occurred. This includes one of two possible averaging methods – Wilders initial and still most commonly used exponential averaging method, or a simple averaging method. We will stick to the most popular approach and use exponential smoothing. The UPS and DOWNS for a 14-day period will then look like this:
UPSday n = / 14
DOWNSday n = / 14
What does the RSI tell us?
here are several signals that the Relative Strength Indexs movement generates. As we said earlier, this indicator is used to determine what kind of trend we have and when it might come to an end. If the RSI moves above 50, it indicates that more market players are buying the asset than selling, thus pushing the price up. When movement crosses below 50, it suggests the opposite – more traders are selling rather than buying and the price decreases. You can see an example of an uptrend below where the RSI remains above 50 for almost the duration of the move.
However, do keep in mind to use the RSI as a trend-confirmation tool, rather than just determining the trend direction all by itself. If your analysis is showing that a new trend is forming, you should check the RSI to receive additional confidence in the current market movement – if RSI is rising above 50, then you have a confirmation at hand. Logically, a downtrend has the opposite properties.
Overbought and oversold levels
Although trend confirmation is an important feature, the most closely watched moment is when the RSI reaches the overbought and oversold levels. They show whether a price movement has been overdone or it is sustainable, thus, indicating if a price reversal is likely or if the market should at least turn sideways and see some correction.
The overbought condition suggests a high probability that there are insufficient buyers on the market to push the asset further up, thus leading to a stall in price movement. The reverse, oversold, level indicates that there are not enough sellers left on the market to further push prices lower.
This means that when the RSI hits the overbought area (in our case 70 and above), it is very likely that price movement will decelerate and, maybe, reverse downward. Such a situation is pictured on the screenshot below. You can see two rebounds from the overbought level with the first move being extraordinary strong and bound to end with a price reversal, or a correction at least.
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Having noted that prices tend to rebound from overbought/oversold levels, we can therefore reach the conclusion that they tend to act as support/resistance zones. This means that we can use those levels to generate entry and exit points for our trading session. As soon as the price hits one of the two extremes, we can use the Relative Strength Index to confirm a probable price reversal and enter an opposite position, hoping that prices will reverse in our favor. We can then set the opposite extreme level as a profit target.
Ultimate guide to trading divergenciesHey guys!
In this post, we are going to learn how to trade divergencies, how to find them on the chart, and how to use them in our automated trading strategy.
Introduction
Divergence occurs when the direction of an asset’s price and the direction of a technical indicator move in opposite directions. Finding divergence between price and momentum indicators, such as the RSI and MACD, is a useful tool for identifying potential changes in the direction of an asset’s price and is therefore a cornerstone of many trading strategies.
Types of divergencies
There are 4 major types of divergencies:
Bullish Divergence
Hidden Bullish Divergence
Bearish Divergence
Hidden Bearish Divergence
Bullish Divergence
Price is printing lower low while the technical indicator shows higher lows. This signalizes a weakening momentum of a downtrend and a reversal to the upside can be expected to follow.
Hidden Bullish Divergence
Price is making higher lows while the oscillator makes lower lows. A hidden bullish divergence can signalize that uptrend will continue and can be found at the tail end of a price throwback (retracement down).
Bearish Divergence
Price is creating higher highs while the technical indicator shows lower highs. This signalizes that momentum to the upside is weakening and a reversal to the downside can be expected to follow.
Hidden Bearish Divergence
Price is making lower highs while the oscillator makes higher highs. A hidden bearish divergence can signalize that downtrend will continue and can be found at the tail end of a price pullback (retracement up).
Regular divergencies provide a reversal signal
Regular divergences can be powerful signals that a trend reversal is likely to occur. They indicate that the trend is strong but its momentum has weakened, providing an early warning of a potential change in direction. Regular divergences can be powerful entry triggers.
Hidden divergencies signal trend continuation
On the other hand, hidden divergences are continuation signals that often occur in the middle of a trend. They indicate that the current trend is likely to continue after a pullback, and can be powerful entry triggers when confluence is present. Hidden divergences are typically used by traders to join the existing trend after a pullback.
Divergence validity
The typical use of divergence is with a momentum indicator - such as RSI , Awesome oscillator , or MACD . These indicators focus on current momentum, and therefore trying to map out divergence from 100+ candles ago does not have any predictive value. However, changing the indicator's period influences the look-back range for a valid divergence.
Always use discretion when determining the validity of the divergence.
Confluences
It is important to approach divergencies with a disciplined and strategic mindset. Using them in conjunction with other forms of technical and fundamental analysis - such as Support and Resistance lines, Fib retracements, or Smart Money Concepts only increases conviction of the divergence validity.
Hope this helps!
🔳TOP 7 INDICATORS TO USE🔳
◻️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☺️
✅Gimme a like and the Gods of Trading will favour you this week👍
Dear followers, let me know, what topic interests you for new educational posts?
ECONOMIC CYCLE & INTEREST RATESHello traders and future traders! The state of an economy can be either growing or shrinking. When an economy is growing, it typically leads to improved conditions for individuals and businesses. Conversely, when an economy is shrinking or experiencing a recession, it can have negative consequences. The central bank works to maintain a stable level of inflation and support moderate economic growth through the management of interest rates.
What is an economic cycle?
An economic cycle refers to the fluctuations or ups and downs in economic activity over a period of time. These cycles are typically characterized by periods of economic growth and expansion, followed by periods of contraction or recession. Economic cycles are often measured by changes in gross domestic product (GDP) and other economic indicators, such as employment, consumer spending, and business investment.
Economic cycles can be caused by a variety of factors, including changes in monetary and fiscal policy, shifts in consumer and business confidence, and changes in global economic conditions. Economic cycles can also be influenced by external events, such as natural disasters or political instability.
Understanding economic cycles is important for businesses, governments, and individuals, as it helps them anticipate and prepare for changes in the economy and make informed decisions about investment, hiring, and other economic activities.
How is an economic cycle related to interest rates?
Interest rates can be an important factor in the economic cycle . During a period of economic expansion, demand for credit typically increases, as businesses and consumers borrow money to make investments and purchases. As a result, interest rates may rise to control the demand for credit and prevent the economy from overheating. Higher interest rates can also encourage saving, which can help to balance out the increased spending that often occurs during an economic expansion.
On the other hand, during a period of economic contraction or recession, demand for credit tends to decline, as businesses and consumers become more cautious about borrowing and spending. In response, central banks may lower interest rates to stimulate demand for credit and encourage economic activity. Lower interest rates can also make borrowing cheaper and more attractive, which can help to boost spending and support economic growth.
Overall, the relationship between interest rates and the economic cycle can be complex and dynamic, and the direction and magnitude of changes in interest rates can depend on a variety of factors, including economic conditions, inflation expectations, and the goals and objectives of central banks and other policy makers.
I hope you leant something new today!
ADX: How to use this under-the-radar tool.Hey everyone! 👋👋
In this video, we're taking a look at the ADX Indicator. We break down how it works, how to interpret its output, common uses for it, and ways that it can help you find and screen for opportunities you like.
Feel free to drop some questions below in the comments!
Remember - nothing in this video constitutes advice, our only goal is to educate you about the markets and how to use our platform more broadly.
Cheers!
-Team TradingView ❤️❤️
Check out more information about the ADX in our help center here .
Overbought & OversoldIf you can identify overbought or oversold conditions, as a trader, this can be highly profitable. In particular, these are two definitions that refer to the extreme values of the price in addition to their intrinsic value. So, when these conditions appear, a reversal of the direction of the price is highly expected.
What is Overbought?
When something is ‘overbought’, it means that the price is thriving for a long peri. Because of this, it’s trading at a higher price than it actually should be. In other words, the asset is overly expensive and a sell-off is about to happen.
What is Oversold?
When something is ‘oversold’, it means the price is in a negative momentum for an extended period. Because of this, it’s trading at a lower price than it actually should be. In other words, the asset is overly cheap and an upward rise is about to happen.
Indicators
Moreover, there’re plenty of technical indicators which you could use in technical analysis. To confirm the Overbought and Oversold conditions the three indicators commonly used are:
Bollinger Bands,
Relative Strength Index and
Stochastics
Bollinger Bands
The Bollinger Bands appear as a channel. Specifically, the middle line is often a twenty-period moving average. On the other hand, the upper band is the moving average plus two times its standard deviation. Furthermore, the lower band is the moving average minus two times its standard deviation. As a result, the price seems to fluctuate in this channel and normally doesn’t move out of the bands. However, when the price tends to move out of the upper band the price can be considered as overbought. Likewise, the same thing happens when the price moves out of the lower band, the price can be considered oversold.
Relative Strength Index
The Relative Strength Index is a momentum oscillator where the horizontal axis appears as a function of time and the vertical axis as on a scale of 0 to 100. In addition, the standard amount of periods used for this indicator is 14.
So, the Relative Strength Index measures the magnitude and the speed of recent price action. The indicator compares a security strength on days when prices go up to its strength on days when prices go down. Yet when the Relative Strength Index has a value higher than 70 the price can be considered as overbought. When the opposite happens and the price drops down a value of 30 the price can be considered as oversold.
Stochastics
Stochastics is like the Relative Strength Index, a momentum oscillator where the horizontal axis appears as a function of time and the vertical axis is displayed on a scale of 0 to 100. However, the stochastic oscillator is predicated on the assumption that closing prices should move in the same direction as the current trend.
Meanwhile, the Relative Strength Index is measuring the magnitude and the speed of the current price action. The Stochastic oscillator does calculate this value and expresses this value into a %K.
In addition, the standard amount of periods used for this indicator is 14. When the %K crosses a value of 80 the price can be considered as overbought. When the opposite happens and the price drops down a value of 20 the price can be considered as oversold.
Combined
One indicator that matches the criteria for being ‘overbought’ or ‘oversold’ can suggest a small trend reversal. But once all 3 indicators combined are matching the criteria, the assumption of a trend reversal is very likely to happen. Therefore, for trading in general this can be a profitable and low-risk strategy.
SK Chart OverlaySK Chart Overlay by Stephen Kalayjian and TradeEZ is advertised as a "cutting edge proprietary chart overlay, with built-in predictive analytics for trading" . The same set of indicators and similar chart setups were used by Stephen Kalayjian in his previous failed projects KnowVera and Ticker Tocker . A closer look into these projects reveals that these indicators are just rebranded well known indicators with a little bit of lipstick.
Trade EZ MA - Welles MA (10) / EMA (19)
Trade EZ 1 - MACD(12, 26, 9)
Trade EZ 2 - DMI (14, 14)
Trade EZ 3 - Stochastic (5, 3, 3)
Trade EZ 4 - ATR Supertrend (52, 2.5) + Welles MA (5) / EMA (9) - previously known as KnowVera Trend Channel and later Ticker Tocker Trend Channel
Chart setup is available at www.tradingview.com
