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Oscillators

A Deep Dive Into The Relative Strength IndexOscillators play an important role in technical analysis due to the amount of information they can return as well as their ability to lead price variations and are often used in conjunction with trend indicators. One of the most popular oscillators available is the relative strength index (RSI), one of the many popular indicators developed by J. Welles Wilder and first appearing in "New Concepts in Trading Systems". This post offers a deep dive into this classic oscillator, sharing observations as well as reviewing derived indicators. Introduction The relative strength index is a normalized (bounded) oscillator in the range (0,100) and aims to indicate when the price is overbought (that is when a security is being traded above its intrinsic value) or oversold (that is when a security is being traded under its intrinsic value) and when a reversal might occur. In order to determine when the security is overbought or oversold the RSI includes one constant overbought (70 suggested by Wilder) and one oversold level (30 suggested by Wilder). An RSI value above the overbought level indicates that the security is overbought, while an RSI value under the oversold level indicates that the security is oversold. The RSI possesses one length user setting allowing the user to obtain information regarding shorter or longer-term price variations, often set as 14 by default. This default setting value is often unchanged. Calculation The various calculations for the RSI reveal much interesting information regarding its construction as well as the information the indicator aims to give. The RSI is generally calculated as follows: delta = close - close upward = max(delta,0) downward = max(-delta,0) relative_strength = rma(upward,length)/rma(downward,length) relative_strength_index = 100 - 100/(1 + relative_strength) where close is the closing price, relative_strength the relative strength, and rma the Wilders moving average (RMA), sometimes referred to as smoothed moving average (SMMA), which is an exponential filter using the smoothing constant 1/length instead of 2/(length+1) in the case of an exponential moving average. A more approachable calculation for the RSI is given by: RSI = rma(upward,length)/rma(abs(delta),length) × 100 This calculation would indicate that the RSI returns the ratio of average upward price changes over the average of the absolute price changes expressed as a percentage. Choice Of Moving Average For The RSI Calculation Choosing which moving average to use for the calculation of the RSI can affect the results returned by the indicator, as well as the way to calculate it. The original calculation makes use of the Wilders moving average, but various authors make use of the simple moving average or exponential moving average. Using The Simple Moving Average Cutler's version of the RSI makes use of the simple moving average for the calculation of the RSI and introduces the most notable changes compared to the EMA and Wilders moving average and has several properties. First the calculation can be obtained with: cutlers = (close - close )/length/MA(abs(delta),length) × 50 + 50 which further simplifies to: cutlers = (close - close )/SUM(abs(delta),length) × 50 + 50 The SMA is more reactive than the RMA, which returns an RSI more prone to cross the overbought/oversold level compared to an RMA-based RSI of the same setting. Additionally, a new input discards the oldest input in the calculation window of the SMA. This can introduce sharp changes in the RSI compared to one based on the EMA/RMA who retain memory of oldest inputs. A downside of using the SMA is the potential occurrence of division by zero, altho unlikely it can still happen if the price of a security is equal to its previous value for a period superior to the used length setting, this would return a change in the price of 0, which ultimately could lead the denominator of the previous calculation to be equal to 0. This do not directly happen when using exponential filters for the RSI calculation. Using The Exponential Moving Average Unlike the SMA, using an exponential moving average does not introduce any particular significant changes. An RSI based on the EMA is more reactive than one based on the RMA when using the same length setting. However both the EMA and RMA are based on exponential averaging, only the smoothing constant differ, as such in order to obtain the length setting used in an RSI based EMA such that it is equal to an RMA based RSI we must solve the following equation with respect to len_ema : 1/len_rma = 2/(len_ema+1) = 2 × len_rma - 1 As such a length 27 EMA-based RSI is equal to a length 14 RMA-based RSI. Effect Of The Length Setting On The RSI When applying the RSI to certain securities with a large sample size, using a higher length setting would return results closer to the central value 50, thus returning a narrower RSI range. In the image above, on the left, you can see the frequency histograms (as a line plot) using a bin size of 15 from various RSI outputs containing 500 observations using an increasing length setting. RSI's with higher length settings return a narrower shape, all having a peak value near 50. On the right, you can see the range of the RSI outputs value over the length setting (from 10 to 100), the range is decaying non-linearly. This behavior is a frequent occurrence if the RSI indicator is applied to price changes having an approximately symmetrical distribution with 0 mean, which is often the case. As such using higher length settings would return an RSI reaching less frequently its overbought/oversold level. This particularity differentiates the RSI from oscillators such as the stochastic oscillator, whose observed range does not change when using different length settings and makes the RSI particularly appropriate when it comes to identifying potential reversals. Interpretations Wilder describes various ways to interpret the RSI. Using Levels The main one is given by the interaction between the RSI and the overbought and oversold levels, with an RSI value over the overbought or under the oversold level indicating a potential reversal or retracement. This sign of a reversal can be given by the RSI crossing over the overbought level and crossing under the oversold, this allows to obtain an early reversal detection but can expose the trader to a continuation of the trend. An RSI value crossing under the overbought level and crossing over the oversold level allows the trader to be less exposed to possible trend continuations but has a worse timing. A more trend-following approach can be used, a value of the RSI superior to 50 would indicate an uptrend and a value under 50 would indicate a downtrend. While this approach provides a worse timing and can produce whipsaw trades, it allows the trader to follow the trend instead of going against it. Using Patterns Wilder also shows that classical chart patterns such as triangles, wedges, head & shoulders...etc, and supports/resistances can be found and used within the RSI. These visible formations are the result of the detrended price observations given by the RSI, and as such can be more frequent. However, the noisy nature of the RSI might make the detection of these formations more complicated. Using Divergences Like with most oscillators, divergences between the RSI and the price can be used to detect potential reversals. A divergence occurs when the price tops/bottoms and RSI tops/bottoms are negatively correlated. Using Failure Swings Failure swings are characterized by the RSI making a significant high/low above the overbought/under the oversold level followed by a retracement which is then followed by a failed attempt of the RSI to reach the overbought/oversold level. The failure point triggers the trade and is determined by the maximum/minimum of the retracement following the high/low made by the RSI. Connor's Period 2 RSI Connor's Period 2 RSI is a short-term contrarian strategy developed by Larry Connors offering a different interpretation of the RSI indicator. As its name indicates the strategy is based on a period 2 RSI and mostly aims to trade retracements and potential reversals. The strategy makes uses a period 200 moving average to determine the overall price trends, a period 5 moving average for exits, and the period 2 RSI for entries. A buy order is opened when the RSI crosses under the oversold level (set at 5) while the price is under the period 200 SMA, a sell order is opened when the RSI crosses over the overbought level (set at 95) while the price is above the period 200 SMA. A position is closed when the price crosses the period 5 SMA. Using such a strategy would require using high timeframes to avoid frictional costs due to the short potential gains obtained from it. Other Indicators Using The RSI The RSI is used by a wide variety of indicators, here are a few of them. Stochastic RSI The Stochastic RSI is as its name indicates a stochastic oscillator using the RSI as input. Since the RSI leads price variations this allows the Stochastic RSI to obtain an increased reactivity. The nature of the Stochastic oscillator calculation allows the Stochastic RSI to be in a range (0,100), which unlike the RSI does not converge toward 50 with a higher length of the RSI/Stochastic. Ehlers Inverse Fisher Transform In an article, Ehlers applies the inverse fisher transform (hyperbolic tangent function) to a smoothed RSI (WMA with period 9), rescaled in the range (-5,5). As seen before the RSI tend to have a symmetrical distribution centered near 50, the inverse fisher transform applied to it allows obtaining a U-shaped distribution, in other words, it "squash" the original smoothed RSI, returning a result in a scale (-1,1). Laguerre RSI Another version of the RSI is presented by Ehlers in his article Time Warp – Without Space Travel . This indicator does not make use of the RSI directly but instead consists of using multistage filters whose degree of smoothness is determined by a user setting gamma in a range (0,1), with values of gamma closer to 1 returning longer-term indications. For its calculation, the indicator calculates its numerator as the sum of the difference between one filter and the one following in the stage, and its denominator is the sum of the absolute difference between one filter and the one following in the stage until finally rescaling the ratio between the numerator and denominator in a (0,100) range that is: L0 = (1 - gamma) × close + gamma × L0 L1 = -gamma × L0 + L0 + gamma × L1 L2 = -gamma × L1 + L1 + gamma × L2 L3 = -gamma × L2 + L2 + gamma × L3 //---- num = (L0 - L1) + (L1 - L2) + (L2 - L3) den = abs(L0 - L1) + abs(L1 - L2) + abs(L2 - L3) lrsi = 50*num/den + 50 Unlike a regular RSI, the Laguerre RSI does not converge near 50 with higher gamma values, having an approximately U-shaped distribution.
TVC:SPXEducation
by LuxAlgo
15
Buy when there's DRY blood in the StreetsBuy When There's Blood in the Street ... After the recent well known events in the financial market and the crypto market I recalled a quote by Baron Rothschild: "Buy when there's blood in the streets, even if the blood is your own." I would say this is very true; however, in the world of trading "Timing is Everything", don't just go blindly with the old saying, this is like the other saying "Catching a Falling Knife". Bottom line, we all have to stomach the ups and downs in the market, this is not for the faint at heart. The downturns are really good opportunities to buy cheap if you pay attention to the Market Structure, trust your indicators, and are disciplined with the money management policies. "Buy when there's blood in the Street ..." I would just wait until the blood is not fresh. It is not about catching the bottom, it is about buying at a discount, which is not the same. I personally use three main variables to time my entry and my exit, (1) Trend, (2) Momentum and (3) Volume. You don't really need more, although each trader has developed his/her own style, I show mine here. I sometimes use more indicators, but basically they measure the same variables from a customized perspective. For the sake of clarity, in this example I use regular popular and publicly available indicators, I use the simple Volume, the RSI, the MACD and the Madrid Ribbons. 1. Trend. "The trend is your friend until that freaking bend at the end". When we see the price structure we determine as simple as it is if there is an uptrend, downtrend, or trading range, the Madrid Ribbons is a very friendly indicator that visualize the direction of the trend at a glance, as long as it is in the green it means uptrend, if this turns from green to red it signals the end of a leg or a reversal of the trend. In this example there's a visible downtrend coming from 2019 when the Energy sector started its decline and a full working economy didn't need as much oil as when it needed a jumpstart. We can see from December 2018 until April 2019 there was a leg to the upside, this didn't last long, on May 2019 it didn't remain above the trendline for long and it kept on slowly bleeding until on January 2020 it collapsed and it broke down. The red ribbons continued until November 2020, when it visually showed a reversal. As simple as that. Follow the trend. 2. Momentum. In this article I use two momentum indicators, the popular RSI and MACD. There are tons of momentum indicators out there, I have coded myself several customized momentum indicators. The idea behind momentum is that momentum precedes the trend. Watch out, it is not "predicting", usually this tells that the direction of the trend is exhausting and it could possibly reverse. We must pay attention if the direction of the momentum is the same of the trend, and if it isn't then raise a momentum divergence flag. This is good to time the entries and exits. a) RSI. Let's look at the RSI on December 2018, it went from Oversold to reach Overbought levels on February 2019, this trip out from oversold signals a trend reversal, entering the trade on January 2nd, 2019 it would have been a great entry. The blood of the downtrend can weight in, trust the indicator and ride the leg. The RSI signals an exit on March 15th, 2019, with a juicy 15% in the leg, not risking to remain longer and not risking a falling knife in the downtrend. b) MACD. This indicator is on the negative side, which means there is a negative momentum going on. We're in a downtrend, remember?; however, it performs a crossover with the signal, which can be seen in the histogram, making it positive. We have a downtrend plus a positive momentum divergence. At the time the price crosses the trend we have a positive trend plus a positive momentum convergence, the Bulls are in control. this signals another entry. Riding the leg from the histogram crossover until the MACD histogram crosses down the Zero line gives us the same performance as the RSI on the same period. Look at the signal from MACD, the trend is still up, but the histogram is already negative, this signals a negative momentum divergence, it would be the time to take the money and run, preventing the main downtrend could continue. 3. Volume. Usually the volume is displayed in contrasting colors, green when the price bar goes up, red when it goes down. It's tricky, in order for the volume to exist there must be two sides, a buying and a selling side. I see it as volume is volume, and it denotes the interest of the market at a certain price level, I'm not too worried if it's red or green, I'm focused on whether there is high or low transactional activity. As you can see on December 21st, 2018 there was a volume peak that was increasing from the 13th and after the 18th it slowed down. There could have been a lot of sellers willing to take the exit when the prices declined, however there were not buyers to take their "garbage" and all of a sudden there are buyers at the lowest level willing to enter the trade on its way down, like kamikaze traders. The relative volume means those were not retail traders, but institutional traders who can get liquidity following the simple rule "buy on weakness, sell on strength". Another volume pattern is "Volume precedes momentum", a higher relative volume is needed to reverse a trend. So far we have this pattern, a downtrend with a low climatic volume, it's a No Go, it is still bleeding a lot. We wait until the relative volume increases meaningfully and the next sequence in the process is an exit from Oversold on the RSI or a Zero cross over to the positive side in the MACD histogram, next in the sequence is a trend reversal. Last but not least, money management, setup the entry - target - stop/trailing stop levels and ride the leg. Let's take a look at the second example, we still see the trend goes down. There are still some recover legs, that fail to break the trend to the upside, we see also the relative volume is low, so here the institutions are not committed and they patiently let the retail traders to consume themselves until the bid side dries up and the ask side has to settle for lower prices. Watch the period between January 2020 and the end of February 2020, the prices are in free fall, but the volume didn't react immediately, until the last part of February and early March, there was a peak that momentarily stopped the free fall and created a weak support, this was broken again, the number of sellers still overwhelm the buyers, and the climatic volume increases. This is the period when the institutional bulls are stepping in and they're buying the "garbage" that creates the kind of panic liquidity the institutions are looking for. At this time also the Bears are switching hats, they're closing their short positions and taking profits. Once the selling volume dries up, which can be seen when the relative volume slows down. This is the point when the bleeding in the market stops and we look for the signals in the Momentum indicators, we see at the end of March 2020 the RSI indicator escaped the Oversold area and the MACD histogram made a crossover the Zero line, in a very strong histogram. Both indicators flash a strong buy. This is the dry blood we're looking for. Emotionally it takes a toll, we just came from a strong downtrend and the fear that this it's not over yet is there. The fear that the heal is temporary and we're just stepping on a weak support is there. If we set the emotions aside and we trust the indicators and a good set of rules of disciplined money management, we can exploit the opportunities of a downturn. _____________________________________ “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” ~Sir John Templeton
NYSE:XOMEducation
by Madrid
11
Trading StrategyDoesn't matter which coin I used, KAVA was picked at random for back testing. The 7, 30, and 100 are used for trend analysis. When both the RSI and MFI are in confluence with support, that is the entry trigger. When above the 7, 30, 100 ride the trend and only exit when bear div on 4hr is apparent, MFI RSI in confluence at overbought, price drops below the 30. Once below the 100, the 100 becomes resistance and the exit trigger. I had one loss when back testing this method. Since these are lagging indicators (especially on the daily) use the 4hr for entry while looking for candle reversal signals at support. 8 trades here = less stress, bigger rewards, less risk. SL should be placed below support at -5%. No leverage, just spot, slow and steady wins the race.
KRAKEN:KAVAUSDEducation
by Randall_Smith
Moving Average Convergence Divergence Indicator Visual EducationHello Traders, Today I wanted to go over one of my favorite as well as one of the most widely used tools in trading, the Moving Average Convergence Divergence (MACD) indicator. This moving average indicator was created invented in 1979 by Gerald Appel responsible for the MACD line and Signal line and later added to this was the histogram, developed by Thomas Aspray in 1986. Now that you know who created the MACD indicator lets discuss the components of the indicator. The MACD indicator consists of 4 main components, the Signal line , the MACD line , the histogram and the zero line of the histogram often referred to as the baseline. Below are the calculations of the different components to help you better understand what makes up this indicator. MACD Indicator Components and Calculations (White Labelling) Signal Line Red colored smooth line The signal line is simply an exponential (weighted) moving average (EMA) based on the prior 26 days closing price. As with any EMA the formula looks like this: EMA = Closing price x 26 + EMA (previous day) x (1-26) MACD Line Blue colored rigid line The MACD line, similarly to the Signal Line is also an EMA based on the prior 12 day closing price. Also, similarly to the signal line it uses a similar equation to display the line which is: EMA = Closing price x 12 + EMA (previous day) x (1-12) Histogram Green and Red vertical bars charted around a horizontal axis known as the baseline. The histogram is determined by subtracting the signal line from the MACD line. This is easier to interpret than looking at the two lines alone, since it is sometimes difficult to tell if one curve is steeper than the other. The histogram is positive when MACD is higher than its nine-day EMA, and negative when it is lower. This oscillator is definitely a nice touch to the indicator as a whole and my personal favorite indication for divergence which I will teach you more about in part 2 of this series. Histogram Zero line Aka "Baseline" This is the line in the center of the histogram oscillator that is also referred to as the baseline. This line is important as you will see later when I explain the signals this indicator creates. This line is calculated by the MACD Line and the Signal line crossing. Which is another way for you to see that the lines are crossing both bullish and bearish crosses. The calculations behind each part of the indicator is not really information that you need to remember as @TradingView has put a nice suite of house tools for you to use that calculate this for you but, I find that the more you know the better you are able to understand these charts and who knows, maybe someday this will help you crate your own indicator using the pine script editor they also make available to us for free. Also, if you understand the math it helps you when editing the settings to adjust indicators better per the asset you are trading. MACD Indicator Signals (Yellow and Teal Labelling) Now lets go over the signals that this indicator produces help with the way you can utilize this indicator to help you trade. A key note to remember is that the MACD indicator is a Moving average indicator and is best used in a trending market. You can identify a trending market by looking for price action that is heading in one solid direction up or down. Tending markets are usually noted by “higher highs” and “higher lows” in an uptrend and “lower highs” and “lower lows” in a downtrend . This indicator is best used to help you determine trend reversals. There are also 3 major signal components to this indicator but, in this first series we are only going to discuss 2 as it is important to understand this indicator before moving onto the next step and applying the more advanced features. These 3 major components are MACD line crossing over the Signal line and both signal line and MACD lines crossing over the zero line on the histogram . MACD Cross (Yellow) The top MACD line (red rigid line) crossing down over the Signal line (Blue smooth line) is a bearish signal and generally indicates a sell signal letting you know that the price action has potentially came to the end of an uptrend. Again, this is used mainly in trending markets and can be very helpful to assisting in taking profit in a long position or starting a new short position. In contrast to the bearish MACD cross , you can also see on the bottom of the chart that there is an indication of a bullish cross of the MACD line (Red rigid line) over the Signal line (Blue smooth line). This would be a good indication the the downtrend has ended and it may be a good time to start a long position or close a short position. The Histogram Zero line cross (Teal) There are 2 signals you can get from this but the one that matters in my opinion the most is the signal line. So for the sake of explanation I have shown them both together as both bearish and bullish signals on the chart. Now that you know about the signal line and the MACD line it should be easy to identify when these two lines are crossing the zero line of the histogram that we have also discussed. As shown in the chart you can see that the bullish cross is showing the two lines coming from below the Zero Line and crossing above which would be a bullish signal and you would be looking for a buy, potential start of or continuation of an uptrend. On the contrary, if these lines crossed from above the Zero line below then this would be a bearish sell signal and you would be looking to open a short position, be looking for a reversal of an uptrend or continuation of a downtrend. Now here are some key takeaways and tips you will want to always follow when using this or any other indicator. #1: Make sure you know the type of market you are trading by analyzing the market structure. Is it trending and creating higher highs and higher lows, lower highs and lower lows? Or is it ranging in almost a rectangular box? #2: KNOW YOUR INDICATOR and the best market it is used in, again, the MACD Indicator is best used in a trending market! #3: This is probably the most important of the 3, It is a must that you learn everything about each indicator you are using and to never use ONE indicator/Oscillator for signals stand alone by itself. Trading just like anything else in life is a numbers game and the better statistics you have, the better outcome you will receive. Congratulations Traders! You now know the basics of the MACD Indicator!!! I hope you will come back for part two and three of this series that I will be releasing after the new year to help some of the new traders entering this ever expanding community here on TradingVeiw! Part 2: MACD and RSI Divergences Visual Education Release 01/01/2022 Part 3: Falling wedges and Fibs Release 01/02/2022 I hope you had a green year and look forward to learning and trading with all of you winners next year! Happy New Years, Savvy
Education
by Savvythe1
How to trade with the Awesome Oscillator?Hello ,everyone! The Awesome Oscillator is the very powerful indicator, which can help to define the true market movement direction. Bill Williams used this indicator as part of the Trading Chaos system. He distinguish 3 types of signals. In this article we consider only long signals. Short signals looks like the long signals if you do exactly the opposite. Moreover, soon I will publish the indicator on TradingView which automatically defines the long and short signals. 1. Buy Signal “Plate” This signal you can see on the chart above. For “plate” signal we need 3 columns on AO histogram. The central one should be less than the two other. Another one condition is that all three columns should be above zero line. When we define the signal bar, we should place buy order in the one tick above the signal bar’s high. 2. Buy Signal “Two Peaks” For this signal we need all AO columns below the zero line. The first peak should be below the second peak. The signal bar is the next one after the peak bar as you can see on the chart. When we define the signal bar, we should place buy order in the one tick above the signal bar’s high.
BITSTAMP:BTCUSDEducation
by Skyrexio
5
Weekly Line Chart DivergencesHello traders, I am not a financial advisor. I am not telling you to trade any asset. I am simply sharing my ideas on how to use tools to implement my own investment strategy. Here is a zoomed-out look you can use to come up with some of your own ideas on where the $SPX may go and how to manage your risk. Most of my core strategies are developed on the indices so I will have to implement them on individual tickers unless the comments are interesting. This is a lagging indicator and should put me on the side of the trade that is *probably* likely to continue. By probably, I mean you need to do your own research and look at what the markets want to go and develop your own tools to work with the data. Orientation: Line Chart of ticker on weekly time frame RSI using 12 periods (or weeks, in this case) Signals can be marked using a vertical line or time-based axis marker . In this case, I am using 3 colors of lines, explained by the "Monday Action" legend. We will dive into more detail later on. I also have EMA using ohlc4 on periods (or weeks) 10, 25, 50, 100, 200. Now to the good stuff: Divergences have been around for quite some time. Research about the RSI (Relative Strength Index) and it's roots It is much easier to see something that is larger, than smaller, thus we look at weekly time frames One can use volume, closing price and RSI to help manage one's risk Narrowing a decision to 3 choices can help alleviate indecision So for this application of the RSI and divergence, one can use a simple line chart on a weekly time frame (this chart is based on the closing price from what I can tell, but I was unable to confirm that with the Help Center. I was able to confirm by checking yesterday's close with current reading - it will be different after this post as the weekly close will come in today (writing before market close Friday morning)). We can start at the March 2020 rally. We can see the March 23rd, 2020 weekly close paint a divergence on the RSI. One can see the price close at a higher high when compared to March, 16th, 2020. The RSI values remain relatively flat: 17.95 to 18.04. Find entry One might conclude this is a time to buy. Because of the magnitude of the move DOWN, the move up was also shorted. One would have to employ the use of other tools in order to find entry in the following week. (Use the white anchored notes to see the explanations of thought process). Find an entry in the next week. One can place orders on the weekend in "shotgun fashion" perhaps placing 50% order above current price and 50% below, or whatever method suits you. Hedge Risk The next yellow line is 08/24 - 31/2020. The close indicates indecision in the market. Since this is the first divergence I would simply hedge the FANTASTIC long during the March 2020 buy. This can help to be determined from YELLOW vs RED using the 10 period moving-average of volume. Use options or other means to protect one's long investments Sell of Heavy Hedge The next divergence is JAN 2021. This is the second one so I would probably sell at this point. I would use my other tools to figure out what to do. Heavy hedging can be using derivatives or shorting your long positions. Timing A simple way to use this strategy might be to use the color's GREEN, YELLOW, RED, just like traffic lights. There will be deviations, and variations to the method, but if you back-test this you will probably find this works generally well. Monday Action Now I used the words Monday Action simply because that was the next possible day to make a decision. I can make my decision probably anytime within Friday if I feel comfortable with it. I can also place actions for Monday on the weekend. Bottom Line This week's close is very important. If we follow the green, yellow, red method from above, this very well can be a RED. It can also be another YELLOW. Volume is indicating something big, but we will see!
SP:SPXEducation
by elkenpolar
RSI: A simple method to trade trends and rangesI write this tiny article to share the basics or my use of ths RSI indicator, coupled to supports and resistances levels, as well as trend lines (or any indicator you want to use as SUP/RES (moving averages, vwap ...)) This use implies a bit of practice in spotting divergences, but let's be honest, many of them appear on previous supports or resistances, just look at these levels and you can be sure you'll find them if a reversal is about to occur.) The second specificity is the use of a moving average applied to the RSI (in my exmaple, a 50 periods EMA) I developped my own RSI+MovingAverage script, but I'm sure you can find similar scripts that have already been shared within the community, thats why I don't publish it for now. Anyway, feel free to ask if you're interested in my script, it's obviously free. Lets consider two different contexts: Trends (Bullish/Bearish) Ranges In trends , there are two things to take into consideration. Let's explain what we need to work on a bullish trend: - If the price is on an interesting level (moving average, trend line, support), you can try to long upon the RSI crosses its moving average, indicating the potential end of the current retracement (even better if a bullish divergence appears close to this price) - If the price gets close to a resistance, and moreover if a bearish divergence appears on the RSI, you can consider it as a good exit price, or wait for the next retracement in order to pyramide your trade (depending on your approach). In a bearish trend, you obviously need to do the exact opposite, wait for retracements (flags or other), and find bearish divergences OR sell when the RSI is clearly crossing down its moving average. Of course you can wait for the RSI crossing above/under its moving average to get another confirmation that the movement is starting. You can see a few examples on the following screen In ranges , it's even simpler. Once you found your support and resistance levels (it can be old levels that have already generated good reactions) all you need is to spot bearish divergences on the resistance, and bullish divergence on the support. I personally like to cut at least a part of my position when we reach 50% of the range, which can be often considered as a support/resistance. It's totally up to you to exit on this point or not, depending on your preferences (simple scalping, anticipations of a range breakout to make a new trend, lower timeframe trend following, etc...) Range example: Additional notes When you trade a divergence, try to always open your position when the RSI rebounds on the divergence line, and not after, remember that opportunities are everywhere, don't mind if you missed the last one, don't enter too late in a movement. Even if a range is a global horizontal movement, it's still composed of alternations of bullish and bearish movements between the same supports and resistances, therefore, you're of course able to trade it as trends on lower timeframes Don't forget to look at candles, which can also give you strong signals on important levels, on current or lower/higher timeframes. The price is always the key Of course, think about the DOW theory.
Education
by noop-noop
2
RSI:MACD advanced indicatorgreetings, hope you're doing well and thanks for your likes and comments . Today i'm gonna teach you how to mix two indicators there's lots of indicators that you can mix together and use them, at this tutorial i'm gonna try adding MACD and RSI . 1_ Once you have added the RSI indicator, you have to open RSI settings. 2_then you have to process the way below : go to settings > go to inputs (its a tab like button above) > open source, select MACD:MACD . congrats you have mixed these two indicators, but it haven't finished. 3_ after these steps you have to go to style tab > set the upper band on number 66.66 4_ you have to turn of the check of middle band (there's no need to use it;) 5_ then, set the lower band on number 33.33; well done ! "Guys there is no any %100 true analysis" . you should buy if the RSI line goes upper than lower band, you can expect growing up the price you should sell id the RSI line goes lower than upper band, you can expect getting down the price, thanks for your likes, and comments <3 If there was any questions, i will be so glad to reply to your messages !
Education
by Trader_mehrab82
The only divergences guide you needHello, everyone! There are a lot of traders and many of them use divergence in their own way. Most of these ways lead to the deposit losses in the long run, because generate the late entries. I like to trade with Alexander Elder’s approach to the divergence. It has the clear entry condition and the small stop-losses in case of mistake. Divergences allows to enter the market exactly before the actual trend reverse, thus you always buy the dip and sell the rip, which produces the best risk to reward ratio. Foe divergence defining we will use MACD indicator, but you can choose any oscillator with zero-lne. After reading this guide you will be able to define divergences on every appropriate oscillator. Let’s consider this approach! Bearish Divergence What is bearish divergence? For the true bearish divergence we should see four obligatory signs. (1) Point C on the price chart should be higher than point A. (2) Point C on the MACD is below than point A. (3) The MACD histogram have to cross the zero-line to the downside to form the point B (4) The MACD histogram have to cross the zero-lne to the upside after the (3). Now it’s time to find the entry point. Point C is formed when the decreasing column appeared on the MACD. (5) It is the time to execute short position . Stop loss we should take above the point’s C high. As you can see we have the very small stop loss with the huge profit potential. Next condition enhances the short signal: (6′) Decreasing MACD lines while the price increases. Bullish Divergence Bullish divergence is the opposite to the bearish. We have to see the following conditions. (1) Point C is below the point A on the price chart. (2) Point C is above the point A on the MACD histogram. (3) We have to see first MACD histogram crossover with zero-line to the upside to form the point B. (4) Than we have to see the opposite crossover to the downside. Now it’s time to wait the first increasing column on MACD histogram to spot the point C and (5) execute the long positions . Stop loss should be set below the point C low. We can often see the price decrease continuation to the point D, this point is (6) also forms divergence, which enhances long signal, like the (7) divergence with MACD lines. In this particular case the stop loss was not hit, but it could be the case. In this case we should re-enter position when the divergence conditions was met again. DISCLAMER: Information is provided only for educational purposes. Do your own study before taking any actions or decisions at the real market.
Education
by Skyrexio
2
Momentum play on NQ 45-min via volume-weighted RSIOverview Simple overbought-oversold momentum play using NEXT RSI , which blends volume analysis with momentum. Volume weighing of the algo reduces the lag and improves accuracy over vanilla RSI as volume often precedes price action. This is a contra-trend (momentum exhaustion) scalping strategy - use order management (TP, SL, trailing stops) and do not trade signal to signal (e.g. long-short-long) . Strategy Rules: - NQ Futures, 45min chart - Long Entry when NEXT RSI crosses over 35 - Short Entry when NEXT RSI crosses under 65 Order Management: - Take profit @ +$50 - Stop Loss @ -$50 Prerequisites and set-up: - NEXT RSI configured to 21,3,65,50,35 - NEXT Strategy Visualizer configured to Signal Source: NEXT RSI, LE @ 35, SE @ 65
CME_MINI:NQ1!Education
by ChartVPS
Volume-Weighted Divergence Play on AAPL 10R via NEXT RSINEXT RSI Divergence Play: Key Concepts - NEXT RSI is a low-lag, volume-weighted momentum oscillator that often precedes price action - Divergence play resets at each open (do not count prior session's highs and lows) - Use as you would other divergence strategies: higher price highs, lower NEXT RSI highs = bearish; lower price lows, higher NEXT RSI lows = bullish -Use a preset TP / SL and/or close if NEXT RSI retraces back to last relevant high or low Target Market: - AAPL 10R Chart - can be used with almost any market; volatility helps Order Management: - Enter on forming divergence, 2 or more clearly separated peaks or troughs - TP / SL at 30 cents (AAPL) - Exit if price retraces to the last NEXT RSI top or bottom referenced when opening the position Optional: - Additional NEXT RSI strategies can be discovered using the free companion NEXT Strategy Visualizer
NASDAQ:AAPLEducation
by ChartVPS
POW Edge Reversal is HERE 🚀🚀🚀🚀🚀🚀🚀We've been sharing ideas on this strategy for quite some time now as part of our 'forward testing' approach and log. In this video, I run through the strategy, how it works and how it can help. Everything we do at POW is based on 'proof it works' - this is no different and you'll see this in the data I run through for you. Any questions about gaining access please drop me a DM on here. This just shows how powerful Pine script is - to automate a strategy and confirm you have an edge in the market. Removing stress, decisions, overwhelm and all of the emotional struggles trading can bring. Let me know in the comments what you think please - be nice right 😅? Please scroll through some of my previous ideas to see some trades in action. Regards Darren
Education
by pow_removetheguesswork
7
4 TIPS ON USING TECHNICAL INDICATORS 🤖🖥 Hey traders, Technical indicators are an essential part of technical analysis. With multiple different indicators on a chart, the trader aims to spot oversold/overbought conditions of the market and make a profit on that. Though, I don't consider myself to be an expert in indicators trading, here are the great tips that will help you dramatically improve your trading with them. #1️⃣ Do not overload your chart with indicators. There is a fallacy among so many traders: more indicators on the chart lead to an increase in trading performance. Following this statement, traders add dozens of technical indicators to their charts. The chart becomes not readable and messy. The trader gets lost and makes wrong trading decisions. Instead, add 1-2 indicators to your chart. That will be enough for you to make correct judgments. Do not overload your chart and try to make it clean: your task is to analyze the price action first and only then look for additional clues reading the indicators. #2️⃣ Learn what exactly the indicator shows The data derived from technical indicator must make sense to you. You must understand the logic behind its algorithm. You must know exactly what it shows to you. Confidence in your actions plays a key role in trading. During the periods of losing streaks and drawdowns, many traders drop their trading strategies. It happens because they lose their confidence. You will be able to overcome negative trading periods only by being confident in your actions. Only knowing exactly what you do, what do you rely on and why you can proceed even in dark times. #3️⃣ Use the indicators that compliment each other Many indicators are based on the same algorithms. Most of the time the only difference between them is a minor change in its input variables. For that reason, such indicators leave very similar clues. In order to improve your trading, try to rely on indicators based on absolutely different algorithms. They must complement each other, not show you the same thing. #4️⃣ Price action first! Remember that your trading strategy must be based primarily on a price action. Trend analysis and structure analysis must go first. You must know the way to make predictions relying on a naked chart. The indicators must be applied as the confirmation signals only. They must support the trading strategy but not be its core. ❗️Remember that the indicators won't do all the work for you. Indicator is just a tool in your toolbox that must be applied properly and in strict combination with other tools. Would you add some other tips in this list? ❤️Please, support this idea with like and comment!❤️
OANDA:XAUUSDEducation
by VasilyTrader
38
Here is Why RSI Divergence Will Increase Your ProfitsRSI can be beneficial in your trading if you use it correctly. This printable cheat sheet will assist you in divergence, so you can trade more precisely and increase your profits. To print this cheat sheet, Right-click the illustration below and then click Save as Picture. What Is RSI Divergence? With RSI divergence, the relative strength index of a specific asset shows lower highs when the price uptrend hits higher highs. Conversely, when the price is trending downward, it will hit lower lows with divergence while the RSI hits higher lows. ⁣ In a bullish divergence scenario you will see RSI show what is called being OVERSOLD and you will see price action form a lower low while the indicator shows a higher low. This represents a transition of volume from seller to buyers and the last push lower is sellers LAST attempt to take control.⁣ ⁣ The opposite is true for a bearish divergence scenario. You will see price action form a higher high, the last attempt from buyers, while RSI shows a lower high. This is a classic OVERBOUGHT setup and can be very profitable when combined with the rest of your technical analysis.⁣ Those setups give us reversal signal in trending markets as well as ranging markets. Keep in mind using one strategy is not enough to have consistent profits. Use combinations of strategies and setups to increase your winning rate. Always trade with affordable risk. What indicator do you use for Divergence? Let us know in the comments Have a best profits Artem Shevelev
BITFINEX:BTCUSDEducation
by ArShevelev
3
Stochastic Indicator (How To Use It)Trading with Stochastic indicator involves the following signals: *Remember: Price Action Moves Before Momentum Changes!!! Stochastic lines cross — indicates trend change. Stochastic readings above 80 level — currency pair is overbought, Stochastic staying above 80 level — uptrend is running strong. Stochastic exiting 80 level downwards — expect a correction down or beginning of a downtrend. Same for readings below 20 level — currency pair is oversold, staying below 20 — downtrend is running strong, exiting upwards above 20 — expect an upward correction or a beginning of an uptrend. There are also so called "trigger levels" that are added to the Stochastic chart at 20 and 80 levels. Those lines suggest when the market is oversold or overbought once Stochastic lines pass over them. You can only trade oversold and/or overbought areas OR use demand/supply zones to trade more. Price Action does not ALWAYS need to hit 20 or below or 80 or higher for you to trade, might be in a trend or at a fib ret golden level (50%-61.8%) reversal area. Strategy 1. Trading Stochastic lines crossover The simplest and common method of reading signals from Stochastic lines as they cross each other. Stochastic %K and %D line work similar to moving averages and:when %K line from above crosses %D line downwards traders open Sell orders. when %K line from below crosses %D line upwards traders open Buy orders. Strategy 2. Trading Stochastic oversold/overbought zones Stochastic by default has 80% level, above which market is treated as overbought, and 20% level, below which market is considered oversold. Strategy 3. Trading Stochastic divergence Traders are looking for a divergence between Stochastic and the price itself. NOTE: You can change the numbers on Stochastic Indicator to whatever you prefer, but for scalping and/or day trading I like 5,3,3 (more sensitive)
Education
by Anbat
1