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Rsi_divergence

Stochastic RSI in detail and how to use it.The Stoch RSI (Stochastic Relative Strength Index) is a technical analysis indicator used to identify overbought or oversold conditions in financial markets. It is a combination of two popular indicators: the Stochastic Oscillator and the Relative Strength Index (RSI). The Stoch RSI applies the Stochastic Oscillator formula to the RSI values, aiming to provide a more sensitive and faster signal for potential trend reversal. The Stoch RSI is calculated as follows: Choose the time period for which you want to calculate the Stoch RSI. The most common period is 14 . Calculate the RSI: (Detailed post on this in the link below) Determine the highest and lowest RSI values: Identify the highest and lowest RSI values over the same time period (e.g., 14 days). Calculate the Stoch RSI: Use the following formula to calculate the Stoch RSI: Stoch RSI = (Current RSI - Lowest RSI) / (Highest RSI - Lowest RSI) The resulting Stoch RSI value will range from 0 to 1 (or 0% to 100%). A value above 0.8 (or 80%) typically indicates an overbought condition, suggesting a potential price correction or reversal, while a value below 0.2 (or 20%) indicates an oversold condition, which may represent a buying opportunity. What does Stoch RSI tell us ? Stoch RSI is a measure of how fast the RSI is changing. As an analogy. Imagine you are driving your car and have foot on the accelerator which will cause increase in the speed of your cat at every moment, now the rate at which your car's speed increases is acceleration. The bigger the more powerful engine your car has the more acceleration you get and the faster you get to the top speed of your car. So, in this analogy speed of your car at any instant is RSI , acceleration is Stoch RSI and top speed of your car is overbought condition of an asset. RSI measures who is relatively more aggressive among buyers and sellers at a given instant. Stoch RSI measures how aggressive the buyers or sellers are at a given instant. So just like in a fight if someone is too aggressive, they are going to spend themselves too quickly and even though they want to fight more they won't be able to until they ease up and relax a bit, this is similar to Stoch RSI of an asset getting to overbought condition and then asset either retraces or takes a pause as buyers are exhausted and need to regain strength by taking profits which turns them into sellers and the asset starts moving in opposite direction. Why is 80 considered overbought? The number 80 is chosen based on empirical evidence, suggesting that when the Stoch RSI reaches these extreme values, there is a higher probability of a price reversal or correction. When the Stoch RSI is above 80, it indicates that the asset's price has risen significantly over a short period and could be overextended. In this situation, the asset may be overvalued, and traders may consider selling or taking profits as the price could reverse or correct. How to use Stoch RSI to enter a trade? How to enter a Long Trade: ======================= Step 1. Always use Stoch RSI along with RSI to make a decision: Step 2. Use it on mid to high term time frame (4h and higher). Step 3. Make sure both RSI and Stoch RSI are in oversold zone. Step 4. Make sure the asset is resting on a key support level and holding it. Step 5. Fearlessly enter the trade. How to enter a Short Trade: ======================= Step 1. Always use Stoch RSI along with RSI to make a decision: Step 2. Use it on mid to high term time frame (4h and higher). Step 3. Make sure both RSI and Stoch RSI are in overbought zone. Step 4. Make sure the asset is rejected from a key resistance level and is not able to breach it. Step 5. Fearlessly enter the trade. What happens if Support or Resistance is broken in Step 3 above: ======================================================= That's where divergences come into play. What is a divergence? =================== Divergence is a technical analysis concept that occurs when the price of an asset and RSI/Stoch RSI indicator move in opposite directions, indicating a potential trend reversal. There are two types of divergences: bullish divergence and bearish divergence. Bullish divergence occurs when the price of an asset makes a new low while the RSI/Stoch RSI indicator makes a higher low. Remember from explanation provided in sections above, this suggests that even though the price is going lower there are more buying activities than selling and the assets are becoming stronger, and a potential trend reversal may be imminent. Bearish divergence, on the other hand, occurs when the price of an asset makes a new high while the RSI/Stoch RSI indicator makes a lower high. I have highlighted bullish divergence in chart with purple line. Shown in Red line is bullish Divergence in Stoch RSI, when RSI is not fully oversold, this can happen when a new support is being formed on the chart due to changes in fundamentals of the underlying asset or some news events. Bullish and Bearish Divergences are even more powerful signals for taking trades, but we must make sure price is holding a support or rejecting from a resistance before taking the trades, otherwise divergences can easily disappear. Why do traders fail to effectively use RSI? The primary reason is lack of experience in trading. Which leads to impatient behavior. Not knowing how to mark key support/resistance levels. No risk management skills. (Taking too much risk) Lack of trust in self when taking trades, (Keep stopping losses too tight which knocks them out of the trades). I have shown several instances where RSI generated long signals and all of them were successful, the only reason a trader would not be able to use RSI effectively is because of the above reasons.
SP:SPXEducation
by zakoraio
RSI Forex: A quick review of the market situationWhat is RSI: . RSI, or Relative Strength Index, is a momentum indicator that is used to measure the strength of a trend. RSI works by comparing the average profit and loss over a specific period. It is primarily used to identify moments of overvaluation or overestimation in the market, allowing investors to enter the market with a much greater chance of profit. RSI is expressed on a scale of 0 to 100, with a value above 70 usually indicating overvaluation and a value below 30 indicating overvaluation. However, there are many other ways to interpret RSI values. Use in practice: . Here are some ways to use RSI in forex trading: At the bottom of the chart: RSI indicator Red dotted line: Level 70 Green dashed line: Level 30 Blue solid line: RSI level Entry signal - The appearance of RSI values below 30 or above 70 can indicate the possibility of entering the market. When the RSI exceeds the 70 level, we expect prices to fall and can open a short position. Conversely, when the RSI falls below the 30 level, we expect prices to rise and can open a long position. . Divergence - In the case of divergence, which is the difference between the behavior of the price and the value of the RSI, we can look for signals that the trend may reverse. For example, if the price is rising and the RSI value is falling, this could indicate a possible trend reversal and a signal to open a short position. . Use of the neutral zone - Some traders use the RSI neutral zone (between 30 and 70) to identify the trend. If the RSI remains in the neutral zone for an extended period of time, it may indicate the absence of a trend. However, if the RSI leaves the neutral zone, it may indicate the emergence of a new trend and a signal to open a position. . In conclusion, RSI is a very popular and effective technical indicator that can be used in forex trading. However, like any other indicator, the RSI is not perfect and requires closer analysis in combination with other indicators. Our dedicated Manticore Investments strategy is based on a combination of 3 indicators, which together provide a very effective position entry signal. We use Haiken Ashi Candles, RSI and Bollinger Bands. In future materials we will show how to apply this combination in practice.
CRYPTOCAP:BTC.DEducation
by Manticore_Investments
Is CL Preparing For A Big Bounce?Technical Analysis: - Crude Oil(CL) is still doing a ((W)) ((X)) ((Y)) correction structure in Daily Chart - We present two possible Paths - For Path 1 in Black with 65% probability. We expect that the correction will be completed at around HKEX:53 -56 where the smart buyers can appear - For Path 2 in Blue with 35% probability, We expect that the correction will be completed at around HKEX:40 where the smart buyers must appear - In short term, It's doing wave ((X)) in black once it's done we can forecast the buy area more precisely - H1 right side is up - H4 right side is turning up - In orange decision area, the Path 1 will increase the odds if H4/Daily RSI divergence are erased - CL is still not preparing for a big bounce really Technical Information: - Don't sell CL in short term - As a swing trader, you must wait for the correction to be completed in wave II in red in order to buy at around HKEX:53 -56 in Path 1
NYMEX:CL1!
by Market-Right-Side
A Long Awaited LONG position on AUDCADACAD (Australian Dollar vs Canadian Dollar) broke past the support last week but quickly recovered this week which makes it seems like a false break. My Long entry was fueled by a Divergence on the RSI as well. Well, what do I loss just 15 pips thereabout and 1% of your trading account for the trade(that's if you wish to go for it). The RR on my end is about 1:6. This isn't a financial advise. I just love sharing my thought so I can develop my trading skill. Note, crosscheck with your strategy and not be swayed by my newbie-like strategy. What do I know. Kindly comments on areas I could better improve. Thanks Everyone
Long
by writershanon
$JD Potential IHS still intact Hey guys, after a big down day today, I wanted to take a look at the chart again. The inverse head and shoulders is still intact. I really want to see the RSI trendline keep that incline slope. If it doesn’t hold RSI tendline, we may head all the way to oversold conditions, which could be several dollars below here if we don’t get a significant rally. Also, It could potentially be a sign that the selling pressure is still present. Everything here is just an opinion, and made for entertainment purposes. This is in no way, shape or form any any type of financial advice or advice in general. This is for entertainment purposes only.
NASDAQ:JDLong
by Urmomma
Relative Strength Index/RSI Made SimpleThe RSI (Relative Strength Index) is like a tool that helps people who buy and sell stocks and other things to figure out how strong the price of something is. It works by looking at the prices of that thing over a certain period of time, like 14 days, and then putting those prices on a scale from 0 to 100. 🔸When the RSI is high, like over 70, it means the price has gone up a lot and might be too high. When the RSI is low, like under 30, it means the price has gone down a lot and might be too low. But just looking at the RSI by itself is not enough. While many traders do use the RSI to buy at the 30 level and sell above the 70 level, this is not the only way to use the indicator. (As shown below) 🔸The RSI should be used in conjunction with other technical indicators and fundamental analysis to make informed trading decisions. In fact, relying solely on these levels can lead to missed opportunities and suboptimal trading decisions. 🔸It's also worth noting that the RSI can be used to identify bullish and bearish trends. When the RSI is above 50, it is considered bullish, indicating that the market is trending upwards. When the RSI is below 50, it is considered bearish, indicating that the market is trending downwards. 🔸While the 70 and 30 levels are popular levels to buy and sell, traders can also use other points based on how price reacts at those levels. For example, if the RSI reaches 80, it may indicate an especially strong upward trend, while a drop to 20 may indicate an especially strong downward trend. Traders should use their own judgment and analysis to determine which levels are most appropriate for their trading strategy. You can also find that as the name suggest (Relative Strength) traders should look for levels in price action where there is a strong reaction and then check to see at what level on the RSI this occurred because it might happen again once we got to that RSI value. (As seen below ) So as you can see in the image above you do not need to wait for price to go to levels 80 or 20 in order to look for reactions you can look at how price has reacted at previous levels before and monitor those levels in the future. Finally lets talk about divergence. 🔸RSI divergence is a trading strategy that involves looking for differences between the movement of the price of an asset and the movement of the RSI indicator. When there is RSI divergence, it means that the price of an asset is moving in a different direction than the RSI indicator, which can signal a potential change in trend. There are two types of RSI divergence: bullish and bearish. Bullish divergence occurs when the price of an asset is making lower lows, but the RSI indicator is making higher lows. This can suggest that the price of the asset is oversold and may be due for a rebound. Conversely, bearish divergence occurs when the price of an asset is making higher highs, but the RSI indicator is making lower highs. This can suggest that the price of the asset is overbought and may be due for a correction. Traders can use RSI divergence to help them make trading decisions. For example, if they see bullish divergence, they may consider buying the asset, while if they see bearish divergence, they may consider selling the asset. However, traders should always use RSI divergence in conjunction with other technical indicators and fundamental analysis to make informed trading decisions. Example is shown below: 🔸Settings of the RSI: Traders can customize the settings of the RSI to suit their trading style and preferences. They can adjust the number of periods used in the calculation, which can range from as low as 2 to as high as 200 or more, depending on the timeframe being analyzed. In addition to the default settings, traders can also adjust the overbought and oversold levels of the RSI. By default, the RSI is considered overbought when it is above 70 and oversold when it is below 30. Traders can adjust these levels to suit their trading style and the specific asset being analyzed. Traders can also add other indicators on top of the RSI to help them analyze the market. For example, they may add a moving average to the RSI to help them identify trend direction and potential areas of support and resistance. ______________________________________________ Also keep in mind that the RSI can be used as a reversal tool and also a trend trading tool. For example, when the RSI reaches extreme levels of overbought or oversold, it can signal a potential reversal in the price trend. When the RSI reaches these levels, traders can look for other confirming indicators or price action to help them decide whether to enter a trade in the opposite direction. On the other hand, as a trend trading tool, traders can use the RSI to identify the strength of a trend and to help them decide when to enter or exit a trade. When the RSI is above 50, it can indicate a bullish trend, and when it is below 50, it can indicate a bearish trend. Traders can use the RSI to help them identify potential areas of support and resistance within the trend and to enter trades in the direction of the trend. It's important to note that traders should not rely solely on the RSI to make trading decisions. The RSI should be used in conjunction with other technical indicators, such as moving averages, and fundamental analysis to get a complete picture of the market. By using the RSI as both a reversal tool and a trend trading tool, traders can better identify potential trading opportunities and make more informed trading decisions.
Education
by ChristopherDownie
8
BTCUSDT Igniting the final bearish leg of this cycleThe price action is telling me that the next macro swing-downward, probably the last leg-down of this cyclical bear market is igniting. Now, after a retrace of the "thrust-false break" to the weekly supply in an greedy extensive wave v, the shape of this retracement triangle is indicating a reliable reversal point. On the other hand, the bears are slowly taking control and the price will not return to the "upthrust". The minute pattern points to demand, which is a expected retrace for the main triangle. I'm considering this peak as a head of a potential head & shoulders formation on macro.
Short
by firmestudio
APE/USDT In The Process Of BreakoutHey traders 👋 Let's keep it simple here, RSI and BB indicators are showing a bullish sign to us which resulted a breakout of structure. We see a good potential to grow here! Waiting for good entry! If you like ideas provided by our team you can show us your support by liking and commenting. Yours Sincerely, Swallow Team 🔱 Disclamer: We are not financial advisors. The content that we share on this website are for educational purposes and are our own personal opinions.
Long
by SwallowAcademy
6
IOTX/USDT looking good for a potential short! Hey guys 👋 IOTX coin is going to be the first coin of the day. Where currently sitting just below that resistance we see a good potential for a short position here. BUckle up and let's go! If you like ideas provided by our team you can show us your support by liking and commenting. Yours Sincerely, Swallow Team 🔱 Disclamer: We are not financial advisors. The content that we share on this website are for educational purposes and are our own personal opinions.
Short
by SwallowAcademy
9