Tag Archives: rsioverbought

Use The Magic Of RSI To Beat Market Trends

Use The Magic Of RSI To Beat Market Trends

RSI MagicRSI (Relative Strength Index) is a Momentum Oscillator. It indicates whether a market is losing or gaining its momentum in the current direction. If used correctly in association with other tools, we can use RSI To Beat Market Trends.

Usually RSI is usded in 3 ways. But to produce best results, a trading strategy must make use of other tools and use RSI as one of the additional indicators to give confirmation. This is because of the fact that RSI can stay at a level for a long period of time while price is still moving.

  1. Overbought/Oversold Conditions
    1. RSI crossing over 70 level is considered as Overbought

      RSI Overbought
      RSI Overbought
    2. RSI crossing below 30 level is considered as Oversold

      RSI Oversold
      RSI Oversold
  2. Divergence (Loss/Gain of Momentum)
    RSI Divergences Chart
    RSI Divergences Chart
    Price Action RSI Expected Type
    Making Lower/Equal Lows Making Higher Lows

    (Gaining Upward Momentum)

    Bullish Regular
    Making Higher/Equal Highs Making Lower Highs

    (Losing Upward Momentum)

    Bearish Regular
    Making Higher/Equal Lows Making Lower Lows

    (Losing Downward Momentum)

    Bullish Hidden
    Making Lower/Equal Highs Making Higher Highs

    (Gaining Downward Momentum)

    Bearish Hidden

    RSI Bullish Regular Divergence Example
    RSI Bullish Regular Divergence Example
  3. Center Line Crossover
    1. Bullish above 50:
      1. Not very reliable so other factors/tools need to be added to produce better results.
      2. A cross over 50 level RSI downwards indicates bearish move.

        RSI 50 Crossover
        RSI 50 Crossover
    2. Bearish below 50
      1. Not very reliable so other factors/tools need to be added to produce better results.
      2. A cross over 50 level RSI downwards indicates bearish move.

        RSI 50 Crossover Level
        RSI 50 Crossover Level
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Leave a comment: I would love to hear your thoughts, suggestions on this topic. Please leave a comment.
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Disclaimer: This web site is just my financial trading log and is for educational purposes.
Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.
Please see the Disclaimer page.
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EURUSD 4H Bat Pattern Trade

EURUSD SHORT IDEA (BAT PATTERN) – 12-Oct-2015

EURUSD 4H Bat Pattern Trade

Reasons For Trade:

1. Bat Pattern
2. Close Fibonacci Confluence of 0.886XA leg with 1.618 AB leg
3.  RSI has been overbought i.e. above 80

Stop Placement:

  1. 1.113 or 1 ATR (37 Pips) above Structure High i.e. Point X of Bat Pattern

Targets:

  1. 38.2 Fib Retracement of AD Leg will be the first target
  2. 61.8 Fib Retracement of AD Leg will be the second target

Trade Execution:

  1. Let the price reach the PRZ and look for Double Top or Bearish Divergence or an Advanced Harmonic Pattern completion in the zone on a lower time frame i..e. 1H or 15M chart.
  2. As soon as Target 1 is hit, move the stop to break even and close half of the position.

Concerns:

  1. Overall trend seems to be bullish at the moment. So this will be a counter trend trade. Second Target may not be achieved.

Planned News Expected: (UK Time)

None

Post Execution Review:

Pending

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Leave a comment: I would love to hear your thoughts, suggestions on this topic. Please leave a comment.
---------------------------------------------------------------------------------
Disclaimer: This web site is just my financial trading log and is for educational purposes.
Please do your research, analysis and take your decisions. You must not rely on my actions or analysis.
Please see the Disclaimer page.
---------------------------------------------------------------------------------