What's the use with RSI, STOCH, CCI? | Forex Factory

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What's the use with RSI, STOCH, CCI?

  • #1
  • First Post: Feb 6, 2007 2:47pm Feb 6, 2007 2:47pm
So I've been trading a bit for a while now but I only use fibs, lines, EMAs, pivots, for confluence levels, and I trade candlestick patterns, or sometimes I'll "catch the knife" when the market slows down there. I zoom out and look for big patterns/shapes/harmonics, zoom in for level confluence and then price triggers.

But it seems like I'm taking less trades because the price projections are so much bigger.

Honestly, do you guys really really use these indicators, - even the MACD, I don't use - there seem to be SO MANY systems, etc, that eventually, don't all these things point at the same thing/trade?



I hope others feel the same way I do - too much info and not too much usefulness -. Don't you sometimes think that they're ALL MEANINGLESS?!?

I hope I'm not ranting here... anyways, it's good to be back here at FF.
  • #2
  • Feb 6, 2007 3:25pm Feb 6, 2007 3:25pm
i dont use stochs or cci's instead i prefer MA's over anything.
after trying almost everything, i have found that a good MA cross system, along with my patented Patience Indicator , has created the best system for me.

good luck
  • #3
  • Feb 6, 2007 4:16pm Feb 6, 2007 4:16pm
Yeah sure, whatever works for you.

I think I'm just not going to use any lagging indicators - period. I think it's just my style - level trading with triggers and price projections. Some breakouts.

I think I should get more into momentum/trend trading, you know, just buying pullbacks to MAs and whatnot - just don't know a good way to discern trending market from ranging market.

Two cents?
  • #4
  • Feb 6, 2007 5:17pm Feb 6, 2007 5:17pm
Quoting pipple
i dont use stochs or cci's instead i prefer MA's over anything.
after trying almost everything, i have found that a good MA cross system, along with my patented Patience Indicator , has created the best system for me.

good luck
I don't prefer MA's, i like MACD. I know it's strange since macd is based on MA's but i think it's better.

I also use RSI, but you can use stochastic, for overbought/oversold. Since sometimes I use candlesticks some formations work better in oversold/overbought.
Try hard, think fast, die young
  • #5
  • Feb 6, 2007 5:43pm Feb 6, 2007 5:43pm
Not use lagging indicators, then why buy pullbacks to MA's?

MA's no matter the finetuning are about the most lagging of all lagging indicators. I shake my head when somebody uses a 200 or I have even seen a 365 period moving average. I guess you might use a much shorter period (8,21,etc?) but still it puzzling.

I think an easy way to see how ineffective MA's are is to look at their position when a market bottoms and tops. Nowhere to be found.

About the only use I see is as a guidepost for the overall trend. Even then it is doubtful how useful that is.
  • #6
  • Feb 6, 2007 6:53pm Feb 6, 2007 6:53pm
Quoting SunTrader
Not use lagging indicators, then why buy pullbacks to MA's?

MA's no matter the finetuning are about the most lagging of all lagging indicators. I shake my head when somebody uses a 200 or I have even seen a 365 period moving average. I guess you might use a much shorter period (8,21,etc?) but still it puzzling.

I think an easy way to see how ineffective MA's are is to look at their position when a market bottoms and tops. Nowhere to be found.

About the only use I see is as a guidepost for the overall trend. Even then it is doubtful how useful that is.
Some geniuses use 800 MA. I think that's the perfect MA.
Try hard, think fast, die young
  • #7
  • Feb 6, 2007 8:12pm Feb 6, 2007 8:12pm
They are all completely useless.
The breaking of a wave cannot explain the whole sea.
  • #8
  • Feb 6, 2007 8:22pm Feb 6, 2007 8:22pm
this debate always goes nowhere

but go ahead give it another try
  • #9
  • Feb 6, 2007 8:49pm Feb 6, 2007 8:49pm
I was very lucky not to have caught the stupid Indicatoritis disease when I first started. I now use MACD with custom settings, but that's about it. Otherwise it's trendlines, S/R and MAs (but not for crossovers). I shouldn't have to mention price action as that is a no-brainer, but I will for the benefit of newbies.

Dial
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  • #10
  • Feb 6, 2007 9:56pm Feb 6, 2007 9:56pm
Quoting Skyhr
Yeah sure, whatever works for you.

I think I'm just not going to use any lagging indicators - period. I think it's just my style - level trading with triggers and price projections. Some breakouts.

I think I should get more into momentum/trend trading, you know, just buying pullbacks to MAs and whatnot - just don't know a good way to discern trending market from ranging market.

Two cents?
Contrary from popular belief, RSI can be very helpful in descerning trending or ranging markets and is extremely helpful in trading each. First off, we need to forget classic overbought and oversold levels. What you will notice is that there will be an overbought and oversold level for a bull market and a differnet one for a bear market. This will leave the middle range as the decision level into which one we are entering. Once a threshold has been broken, we can look for positive and negative reversals in RSI to get us in on the right side of the trend. At the same time, if the market is indecisive and ranging in the "indecisive levels" , we can use these levels as buy and sell zones to profit off of as well.

I am not saying that the same cannot be done off of price, but In this manner of using rsi, the only lag is in confirmation of a move, which would equally exist with price. Also, I have found that once the key levels have been delineated, these levels, if reverse engineering rsi, can serve as good leading indicators for strong buy and sell zones and they adapt to momentum of the market.

As for divergence, I am not to keen on them because they go against the prevalent trend, however, when a time cycle analysis lines up with divergence it can be a very accurate prediction as well.

This first graph is a ranging market within the timeframe used. The channel formed is with rsi reverse engineered lines for specific levels.
Attached Image
Man who scratches ass should not bite fingernails
  • #11
  • Feb 6, 2007 10:06pm Feb 6, 2007 10:06pm
This second pic shows a confirmed positive reversal. Notice how price(where the blue trend line lies) is experiencing a higher low. Notice the higher low and how it touches the rsi 50 reverse engineered line. What this tells me is that the original low didn't reach an rsi reading of 50 while the second yet higher low did reach rsi of 50(or a lower rsi reading). This fact of momentum increasing to the downside without a match in price to the downside lets me know that I must be in an uptrend(indicated by the upward sloping channel). Now as price is confirmed to turn after these characteristics materialize, I have witnessed a positive reversal in rsi and can expect price to move to at least a double top.

Positive reversal then measures lows in an uptrend. If we have higher lows in price matched by lower lows in RSI in an uptrend, we have a positive reversal. The opposite would delineate negative reversals in a downtrend.

Here is an example on a 1600 tick chart from earlier in January
Attached Image
Man who scratches ass should not bite fingernails
  • #12
  • Feb 6, 2007 10:14pm Feb 6, 2007 10:14pm
Here is the pic of the two most recent positive reversals on the weeklys for cable - the most recent one projects price up to 2.0100 level in the minimum.
Attached Image
Man who scratches ass should not bite fingernails
  • #13
  • Feb 6, 2007 10:18pm Feb 6, 2007 10:18pm
Anyone who projects over 2.00 on Cable underestimates the power of the U.S. government...
"The time to act is when others show signs of tire." --W.D. Gann
  • #14
  • Feb 6, 2007 10:27pm Feb 6, 2007 10:27pm
The ol' reverse divergence setup. Good stuff, Leugimo.

I agree that indicators (particularly CCI and RSI) can be useful. No, not for entering when they cross over certain levels (a sure way to lose). But they can help you see divergence, trends, momentum, etc. Sure, with enough practice you can do this without indicators. But indicators have an advantage for us more systematic traders: they make backtesting easier.

For example, let's say you want to test a reversal setup (chart or candlestick pattern). You could limit your test to situations in which RSI or CCI has reached an extreme level and has started diverging with price. This helps you pinpoint favorable opportunities and stay out of ranging markets.



Quoting Leugimp
Here is the pic of the two most recent positive reversals on the weeklys for cable - the most recent one projects price up to 2.0100 level in the minimum.
  • #15
  • Feb 6, 2007 10:45pm Feb 6, 2007 10:45pm
Quoting dukeofdents
Anyone who projects over 2.00 on Cable underestimates the power of the U.S. government...
First I am not predicting anything, this pattern is - and I would never just trade someting blindly, I would plan within the context. However, as far as 2.0000 is concerned, 2.0000 doesn't mean any more or less than 1.9914 - it is only a psychological level for us. Underestimating the gov't at 2.0000 is actually underestimating less than predicting 1.9914 early in 2006(although that seemed to work out for whoever did). In reality how far is 2.0000 away that it would really be such a shocker. I dont think any prediction of this kind underestimates the government, i think ignoring all of the signs underestimates the market, as well as overestimates the state of our economy and capital flows across borders. Of course this is just one opinion, but it doesn't confirm nor negate the fact that this positive reversal is hostorically a very strong signal, especially on the weeklys.
Man who scratches ass should not bite fingernails
  • #16
  • Feb 7, 2007 8:44am Feb 7, 2007 8:44am
I am also not so sure why GBPUSD would be important to the USA as much as USDJPY, EURUSD and Renminbi/Dollar rates?
  • #17
  • Feb 7, 2007 3:54pm Feb 7, 2007 3:54pm
Quoting SunTrader
Not use lagging indicators, then why buy pullbacks to MA's?

MA's no matter the finetuning are about the most lagging of all lagging indicators. I shake my head when somebody uses a 200 or I have even seen a 365 period moving average. I guess you might use a much shorter period (8,21,etc?) but still it puzzling.

I think an easy way to see how ineffective MA's are is to look at their position when a market bottoms and tops. Nowhere to be found.

About the only use I see is as a guidepost for the overall trend. Even then it is doubtful how useful that is.
I use EMAs as levels, not crossovers, etc. Sure, they're lagging but I use them as predictive indicators. So basically, I don't really care about the crossovers - the price movement already showed me that. All I care about are EMA confluence with other levels for bounces, or retesting that level after penetration.
  • #18
  • Feb 7, 2007 3:55pm Feb 7, 2007 3:55pm
Quoting Leugimp
Contrary from popular belief, RSI can be very helpful in descerning trending or ranging markets and is extremely helpful in trading each. First off, we need to forget classic overbought and oversold levels. What you will notice is that there will be an overbought and oversold level for a bull market and a differnet one for a bear market. This will leave the middle range as the decision level into which one we are entering. Once a threshold has been broken, we can look for positive and negative reversals in RSI to get us in on the right side of the trend. At the same time, if the market is indecisive and ranging in the "indecisive levels" , we can use these levels as buy and sell zones to profit off of as well.

I am not saying that the same cannot be done off of price, but In this manner of using rsi, the only lag is in confirmation of a move, which would equally exist with price. Also, I have found that once the key levels have been delineated, these levels, if reverse engineering rsi, can serve as good leading indicators for strong buy and sell zones and they adapt to momentum of the market.

As for divergence, I am not to keen on them because they go against the prevalent trend, however, when a time cycle analysis lines up with divergence it can be a very accurate prediction as well.

This first graph is a ranging market within the timeframe used. The channel formed is with rsi reverse engineered lines for specific levels.


Wow, this seems really insightful but I am still a little bit confused. I don't know how to setup my charts like that (metatrader) with RSI (and I'm guessing 2SD(?)) but is there another link that thoroughly explains this with RSI AND CCI?

Thanks a lot.
  • #19
  • Feb 7, 2007 9:29pm Feb 7, 2007 9:29pm
Quoting pipple
...along with my patented Patience Indicator , has created the best system for me...
Screen shot of the PPI in action....

http://accrete.com/fx-posts/mispix/PPIspoof.gif


Pipple, I can't thank you enough for sharing your custom PPI.mq4 it has revolutionized my trading. Having that constant reminder on my charts and switching to watching only bounces off the 800MA on the Monthly charts...Oh yea baby!

One of the great things about watching the 800MA on the monthly charts is that it has yet to show up as there are not 800 months of history to calculate the MA, this has proven to be very beneficial in this particular model of building my patience for there is no price action to trade off of yet.

This will revolutionize the forex market.

Thanks again for a great indicator ; - )

Cheers,
Thom
  • #20
  • Feb 7, 2007 10:27pm Feb 7, 2007 10:27pm
Do I detect a note of sarcasm?

I notice that the bottom on March 1985 was widest range bar on the chart and it engulfed previous 3 months as well as traded into the range of the prior 3 months. As sure a sign a bottom was put in.
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