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The RSI Trade

  • #341
  • Jun 15, 2009 8:24am Jun 15, 2009 8:24am
Hi Kareem,
To get a better understanding of using the RSI draw the R/S 80/40 levels in green and the 60/20 levels in red

Another point - regarding divergence
As the RSI is a bound indicator i.e. operates between 0 and 100 and is less responsive at its extremes - sometimes it may miss a divergence
Consider using an unbound oscillator, say the CCI(10). I have both of them on my screens.

Regarding the RSI ON 15MIN CHARTS - I would imagine the "noise" at that level would make any indicator questionable, probably best to use price S/R and price action
Personally anything under the 4 hour chart is not in my cumfort zone - even when I was more active in the market in my younger years.

Another problem with indicators especially when the period used for the calc is small is exceptionally large price moves - the indicator value when this occurs is acceptable - but when this price drops out of the calc, it can give a questionable reading

Well thats me for the day,its nearing bed time here is Aussie land 11.17pm

Have a great day
Peter
  • #342
  • Jun 15, 2009 9:51pm Jun 15, 2009 9:51pm
Hi Kareem,
Just a quicky. I feel I may have changed the direction of this thread a little, which was not my intention.

I THINK THE USE OF THE RSI TRENDLINE IS A GREAT WAY TO TRADE.

Like any signal not all trendlines are created equal? some have better potential than others so if this is the case - it would be in our interest to wait for only the best.

How do you grade your trendlines?

Does the location within the RSI range have any significance/expectation/potential (with reference to my initial post)
Do you reference higher and lower timeframes
Are some trendlines stronger than others, depending on how the RSI trace interacts with the trendline
Is the steepness of the trendline meaningful
Do trendlines tend to be more prevalent / work better on some pairs than others
Do you use price action for confirmation of a breach of the trendline
etc. etc

I hope the above gives you something to think about / experiment with

Sorry for the intrusion, I'm going back into hibernation

Have a great day
Peter
  • #343
  • Jun 16, 2009 9:41am Jun 16, 2009 9:41am
[quote=lizpet;2802456]Hi Kareem and friends,
Great thread, thank you.

I am a bit of an imposter here as I only trade stocks. I trade my super fund which places restrictions on what I can trade.

However, the RSI is the basis of my trading and has been for a long time.

I am 70+ years old and trade on the daily charts (using multiple timeframes). I allocate half an hour max. to trading each day, sometimes just 5 mins to update my stops.

RSI Construction
If you plug values into the RSI formula, you will find that it is more responsive around the 50 level, as the RSI values move towards 0 and 100 - it becomes less responsive i.e. it takes a larger price move to change the RSI by a set amount.

Hi Lizpet
Thankyou for your posts. As with everything things get forgotten and reading your post gave me some new thoughts and made me read this thread again.It's amazing how much one forgets in the pursuit of new ideas when the old ones were doing just fine.
Coud you expand on your comment above please regarding "plugging in new values". Are you referring to changing the code and if so how? I am sure Kareem wouldn't mind you getting off thread but if you wish you may pm me. Looking forward to hearing more.
Thanks
Andy
  • #344
  • Edited 6:52pm Jun 16, 2009 3:22pm | Edited 6:52pm
Hi Peter,
I have been trading for years. The first three were losing years, but they were, luckily, small losses. I did not make a lot of money then, so I kept losses small trading mini lots only. Eight months ago I read somewhere that large number of professional traders were asked this question; if you had to choose only one indicator on your charts, what would that indicator be? Most answered RSI. So I did some reading and found out that the RSI divergence is one of the most powerful signal a trader can get. So I traded (only) the RSI divergence on the EURUSD and made an average of 20 pips a day for almost six months.
Then I found an interesting TASC article (mentioned in the 1st post) about trend lines and started to use it. I did very well for about a month. I used it only on the EURUSD 5M chart and made somewhere between 20-40 pips a day.
Then one day it just stopped working. Or may be I did! Luckily at that time my full time job was getting busier and busier so, I have stopped trading it for a while. Now that work ( sales out of the house) is back to normal, I am watching the RSI trend line set up and I see it working again ( or again it was most probably me).
What seems, now and in the past, to work best is the divergence in combination of the trend lines for exit. I am trading again using RSI and a couple of other set ups I have picked up along the way. I have noticed that the higher the angle of the trend line is, the better the break. Also the longer the trend line, the better the trade will be. I have also used multiple trend lines for scale out set up. I have also noticed that the RSI set up (or any other set up for that matter) will not work during major news. The RSI trend line seems to lead price, many examples are posted earlier. And most important is I only tried this on EURUSD and 5M chart for a short period of time; six months.
I will start posting again soon. I am also thinking of changing/adding to the NQ futures contract, but not with the RSI trend line set up.

Please feel free to add any ideas you have. I like the RSI and would like to work with it some more. I liked your post and you seem to have good grasp over your trading. I will use your ideas and post some (hopefully) successful trades using your concepts. I will do my best to actively post more. Do try to learn posting pictures. Once learned you will find out that they are even faster than typing.

Hi Andy,
Glad to see you posting again. I hope all is well.


Kareem
Trade Garlic
  • #345
  • Jun 16, 2009 6:01pm Jun 16, 2009 6:01pm
Hi K.
Good to hear you have found time to trade from home again.
Will be busy with other things tmw but will chat soon. Lizpet has stirred the grey matter again. Also tried binaries today and had some luck.
Andy
  • #346
  • Jun 16, 2009 10:43pm Jun 16, 2009 10:43pm
Hi Andy/Kareem,
Andy, RSI formla:
RSI=100-[100/1+(U/D)]
where U=the average upward price change
and D= the average downward price change
VARIABLE ;U/D RATIO
Draw up table as below and insert U, D values
e.g
UP move Down move RSI
1 1 50
2 1 66.6 difference 16.6
.
.
.
9 1 90
10 1 90.91 difference 0.91
.
.
.
etc
Do another table for a variance in down moves - same type result
Don't know the mathamatical term for this progressively increasing/decreasing up/down ratio to RSI value - logerithmic exponential ??

PS The only indicators that I use are
RSI- Basic trading, and indispensible in scanning for trades based on the RSI S/R levels
Bollinger Bands - used for breakouts/trend trading (also great S/R)
ADX - great for confirming the start of a new trend
ADX/SAR - combination great to pin point the end of a short term trend

I could trade pure price action and R/S but I am addicted to the above indicators - a no thought process as I know them pretty well

PS Bollinger Bands can also be used as a stand alone indicator when used with breakout trades fron consolidation

My trading (stocks) also incorporate VSA, PA, price S/R and especially multi timeframe analysis (for market structure)

Have to go - plumber has just arrived to do a little? job for us.
Will post again later

Regards
Peter
(hope the above makes sense - not checked)
  • #347
  • Jun 16, 2009 11:43pm Jun 16, 2009 11:43pm
Back again - that was short and "sweet" $100+ (min charge) to be told that the unit has to be replaced (5 mins)

Oh well back to trading:

If you are interested in the RSI S/R levels - check out what happens when say the RSI trades thro the 60/65 area (from congestion), and when it drops back thro this area - same when it drops back below 80 - this is basic S/T trading

If you want to give your trade more room i.e. stay in the trade as long as it does not move into a downtrend, then as long as the RSI stays above 40 stay in the trade (this will obviously include sideways movement which hopefully leads to trend continuation - refer to higher timeframe for likelyhood

A stock trading status is confirmed when the RSI tests both its support and resistance levelse.g. a stock is range trading when confirmed by the RSI testing both 40 and 60

An uptrend following a large correction will pass up thro the 40 area and pass right up thro the 40/60 (range trading area) and then thro the 60/65 area --------

Depending on your trading style - you could also trade of any of these levels (I also include 50 as an important level) e.g. say RSI approaches 80 - place stop below the associated price bar etc, etc
Simple RSI trading

Check it out - experiment - so many options

The RSI is tops - some say it can also be used to predict price, but I never ventured into that area.

Like every other method PA,PA S/R, VSA, Elliot Wave, you name it, any form of TA or FA, THE RSI is definately not infallable, just use whatever you feel comfortable using. Have a trading plan, and each trade that you take trade it the same way each and every time as per your plan. Only take the best trades, be patient and KEEP YOUR LOSSES TO A MINIMUM (only take low risk trades) and get your stop to break even ASAP

Hope my little input will be of use to somebody

Trade well

This is too time consuming - definately my last post

RSI - Really Superior Indicator

Have a great day
Peter
  • #348
  • Jun 19, 2009 6:25am Jun 19, 2009 6:25am
Got to post a quickie (even though I decided to stop posting till after the summer... that didn't last long) : finally after all these years I managed to exit on the low. Just over $600 and done for the day.

Pure skill of course .

Not the Really Superior Indicator, but it's Quick Quiet Excellent derivative.

Great weekend, everybody...
Attached Image (click to enlarge)
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  • #349
  • Jun 19, 2009 7:04am Jun 19, 2009 7:04am
Quoting lizpet
Back again - that was short and "sweet" $100+ (min charge) to be told that the unit has to be replaced (5 mins)

Oh well back to trading:

If you are interested in the RSI S/R levels - check out what happens when say the RSI trades thro the 60/65 area (from congestion), and when it drops back thro this area - same when it drops back below 80 - this is basic S/T trading

If you want to give your trade more room i.e. stay in the trade as long as it does not move into a downtrend, then as long as the RSI stays above 40 stay in the trade (this...
Thank you Peter, Best of luck to you and I hope we hear again from you soon.
Kareem
Trade Garlic
  • #350
  • Jun 19, 2009 7:06am Jun 19, 2009 7:06am
Quoting jtrade
Got to post a quickie (even though I decided to stop posting till after the summer... that didn't last long) : finally after all these years I managed to exit on the low. Just over $600 and done for the day.

Pure skill of course .

Not the Really Superior Indicator, but it's Quick Quiet Excellent derivative.

Great weekend, everybody...
Hi J,
Nice trade. Small post don't take a lot of time, I hope we see more of these soon. Take care,
Kareem
Trade Garlic
  • #351
  • Jun 19, 2009 7:33am Jun 19, 2009 7:33am
Hi Lizpet.
thanks for the answer on the rsi formula although I have to admit it's a bit over my head. i'll stick to what I know. I am trying the rsi9 alonside the 14.
have you tried using a ma for entry. I currently use a 20ema on rsi 14 and the rsi9 for entry on a 1 minute chart.


Hi K.
How do I post charts on here. Can you remind me again please and i'll post some of my trades as I take them.

Hi J.
Good money for the day. Are you still splitting your trade in three or just going for the 20 pips in one go as you mentioned before? Don't stop posting, just post here in one place. I have changed my targets slightly. 20 point target for compo tin then keep scalping for 10 's until i get two losses in a row then stop. Doing well and only needed to stop when got bored so far. About 60 pips per day.

Andy
  • #352
  • Jun 19, 2009 10:53am Jun 19, 2009 10:53am
Quoting andypips
Hi Lizpet.
thanks for the answer on the rsi formula although I have to admit it's a bit over my head. i'll stick to what I know. I am trying the rsi9 alonside the 14.
have you tried using a ma for entry. I currently use a 20ema on rsi 14 and the rsi9 for entry on a 1 minute chart.


Hi K.
How do I post charts on here. Can you remind me again please and i'll post some of my trades as I take them.

Hi J.
Good money for the day. Are you still splitting your trade in three or just going for the 20 pips in one go as you mentioned before? Don't stop...
Hi Andy,
In MetaTrader just right click and save as picture in your desktop. Then in " manager attachments" import that picture to your post. It is very easy.
Also I will take 20 pips a day, lately I am just breaking even. Markets seem very choppy the past two weeks.
Kareem
Trade Garlic
  • #353
  • Jun 19, 2009 1:34pm Jun 19, 2009 1:34pm
Quoting andypips
Hi J.
Good money for the day. Are you still splitting your trade in three or just going for the 20 pips in one go as you mentioned before? Don't stop posting, just post here in one place. I have changed my targets slightly. 20 point target for compo tin then keep scalping for 10 's until i get two losses in a row then stop. Doing well and only needed to stop when got bored so far. About 60 pips per day.

Andy
60 pips is not too shabby : well done !

I found my quick fix for 10 pips on part of the position suits my psychology : I can then move the stop to the size of the partial profit for a b/e trade, still giving it some room. But I am finding it very difficult to finalise this issue. I'm trading in two lots rather than my preferred thirds as I am experimenting with d'Alembert position sizing. 2 lots / contracts>4>6>8 increasing after a loser, coming back down after a winner. I am of course assuming I can maintain a very high win rate.... probably another example of my stupidity...

...but most of my present focus is on longer term trading based primarily on RSI... lots of R&D going on.
  • #354
  • Jun 19, 2009 6:23pm Jun 19, 2009 6:23pm
Quoting jtrade
60 pips is not too shabby : well done !

I found my quick fix for 10 pips on part of the position suits my psychology : I can then move the stop to the size of the partial profit for a b/e trade, still giving it some room. But I am finding it very difficult to finalise this issue. I'm trading in two lots rather than my preferred thirds as I am experimenting with d'Alembert position sizing. 2 lots / contracts>4>6>8 increasing after a loser, coming back down after a winner. I am of course assuming I can maintain a very high win rate.......
Hi J,
Futures mag. had an article recetly that document the all-in/all-out as the most profitable way to trade, but they did mention that scalping the first lot and moving to BE on the rest was the most "comfortable" way to most traders. So, you are doing the right thing even though it is not the most profitable.
Kareem
Trade Garlic
  • #355
  • Jun 20, 2009 7:57am Jun 20, 2009 7:57am
Hi,
Nice to see the thread picking up steam again.
Nice chart jt. Looks a good combination of indicators
CCE used for entry provided Klinger is negative, and Klinger for EXIT ?

Andy,
Regarding "do I use a ma"?
No

Does not suit my style of trading - will give late signals, and when your pair is range trading it will tend to give false signals

My trading is based primarily on RSI support and resistance levels, with divergence trading also a favourite

Have you considered the use of multi timeframes?
I use three, I look for a signal on the intermediate timeframe.
Confirm that it is in the same direction as the highest timerame
Then look for an entry in the same direction on the lowest timeframe
When all three timeframes are in alignment your probability of a winning trade, and a good sized move, is high. Your trading with the backing of the traders using the higher timeframes

Keep on posting your charts, I can see what you are doing, but wish I could directly compare them to my charts. As mentioned earlier, I cannot trade Forex, I'm stuck with stocks

Have a nice weekend
Peter
  • #356
  • Jun 21, 2009 3:47pm Jun 21, 2009 3:47pm
Hi, Peter,

I just made a lengthy reply explaining my trading method and then right clicked by mistake and deleted my post...grrrrrrrrr... so sorry, too tired to continue on a Sunday night (just shared a bottle of 1988 St Julian Grand Vin de Leoville du Marquis de las Casas this evening; it was a rare delight).

But I like posting to this thread and will continue to do so. Essentially, I am looking at price structure, using the indicators for confirmation only. My starting point is the supposition that all moves (except V reversals) start from ranges, ie. price moves from the centre to the extreme, so I draw pivots through ranges as I trade and am looking for price structure that leads me to enter through these pivots. In the chart above, "my" ideal entry was at 1.3925 about 5 minutes earlier, but I missed it, so I took the triple break 10 ticks lower at 1.3915. I like to see QQE (which like the Klinger Volume version I use has ATR within its summation) continue to flow in my trade direction during a retracement, as occurred in this trade shortly before my entry.

The exit on the exact low was pure luck .

J.

Edit : If you look at the Ninja chart in my post # 322, you will see a standard RSI + RSI MA : I also have this chart right under my TS chart, albeit with a different (Interactive Brokers) datafeed and tick count. Sometimes the market structure will be clearer on the Ninja chart : the IB datafeed filters more ticks, but as a result tends to be much faster with very little lag (if any) around news. I used to trade the fast charts directly from the Ninja charts, but as I am adding longer-term methods, I am trying to work out which account best to use for what...
  • #357
  • Edited 5:50pm Jun 23, 2009 7:56am | Edited 5:50pm
Quoting jtrade
Hi, Peter,

I just made a lengthy reply explaining my trading method and then right clicked by mistake and deleted my post...grrrrrrrrr... so sorry, too tired to continue on a Sunday night (just shared a bottle of 1988 St Julian Grand Vin de Leoville du Marquis de las Casas this evening; it was a rare delight).

But I like posting to this thread and will continue to do so. Essentially, I am looking at price structure, using the indicators for confirmation only. My starting point is the supposition that all moves (except V reversals) start from...
I learned my lesson on posting. I always write the whole post on a word document then cut and paste!
Kareem
Trade Garlic
  • #358
  • Jul 1, 2009 2:55pm Jul 1, 2009 2:55pm
HI K/J/Lizpet
A nice tap down from this upper t/l coinciding with the 70 line and divergence, then a breakout of the lower line to keep it going. Still in this from 1.4190 with stop at 4160 now. The trendline and 40,50,60 etc levels keep it so simple. I find it has to be no longer than m5 for me but the lines must be drawn from obvious and clear highs and lows (highs and lows on rsi created by pronounced price high and lows as opposed to a spike low on rsi with flat price action). Hope you're all well and not too shocked to see the thread in the top 10 again.
Andy
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  • #359
  • Jul 1, 2009 9:50pm Jul 1, 2009 9:50pm
Quoting andypips
HI K/J/Lizpet
A nice tap down from this upper t/l coinciding with the 70 line and divergence, then a breakout of the lower line to keep it going. Still in this from 1.4190 with stop at 4160 now. The trendline and 40,50,60 etc levels keep it so simple. I find it has to be no longer than m5 for me but the lines must be drawn from obvious and clear highs and lows (highs and lows on rsi created by pronounced price high and lows as opposed to a spike low on rsi with flat price action). Hope you're all well and not too shocked to see the thread in the...
Hi Andy,
Nice to see you posting again. It seems as the 40 and 60 level are coming out in many of trading articles/books that I have been reading. I have looked at some charts and they do seem to play a big role in trending reversal and/or continuation. Again I will do my best to post some charts on 40/60 levels or the RSI trendlines.
I hope all is well in health and business.
Kareem
Trade Garlic
  • #360
  • Jul 2, 2009 3:06am Jul 2, 2009 3:06am
'Morning, boys...

Hey, Andy, my latest chart is a lot more naked than your latest chart (better show the Ninja chart as well in case K boots me from his thread )...

No trades this morning as took the goldendoodle for a walk in the forest after the school run.
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