The RSI Trade

The traders_dynamic_index have a ma ,I don't know if is a simple ma or linear weighted ma.
If what i use its good for you ,here is how to put the indy on your chart .
Sorry for my limited english.

Hi MainMayor
To add lwma to the standard mt4 rsi do the following:

Drop down the standard indis using the navigator tab.
Drag and drop the moving average onto the rsi indi on the chart.
Now choose your input, colour etc.
Then where it says 'apply to' you need to drop it down and choose first indicators data.
Then ok and it will appear.
Any questions just ask.
Andy

Hi Gavril
May I ask where you have got those candles from please. A sort of getting hotter/colder look to them.
Thanks
Andy

Thank you for the great stuff about trading with rsi.
Here is the site http://www.forexfactory.com/showthread.php?t=23592

1. The RSI is set to record all Positive Reversals and Negative Reversals the Range specified for bullish and bearish reversals.
2. The Red arrow points to the first point of the RSI. If you look closely you will see RSI has climbed to a mountain top and is headed down the other side creating peaks as it does so and a deep valley. Knowing where these peaks are in relation to Reversals will let you in “early” on trades which is an aggressive method of trading but should bring 40% winning trades with practice and much higher profits than that if you are closely monitoring losing trades.
3. Once the valley was finished there was a new mountain being created and new peaks leading to the current entry.
4. Not every peak on the inside of a valley will lead to lower prices and not every valley in a rising mountain will lead to higher prices.

1. Point 1 is the peak of the mountain on RSI.
2. Climbing down the mountain there are points where we see through the RSI and our own analysis of where the mountain peaks are formed.
3. Once the mountain has been formed a valley forms, and a new mountain is in place.
4. The purple circles are all entry points for the aggressive RSI trader. More conservative points can also be used.
5. Point 2 is the possible new peak and a good place to take all or part of the profit. In this case 114 pips.
6. Not every peak on the inside of a valley will lead to lower prices and not every valley in a rising mountain will lead to higher prices.

Lots of great posts and charts while I've been basking by a pool in the Tuscan hills these last few weeks... I promised my wife not to work, not even look at a single email, but she couldn't stop me contemplating over and over on how to simplify my intraday setup. I made this very naked chart this morning - any idea what's what (marking deliberately covered up) ?

The answer is that I made a simple line chart and then swapped the asymmetric RSI with price, ie. ARSI above, price below... they are so similar, I wondered why use both...

Here are two untampered-with charts - the vertical line marks exactly the same time point in each (both are 89 tick GBP futures).

The ARSI shows a centreline and of course can show price divergence, but I'm going to trade the price chart only for awhile. Remember also that a line chart can and will have been places not shown on the chart, as the intrabar highs and lows are only shown as they are hit, not after the fact.

Food for thought.

Hi Paul,
Ref your posts 505/506 above

Your posts are full of riddles - why not just tell us in plain English what you are saying?

e.g Not every peak on the inside of a valley (downtrend) will lead to lower prices, and not every valley (trough) in a rising mountain (upmove) will lead to higher prices ----------BUT WHEN THEY FORM HIDDEN DIVERGENCE, ITS HIGHLY LIKELY !

Here's another that perhaps someone can help me with?
PT2 "Climbing down the mountain (downtrend?) there are points where we see through the RSI and our own analysis of where the mountain peaks are formed" ???????
Is this saying that the downmove can be used somehow to determine the future up move peak? (other than fibonacci?) if so how?

Anybody - any other interpretations?

One thing about Pauls posts - they give us something to think about http://www.forexfactory.com/images/icons/icon8.gif

Regards
Peter http://www.forexfactory.com/images/icons/icon7.gif

Aren't these candles just based on Moving Averages rather than real price action bars. I'm not a programmer but from what I could tell that looks like the case. If they are then they will be a lagging indicator useful only in a trend and not useful in consolidation. Plus any trade entry will be late and there will be many false signals.

Some of the best teachers teach in riddles. I'm not trying to hide anything but were I to explain in detail every aspect of trading RSI it would end up being a book. And I am not sure everyone here wants to hear what I have to say.

Here was your first question:

Not every peak on the inside of a valley (downtrend) will lead to lower prices, and not every valley (trough) in a rising mountain (upmove) will lead to higher prices.

That is true. When you have RSI dropping down into the bearish range for RSI (60-20) there is a good chance that the peaks that are being formed are entry points for moves to the downside and not all will accelerate. The opposite is true when you are inside the "cave" and price is moving up. The trader has to decide which situation he/she is in.

This is more aggressive then waiting for Negative Reversals and/or Positive Reversals (which have been called hidden divergences but they are more correctly called continuations.)
You can Google Reversals on RSI - I think I already explained these in an earlier post.

Having said that, a trader learning to trade this way; Andrew Cardwell, Constance Brown, Walter Baeyens and John Hayden, needs to learn the steps to trading conservatively. That means being able to identify all the reversals and divergences on the chart as they tell a story.

I don't necessarily agree with all of the findings of the above authors. I agree the most with Cardwell but don't like the periods he uses for his moving averages. My moving averages are set for what most people say that institutional traders use but they do not have the final say in my trading.

Baeyens book is about channels. The most significant thing about his book is that channels exist. The relevance is, if you draw the channels, they move in descending channels when price is rising and ascending when price is falling. Movement of RSI into the next channel depending on direction signals an increase in momentum and a continuation of the trend.
Brown does not give you any information that you can't get from Cardwell and Baeyens. Unfortunately Cardwell's course costs $9000.00 for both courses and Baeyens book teaches you very little about trading RSI.
Hayden's book is really not much help.

Second question
PT2 "Climbing down the mountain (downtrend?) there are points where we see through the RSI and our own analysis of where the mountain peaks are formed" ???????

This is somewhat cryptic and I apologize but it is saying about the same thing as the above. I traded Reversals/continuations for about 8 months which you can do successfully with tight risk and great reward potential, sometimes 20 to 1. But there are many false signals. Understanding price action bars helps significantly plus the basic fundamentals of Dow futures before the open, Dow and S&P after the open and gold and oil. All of these factors can lead to significant profits on hourly charts. Yesterday I took 4 trades and made 360 pips. Today there was little movement in the markets, so it was a good day to stay out.

There are two points to a reversal/continuation. Pt1 is the first point, Pt2 is the confirmation point where the trader decides if conditions are right for the trade.

Recently I have been attempting to locate entries at successful Pt1s as these location are where price and momentum are pretty much 100% in correlation.

You also mentioned Fibonacci. I am very proficient with them but they are not dependable in my mind due to the fact that they can be drawn from many locations, so many in fact that you can just about make them say what you want them to say. The most important thing about Fibonacci Ratios is that if they locate a level of resistance or support that it lines up with previous resistance and support. I seldom draw them except in situations where it is clear that I might be able to use 3 to find a point of confluence.

I hope that helps.

Hi Paul,Thankyou for the nice explanations.You said no one here wants to hear what you say.I think many here want to hear what you say.Atleast I for one will be keenly watching your posts.

Regards

Thanks.

Hi Paul,
Thank you for the reply


Divergence
A lot of confusion is created by the various names given to the 4 main types of divergence - and thats a pity

Divergence is not unique to the RSI, it can be related generally to oscillators.

I don't care who first discovered divergence and named them - They are a great trading tool!

For more types and info. on divergencies - have a look at www.trading-naked.com/Divergencies.htm.

The RSI is my feel good comfort tool, could probably trade without it, but habits die hard.

The RSI S/R and divergence suit me just fine. Nice and simple and plenty of trading opportunities - qualify them with price action and trade them with discipline - what more do you want? (nothing is perfect)

The best signals are the obvious ones i.e. the ones that you do not have to search for

Take care
Peter http://www.forexfactory.com/images/icons/icon7.gif

Yes you are right ,but seems to work well on higher timeframes , try 1H
gbpusd . Anyway just experimenting , has nice colours
I'm everyday more confident using rsi , I don't have much time to dedicate trading ,but i hope one day will became a fulltime job
I like to enter on this kind of retracement and breakouts using rsi and slope direction line (give me faith on reading candlestick patterns) ,with tp 15 eurgbp and 20 gbpusd, and r:r at least 1:1 .Seems to work for me.
I'm always opened to hear advices

Here is a way to prevent false signals, the Choppiness Index. Google "Choppiness Index" for more on it.

Note where the RSI broke way before the price did. Target is .6715. My original stop was at the break of the 70 level of the RSI. Note RSI came back to test the trendline. Price should the same shortly.
Kareem

The price did test the trendline then continued down. The stop should be moved to 10 pips above the price trendline and target is still the same .6715 ( the next resistance level).

Trendline and support is being re-tested. If it does hold, then the target should be reached. There is two lines of support at this level, so it should hold.
Kareem

Really nice to jump from M5 to H4...Like climbing with no tools...