Quote from VictorS:
Not trying to complicate things, as this method is pretty straightforward.
Using your example...if a market has been trending downward for three months, ask is below support, and rsi is reading oversold, how do you trade that? do you overrule the rsi and short anyway?
thanx Vic
Firstly 3 months is just an example.
If you want to keep it simple simple then yes, ignore all indicators & trade every single break. It's worth noting that for short term trading opportunities exist on upwards and downwards break of a major level, just pay attention to spread vs average oscillation based on momentum for instance in EUR/USD I pay 2 pip spread and on average there are 10-20 pips on offer, so that pair is perfect for SHORT term buy/sell.
I do follow RSI/MACD on 240/60/5/1. Just because RSI on weekly/daily has gone passed 70 or 30 does not suggest immediate overbought/sold condition. Normally RSI indicates pullback/reversal prior to MACD, so MACD works as confirmation after RSI. Firstly I look for a failure swing in RSI (see attachment), followed by MACD signal cross & 0 line cross, though a lot of the time signal cross is sufficient as at the time MACD performs 0 line cross momentum is there ~90% of the time. So putting it in perspective that's how it goes:
1. I note all MAJOR S/R level on a weekly chart (in this example price has been advancing and approaching major Resistance);
2. I have 240/60/5/1 charts switched on;
3. Observe what's happening on RSI and MACD on all those time frames (getting complicated);
4. Let's assume there has been a slight pullback and RSI on 60 is below 30 and you see a failure swing (see attachment);
5. After a while MACD performs a signal line cross, by this time price could be very near Resistance level;
6. I would normally have a look at 5 & 1 min charts prior to making an entry. IMPORTANT!!! If RSI on 1 & 5 min charts is already above 70, then price might bounce off a Resistance level, so it is a lot more favourable if RSI is either below 30 or just above it displaying a failure swing;
7. Let's assume Resistance is @ 1.1000 & spread is 2 pips (points) I have a buy order @ 1.1002 as I need to see the Bid hit actual Resistance level (1.1000).
That's it pretty much & don't forget that I personally do use tight stops, but it's up to an individual to work out range as far as stops are concerned.
