RSI & Momentum Indicators: Deciding Time Periods

[Evolution88]

Hi All,

I am reading the following article: http://www.investopedia.com/articles/technical/03/070203.asp#axzz1dx976t9W.

I am wondering how you choose the parameters for the technical indicators. For example, you choose 80/20 rather than 70/30 for the overbought/oversold conditions for RSI to ensure that you do not pull the trigger too early when buying or selling.

The time periods for both the RSI and Momentum indicators are 12 day periods. How do you decide what period to use? Why not 10 or 20 day periods?

Please forgive if the question betrays my newness to the world of trading.

Thanks, and Cheers!

 

[nazzdack]

Quote from Evolution88:
----article....
----how you choose the parameters....
----80/20....70/30....
----overbought/oversold conditions....
----RSI.....
----ensure that you do not pull the trigger too early....
----time periods....
----my newness to the world of trading.

1) There are no perfect/optimal settings nor time periods. They "work" some of the time but not all of the time.
2) The more extreme a setting is, i.e. 70/30 versus 90/10, the fewer trading signals you can expect to generate. :eek:
3) It WILL happen from time-to-time where you initiate a position and get quickly stopped-out with a loss, provided that you are using protective stops.

 

[murray t turtle]

Quote from nazzdack:


2) The more extreme a setting is, i.e. 70/30 versus 90/10, the fewer trading signals you can expect to generate. :eek:
==================
Prefer the fewer trading signals;
also mo mo is a gret indicator.But it gets you WAY to early out of a trend, therfore its a great indicator for other trders, not me...
Wisdom is profitable.