RSI - Relative Strength Index (Wilder) & RMI - Relative Momentum Index
- Thread starter endgame
- Start date
and the original Ehler's paper was awarded the 2008 Runner-Up Winner of the Market Technician's Association's Charles H. Dow Award....so what's your point
taken from the article you posted:
"When the curve crosses above 27, it is a buying point, and when it falls below 73, it is a selling point."
I suggest that you read "everything" in the link I posted..
Every once in awhile you learn something new. I was able to find myself a new indicator to use after reading these posts and searching for something different.
Obviously using standard indicators don't work since they lag, and yes many of them do look the same so why put multiple lagging indicators on one's chart.
Also, once you find an indicator, you need to decide how and when to use it. I am going to use it as a secondary confirmation to a PA setup. So for example, I see that it's possible the market is about to continue its trend up by reading the candles on the chart in relation to its channel or diagonal, and then look for indicator to also predict the future.
So now we have 2 confirmations, and can enter a trade with a stop and a target. The stop should be wide enough to give the trade room to breath especially if you want to go for a longer target. For example, you either want an equal risk vs reward, or a higher reward vs risk. The difference being that a higher reward may reduce win%, but a lower reward increases the effect of cost of placing the trade and the fact that if the win% is closer to 50%, multiple losses will wipe out all of the trading profit anyway. So to do equal risk vs reward, the win% has to be closer to 65% or higher.
Obviously using standard indicators don't work since they lag, and yes many of them do look the same so why put multiple lagging indicators on one's chart.
Also, once you find an indicator, you need to decide how and when to use it. I am going to use it as a secondary confirmation to a PA setup. So for example, I see that it's possible the market is about to continue its trend up by reading the candles on the chart in relation to its channel or diagonal, and then look for indicator to also predict the future.
So now we have 2 confirmations, and can enter a trade with a stop and a target. The stop should be wide enough to give the trade room to breath especially if you want to go for a longer target. For example, you either want an equal risk vs reward, or a higher reward vs risk. The difference being that a higher reward may reduce win%, but a lower reward increases the effect of cost of placing the trade and the fact that if the win% is closer to 50%, multiple losses will wipe out all of the trading profit anyway. So to do equal risk vs reward, the win% has to be closer to 65% or higher.
I must disagree totally since I have been using them 30 years. Indicators tell me entries but they also tell me when entries will not have a low enough losing percentage of losers. Indicators will tell me when to get out, reverse, when in chop and drop down to different money management targets. Indicators will also tell me when to buy/sell the farm. You spend enough time with them, you will gain knowledge. When your hooked up for automation using divergences, only indicators are the money management.
Two and half weeks ago I had clots in each chamber, left thigh and other organs plus heart attack, doctors said I should have died, plus still have cancer. I can't be coming on as I use to be, but like to say thanks for nice emails I have received. Yep, the good die young and the grumpy s.o.b.'s live forever.
The Bullish div that you see is far different than what I see, divergences that are too short in duration are iffy meaning 50/50, that is way too short for me to trade on, divergences in the middle of the indicator are LOW of value, best ones are from the lowest lows or highest highs. The trouble with RSI is slow at times but slow is good as it stops most from overtrading, also folks only "see" what the indicator is doing but they forget what price is doing. I have found in my three decades that understanding more about the indicators and what they SHOULD be doing in relationship to Price, we then form better ideas of what is most likely to happen in a form of "hidden" divergences(unlike the "hidden divergences of new indicator lows and higher price lows). I always check out differences between previous highs or lows.
Expected trend? It was already up.
It took me awhile back in the 1980's, but I was told by old traders "Don't design new methods that no one is doing", Don't have to re-invent the wheel, find what works and coat-tail with the best. I added couple twists thru the years using options at new contract highs/lows, but overall, I try to get in where the producers or banks get in. Buy low, buy high and sell higher. Indicators work best with the underlying price pattern is there, blending both together has lowered my losing trade percentages.
I am much more interested in keeping my losing trades low than profits I might miss. Equity curve is much more smoother.
It took me awhile back in the 1980's, but I was told by old traders "Don't design new methods that no one is doing", Don't have to re-invent the wheel, find what works and coat-tail with the best. I added couple twists thru the years using options at new contract highs/lows, but overall, I try to get in where the producers or banks get in. Buy low, buy high and sell higher. Indicators work best with the underlying price pattern is there, blending both together has lowered my losing trade percentages.
I am much more interested in keeping my losing trades low than profits I might miss. Equity curve is much more smoother.