Tomorrow Crash?

I take note when indicators are at extreme readings but always require price confirming by following through.

For every buyer there is a seller (vice versa) so overbought and oversold don't mean much, if anything, to me. Pick just about any example on just about any chart and price will continue, until it doesn't, right after extreme OB/OS read-outs.

Makes me think of an old Robin Williams skit about Saddam Hussein daring Pres Bush before Gulf War, "ok I dare you cross this line, now this line, now this line ........". :)
 
SunTrader said:
For every buyer there is a seller (vice versa) so overbought and oversold don't mean much, if anything, to me. Pick just about any example on just about any chart and price will continue, until it doesn't, right after extreme OB/OS read-outs.
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To me, it is interesting how well RSI does work. Even on a fast chart, half of the moves turn on a dime. (I use 20 and 80 as opposed to the standard 30 and 70)

But this is what I've discovered with all these indicators. They all work roughly 50% of the time! LOL... If one was ever so bad as to fail 90% of the time, you could just do the opposite and make a killing!

What I have found was that even if its overbought, its amazing how quickly this indicator can drop as price just goes sideways. The indicator is nothing special... its just math. As you add a few more bars, this indicator with "self-correct" even if price isn't doing what you expect.
 
NoahA said:
To me, it is interesting how well RSI does work. Even on a fast chart, half of the moves turn on a dime. (I use 20 and 80 as opposed to the standard 30 and 70)

But this is what I've discovered with all these indicators. They all work roughly 50% of the time! LOL... If one was ever so bad as to fail 90% of the time, you could just do the opposite and make a killing!

What I have found was that even if its overbought, its amazing how quickly this indicator can drop as price just goes sideways. The indicator is nothing special... its just math. As you add a few more bars, this indicator with "self-correct" even if price isn't doing what you expect.
More...
Most indicators measure rate of change (which is why one of the few I use is duh a Rate of Change {Ratio not simple points Diff}) but the rate of change often can just slow and even reverse without price doing so as well. Then it has to "catch up" to price again, especially if price trend continues once again only this time twice as fast.
 
NoahA said:
What I have found was that even if its overbought, its amazing how quickly this indicator can drop as price just goes sideways. The indicator is nothing special... its just math. As you add a few more bars, this indicator with "self-correct" even if price isn't doing what you expect.
More...
Is it possible that what price is doing is causing the indicator to move. Not the other way around.
 
deaddog said:
Is it possible that what price is doing is causing the indicator to move. Not the other way around.
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100%.... this is kind of what I think I was saying.

I do think indicators have their place. For example, a trend line or moving average can tell you to only look for longs as an example. But it doesn't matter one bit for what traders will actually do with their orders at some future point.
 
I'll try to clarify. It is not that uncommon for a stock to close with an RSI above 80 in a market rally. AVGO, NVDA, META, and TSLA have all had at least several days with an RSI greater than 80 in the last 15 trading days, with TSLA being on a current run with 6 consecutive days at 86 or better. ETF's on the other hand, very, very, rarely breach an RSI of 80, and if you are fortunate enough to catch it, the odds of a green trade are literally unbeatable in the near term.
 
Read the recent messages about hiring a programmer, if it's not so complex you barely know how you got to the end result then the markets have already discounted it to zero, maybe not today but they have.

If an RSI 80 had any 'consistent' value everyone would be millionaires, the question is can you filter out the rest of the market noise, that is where the complexity comes in but no one is going to tell you how to do that, because they don't know themselves, "it just is".
 
RSI and the plethora of other indicators is like a candy store on main street.
Looks nice, smells nice, very tempting, but you know (or you soon will) it's bad for you.

We eat for a couple of reasons, hunger and pleasure and sustenance.
If you're hungry for trading, spend your time inside the price action store, give the indicator store a miss even though it may look yummy.
 
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