Market Veterans feedback welcome @Amit_Gulecha @gautam_icma @sahneydeepak
Practical thread on RSI focused on day trading:
1. Momentum is the one of the most important and crucial aspects of TA in trading without which opportunity cost is lost.
Practical thread on RSI focused on day trading:
1. Momentum is the one of the most important and crucial aspects of TA in trading without which opportunity cost is lost.
2. The main purpose of RSI is to assess the momentum of the current and past price moves (which we will discuss later).
3. RSI is measured between values of 0 and 100 with certain values being defined as overbought and oversold.
4. These values are not constant but depends on:
3. RSI is measured between values of 0 and 100 with certain values being defined as overbought and oversold.
4. These values are not constant but depends on:
a. Time frame of analysis.
b. Overall strength of the stock's/market's trend.
c. Current Market cycle.
5. The size of the TF and value of RSI are inversely proportional.
6. Ideal trade conditions are when RSI on 5 mins>15 mins>1hr in case of bullish trend.
b. Overall strength of the stock's/market's trend.
c. Current Market cycle.
5. The size of the TF and value of RSI are inversely proportional.
6. Ideal trade conditions are when RSI on 5 mins>15 mins>1hr in case of bullish trend.
RSI on 5 mins<15 mins< 1 hr in case of bearish trend.
7. RSI>50 is considered to have bullish momentum and below 40 to have bearish momentum. Some consider ideal bullish momentum> 60
8. RSI between 40-50 is considered as a no trend zone.
9. Overbought and Oversold conditions:
7. RSI>50 is considered to have bullish momentum and below 40 to have bearish momentum. Some consider ideal bullish momentum> 60
8. RSI between 40-50 is considered as a no trend zone.
9. Overbought and Oversold conditions:
A. RSI >70 and <30 is considered to be OB and OS conditions on 1 day and 1 hr TFs. On smaller TFs like 15 and 5 mins, it can extend till 80 and 20. In extreme cases, 90 and 10 as well.
B. What does OB and OS conditions tell you?
B. What does OB and OS conditions tell you?
OB: Do not enter fresh longs. If entered earlier, trail SL tighter and get ready to exit if price starts reversing.
OS: Do not enter fresh shorts. If entered earlier, trail SL tighter and get ready to exit if price starts reversing.
OS: Do not enter fresh shorts. If entered earlier, trail SL tighter and get ready to exit if price starts reversing.
C. Just OB doesn't mean - Exit your longs or enter fresh shorts.
D. Just OS does't mean - Exit your shorts or enter fresh longs.
E. In typical bull and bear market conditions, RSI can remain in OB and OS for long periods with price not reversing.
D. Just OS does't mean - Exit your shorts or enter fresh longs.
E. In typical bull and bear market conditions, RSI can remain in OB and OS for long periods with price not reversing.
F. Unless price confirms, this denotes strong trend continuation rather than reversals.
G. Divergences (detailed thread to follow): Those who know divergences, remember, more often than not, divergences do not signify trend reversal but can mean price consolidation at lower or higher levels and trend resumption.
10. The ideal conditions to day trade are: When there is price and RSI co-relation in the direction of the trend.
11. Use price as your base but not RSI and you will be rewarded most of the times.
11. Use price as your base but not RSI and you will be rewarded most of the times.
12. Always remember, in real market conditions, these levels can be rounded by +1 or -1 since discretionary trading is not quantitative but qualitative.
13. The more you experience trading, the more you will be able to take better decisions.
13. The more you experience trading, the more you will be able to take better decisions.
14. Stocks example to check how far RSI can extend in OB and OS on lower TFS: HUL, Dr. Reddy, Ibul Housing Finance.
If you liked the thread, please like and RT. Feed backs are welcome. Do note, this is just the tip of the deep subject of RSI. It has multi fold uses.
If you liked the thread, please like and RT. Feed backs are welcome. Do note, this is just the tip of the deep subject of RSI. It has multi fold uses.
Thank you - Abishek
@prodigal_trader Sorry missed you. Your opinion would be valuable too.
