[Trading strategy with RSI and ICHIMOKU]- Steemit Crypto Academy- Homework post for Professor @abdu.navi03
Hello everyone. I welcome you all in the second week of the 6th season. This week, the professor @abdu.navi03 has delivered a lecture on a trading strategy that combines the RSI and the Ichimoku Cloud indicator. This is my homework post.
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Question 1
Put your Understanding in word about of RSI + Ichimoku Strategy
The crypto market is highly versatile where the price of the coins are not stables and keep changing time to time. The traders keep doing the trading and their buying and selling pressure effect the movement of the market. The market behave according to the moves of the traders in the market. So the traders first analyze the market before taking the trading decision. There are multiple tools and strategies and the indicators are use to analyze the market to predict the future of the market
The technical indicators are consider best to analyze the market. These tools use the price history to predict the market next move. The technical analysis help the traders to take the best trading decisions. The traders can get the best entry and exit spots using the technical tools and then can earn high profit.
But no technical indicator is 100% accurate when use it alone. We cannot get the highly accurate result by using the technical tool alone. We need to combine the technical tools in order to get the more authentic and accurate results. There are a lot of trading strategies in which we combine two or more indicators to get the best trading signals. In this post, we are going to study the trading strategy that combine the RSI and Ichimoku Cloud indicators.
The RSI is the momentum based indicator which is very popular and well known indicator in crypto world. The traders use this indicator to analyze the market. The RSI is very powerful and useful indicator which is use in the market to get to know about the market conditions like whether the market is in overbought zone, oversold zone, trend reversal, etc.
This indicator also help to determine when the enter into the market and which is best selling spot. This indicator has 100 levels within which, it oscillate. When the RSI move below the 30 level, it indicate that the market is in oversold zone and selling pressure is high. The market price is decreasing and is in bearish trend. At this point, the bullish trend is expected. This is consider best spot to enter into the market.
When the RSI move above the 70 level, it indicate that the market is in overbought zone and buying pressure is high. The market price is increasing and is in bullish trend. At this point, the bearish trend is expected. This is consider best selling spot.
But this dark point of this indicator is that it always can be use in the trending market. It cannot be helpful when market is in range zone.
The Ichimoku indicator is also very useful technical indicator. This indicator was introduced by Goichi Hosoda in 1960s. This indicator help to identify the support and resistance level in the market. We can also get the best entry and exit spot using the ichimoku indicator. This is trend based indicator which the traders use to identify the market trend. The traders can also use this indicator to identify the future support and resistance level. This is very useful and good indicator to identify the market current trend. This is the lagging indicator where the signals are produced when the price has moved already. The signals received from the Ichimoku indicators are always late.
When we combine both these indicators, a very useful and powerful trading strategy is formed which is extremely beneficial for the indicators to analyze the market. The ichimoku indicator is best to determine the market next move and the RSI is best to identify the strength of the market trend as if it is overbought or oversold zone.
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The Ichimoku overcome the weak point of RSI and RSI offer what is weak in Ichimoku indicator. There are some traders who consider this strategy not useful because here the entry positions are spotted only at the breakout occurrence points. But still this trading strategy which is formed by combining them is very effective and efficient. This trading strategy provide us result with more than 80% accuracy and give us best entry and exit spots. Using this strategy, the traders can get the early signals and can take the positions with low risk before the trend start.
Question 2.
Explain the flaws of RSI and Ichimoku cloud when worked individually
- Flaws of the RSI Indicator
The RSI is a momentum based technical indicator which is use in the crypto market to analyze it. This indicator helpful to identify whether the market is in overbought zone or oversold region. This indicator help to identify the market strength using the overbought and oversold zone.
The traders can get to know either the sellers are in control or buyers have more strength. This indicator This indicator has 100 levels within which, it oscillate. When the RSI move below the 30 level, it indicate that the market is in oversold zone and selling pressure is high. The market price is decreasing and is in bearish trend. At this point, the bullish trend is expected. When the RSI move above the 70 level, it indicate that the market is in overbought zone and buying pressure is high. The market price is increasing and is in bullish trend. At this point, the bearish trend is expected.
But the first dark point of the Indicator is that this cannot be useful in the ranging market. We can use it only in trending market but market is not always be in trend. There are some spots when the market stop moving in certain direction and start showing the sideway moves. AT this point, market is known as the ranging market with no clear trend. The RSI cannot be use in such sort of the markets.
The second false point of this indicator is that this indicator cannot give us the volume in the market. Traders cannot get to know exact market volume using the RSI. This indicator do not work best for the confirmation of the trade orders execution. This indicator also does not work best when use it alone.
We need to combine it with some other indicator in order to get the best and accurate results. In case of using it alone, we may get the false results because of which, the traders may face lose.
The traders face very difficulty in identifying the price reversal time line using the RSI indicator. When buying pressure get high and the buyers are in control in the market, market move from down to top and price rise up. The market is in the overbought condition at that time. Then the RSI line sometime fail to come back to downward as it suppose. The market still remain in the overbought and oversold condition. This is not good for the traders. The sellers may get the liquidity at this spot. It cannot measure how long the trend will remain in the market in future.
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- Flaws of the Ichimoku Cloud Indicator
The Ichimoku indicator is also very useful technical indicator. This indicator was introduced by Goichi Hosoda in 1960s. This indicator help to identify the support and resistance level in the market. We can also get the best entry and exit spot using the ichimoku indicator. This is trend based indicator which the traders use to identify the market trend. The traders can also use this indicator to identify the future support and resistance level. This is very useful and good indicator to identify the market current trend. This spot the future resistance and support points which help to identify the price reversal points.
The dark point of the Ichimoku indicator is that this is the lagging indicator where the signals are produced when the price has moved already. The signals received from the Ichimoku indicators are always late. It lag behind the assets price.
We cannot get the entry and exit spots early and because of this, we may face the lose sometime. The traders cannot take the trading decisions of entering or exiting from the market at the best point because it fail to identify the buyers and sellers attitude, behavior and action in the market earlier.
This indicator use the historical data to predict the future. But this may happen that history do not repeat itself. At this situation, the indicator may produce the false signals for the traders. In the highly liquidate markets, the indicator sometime fail to spot appropriately the resistance and the support levels.
This indicator also does not work best when use it alone. We need to combine it with some other indicator in order to get the best and accurate results. In case of using it alone, we may get the false results because of which, the traders may face lose.
Question 3
Explain the Trend Identification Using RSI+Ichimoku Strategy
In this section, i will explain how to identify the trend in the market using the RSI + Ichimoku trading strategy.
To identify the bullish trend, we need to identify some points. Below i have mentioned those points which we need to focus on while identifying whether the market is in bullish trend or not.
When the buying pressure get increase, the demand increase and supply get decrease. This push the price upward and price start rising. The price move in upward direction because of which, the bullish trend occur in the market.
When the RSI is above the 70 levels, the price is consider to be in overbought zone. The market is said to be in overbought condition when RSI is above 70 points. At this time, the market is consider to be in bullish trend. During the bullish trend, market is above the 70 points and is in overbought condition.
The buying pressure is strong and the price continue to rise up. The price form the higher high while moving upward where each high is higher than previous high. At this time, market is in bullish trend.
But the RSI is an indicator which cannot explain the buying volume of the market. This indicator cannot measure the buying volume of coin which is pushing the price of coin moving down to top. Here is the point where the ichimoku is come to play its role. When the price of the coin moving above the ichimoku cloud on the chart, the market is said to be in uptrend. There is bullish trend in the market and volume of the bullish trend can also be seen on the ichimoku cloud indicator.
So when the RSI line is above the 70 points and price move above the ichimoku cloud, market is said to be in uptrend. The volume of the uptrend and buying pressure can be measure using the expansion of ichimoku indicator. The size the ichimoku cloud is use to determine the volume of the buying pressure in the uptrend market. The larger the cloud size, the higher the volume will be.
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To identify the bearish trend, we need to identify some points. Below i have mentioned those points which we need to focus on while identifying whether the market is in bearish trend or not.
When the selling pressure get increase, the demand decrease and supply get increase. This push the price downward and price start declining. The price move in downward direction because of which, the earish trend occur in the market.
When the RSI is below 30 levels, the price is consider to be in oversold zone. The market is said to be in oversold condition when RSI is below 30 points. At this time, the market is consider to be in bearish trend. During the bearish trend, market is below 30 points and is in oversold condition.
The selling pressure is strong and the price continue to decline. The price form the lower low where each low is lower than the previous low. At this time, market is in bearsish trend.
But the RSI is an indicator which cannot explain the selling volume of the market. This indicator cannot measure the selling volume of coin which is pushing the price of coin moving top to down. Here is the point where the ichimoku is come to play its role. When the price of the coin moving below the ichimoku cloud on the chart, the market is said to be in downtrend. There is bearish trend in the market and volume of the bullish trend can also be seen on the expansion of ichimoku cloud indicator.
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So when the RSI line is below 30 points and price move below the ichimoku cloud, market is said to be in downtrend. The volume of the downtrend and selling pressure can be measure using the expansion of ichimoku indicator. The size the ichimoku cloud is use to determine the volume of the selling pressure in the downtrend market. The larger the cloud size, the higher the volume will be.
The RSI also help to identify the trend reversal. When the price would break the ichimoku cloud for seversal time. When these conditions fulfill, the trend is expected to reverse and price is suppose to move in opposite direction.
Question 4.
Explain the usage of MA with this strategy and what lengths can be good regarding this strategy (screenshots required)
The Moving average is the technical indicator which is very useful to analyze the market. This is very easy to understand and simple to use. It has only one oscillating line. hen price is moving above the MA line, it indicate that there is bullish trend.
When the price move below the indicator line, it indicate that there is downtrend in the market. When the line hit the assets price, it indicate that the trend has been reversed and price start moving in opposite direction.
We can combine the Moving Average indicator with the RSI+ Ichimoku trading strategy. This will help to filter out the false signals. This combination will also help the traders to get the more accurate and authentic trading signals.
We can change the period of the Moving average. This setting depend upon the trading strategy. The traders can choose the setting which suit on the trading strategy. We should use the high period setting for the Moving average because a low length Moving average is already been using in the Ichimoku cloud indicator.
The strategy which we have studied this week, the Moving average period was set as 85. We have used the 85 period Moving average while combining it with RSI+Ichimoku cloud trading strategy.
In the above chart, we have combined the MA with the RSI+Ichimoku trading strategy. When the RSI is below the 30 level and price is moving below the Ichimoku and 85 period moving average, the market is said to be in downtrend.
In the above chart, we have combined the MA with the RSI+Ichimoku trading strategy. When the RSI is above the 70 level and price is moving above the Ichimoku and 85 period moving average, the market is said to be in uptrend.
Question 5.
Explain support and resistance with this strategy (screenshots required)
- Resistance Level
The resistance level is an area where the price stop increasing up further, the buying pressure expected to pause and price is expected to bounce back. At this level, the sellers enter into the market and stop price increasing more, a lot of pending selling orders get executed because of which, price start moving in opposite direction and trend get reverse.
This is the level where the buying pressure pause, the selling pressure increase which prevent the price to move further in upward direction. Because of consolidation of a large number of selling orders at the resistance level, the price bounce back resulting in trend reversal.
- Support Level
The support is an area where the price stop decreasing up further, the selling pressure expected to pause and price is expected to bounce back. At this level, the selling pressure get exhausted and the buyers enter into the market and stop price decreasing more, a lot of pending buying orders get executed because of which, price start moving in upward direction and trend get reverse.
This is the level where the selling pressure pause, the buying pressure increase which prevent the price to move further in downward direction. Because of consolidation of a large number of buying orders at the support level, the price bounce back resulting in trend reversal.
Support and Resistance with RSI + Ichimoku Strategy
This strategy is really useful to identify the resistance and support level. The Ichimoku indicator help to get the resistance and support level in the trending markets. Where the market is moving in a clear direction, the ichimoku indicator can be use to identify the resistance and support level.
The RSI on the other hand is useful to identify the support and resistance level in the ranging market. When the market is not trending in a clear direction, the RSI can be use to get the resistance and support level.
Support and Resistance with RSI + Ichimoku Strategy in Trending Markets
The Ichimoku strategy is very beneficial for identifying the support and resistance level in the trending markets. When the market has a clear direction, the ichimoku cloud indicator can identify the resistance and support level. The support level is find in the uptrend market. When the market is moving from down to top, the support level is identifed using the ichimoku cloud indicator. When the cloud color is green, this indicate the support level.
When the market is trending downward, the ichimoku cloud indicator work to identify the resistance level. When the ichimoku cloud get red, it indicate the resistance level.
When the price is near to the cloud, it produce the signal that the trend is weak. When the price is far away from the cloud, it give us signal that the trend is strong. When the price cross the cloud, it indicate the trend reversal.
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Using this Strategy for ranging markets
The ichimoku cloud indicator cannot be use to get the more appropriate and accurate trading signals. In the ranging markets, the RSI is use in the ranging markets. The RSI produce the signals to identify the overbought and oversold market conditions. The overbought and oversold are identified as the support and resistance level. The RSI also produce the signals to measure the momentum in the assets price which can be use to identify the trend reversal points on the chart.
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In the above chart, the RSI have been use to identified the resistance level in the overbought condition and support in the oversold region.
Question 6
In your opinion, can this strategy be a good strategy for intraday traders?
The Intraday traders are those who want to get the quick benefit and profit from the price movement by selling and buying the coins. All the trading strategies are effective and useful but it depend upon how the traders use them. Different trading strategies use in different trading systems. Some trading strategies useful for long term trading and some suitable for short term trading. The traders can use any trading strategy which suit on their trading plan to earn the profit and safe from risk.
The trading strategy which we have discussed in this lecture is very useful for the intraday traders. This is suitable for trending markets and also for ranging markets. The intraday traders can use it to identify the market trend, trend reversal, sell spots buy spot, overbought condition, oversold condition, etc. This trading strategy can be use to get the best trading signals and can earn high profit.
The traders can get the best entry and exit points using which they can enter at the best spot to get the high profit and safe from risk of losing money. When we combine this strategy with Moving average, it become more effective and can be use to get the more appropriate and the accurate results. It will filter out the false signals and traders will get the best signals which will help to perform the trading with more profit and low risk factor. There are a lot of other indicators which the traders can combine with this strategy to get the more efficient and accurate results.
Question 7
Open two demo trades, one of buying and another one of selling, by using this strategy
Buy Entry
In the below chart, i first check the RSI indicator to get the buy signals. The RSI indicator was above the 50 points which indicate that the market was in the bulish trend. The RSI has indicate that there is bullish trend in the market. It produce the buy signals. Now buy signals has been produce by the RSI.
Now we will check the Ichimoku indicator. The price ismo.png)
ving above the ichimoku indicator which indicate that there is bullish trend in the market and also produce the buy signals. Now the Buy entry has been confirmed by both indicators. The traders can now enter into the market with more confident.
Sell Entry
In the below chart, i first check the RSI indicator to get the sell signals. The RSI indicator was below the 50 points which indicate that the market was in the downtrend. The RSI has indicate that there is bearish trend in the market.
It produce the sell signals. Now sell signals has been produce by the RSI. Now we will check the Ichimoku indicator. The price is moving below the ichimoku indicator which indicate that there is bearish trend in the market and also produce the sell signals. Now the sell entry has been confirmed by both indicators. The traders can now exit from the market with more confident.
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Conclusion
The Ichimoku+ RSi trading strategy is very useful and powerful trading strategy is formed which is extremely beneficial for the indicators to analyze the market. The ichimoku indicator is best to determine the market next move and the RSI is best to identify the strength of the market trend as if it is overbought or oversold zone. This strategy give us the best signals to enter into the market or exit from the market.
The traders get the best trend reversal spots. It also help to identify the current market trend. When we combine it with MA or with any other suitable technical indicator, its accuracy get enhanced and we get the more accurate and effective results.
This trading strategy is very succefull for the intraday traders but it depend upon the traders experience and capabilities that how he utilize this trading strategy.
Thanks to @abdu.navi03