Journey to CFD crypto trading - Episode 010 - RSI

davidke20 (74)in #trading • 6 years ago

This is a BTC chart on 5 minutes. From what I previously mentioned, the Ichimoku cloud is a very good tool to identify possible support and or resistance. This, I learned that people said the easiest way to follow Ichimoku is to take long any time above the cloud or take short any time below the cloud. So, I'm thinking, I could be dead wrong at anytime if that is the last few moment before the market will shake and spill everything off. So I decided to take RSI-Relative Strength Index into account.

Head to the Insert tab, select Indicators, and then look fro Oscillators, and finally the RSI is appeared.

I don't really like to change settings for indicators, so as this one. There's a reason of 14 and I don't wanna know the "theory" behind it. Indicator were designed by professional traders many years ago based on PATTERN recognition, Hence, these indicators are manually curve fitted by their author, these numbers must be the most sensitive number amongst all.

The Relative Strength Index - RSI is a momentum indicator that measures the magnitude of recent price changes to analyze overbought or oversold conditions. It is primarily used to attempt to identify overbought or oversold conditions in the trading of an asset.
Read more: Relative Strength Index (RSI) https://www.investopedia.com/terms/r/rsi.asp#ixzz5RkTbFeJu
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Ok. Here's what I did, after adding the indicator to the screen, before it initialized, I can move to LEVELS tab, and include 50% into the monitoring line. With this middle splitter, I will be able to divide the momentum into two sides.

Here's the graph, I hypothetically draw the best case scenario, but isn't that too simple? And I realized, no it was never easy to trade. People are always greedy and tend to overly obsessed in putting a trade up just to see it lose money. So here I go, give the best case scenario, amongst all 3 yellow arrows, which one would I rather take? The answer is no.2.

Here's the theory I'm holding on to. I'm going to list it down here for my furture reference incase if I forgotten why would I trade like this.

Ichimoku cloud is a form of trending indicator, but at the same time it is 52 bars lagging indicator, which will shift the "MONEY" out.
Since Ichimoku cloud is a lagging indicator, it is a very good pattern recognition system. Which means, anytime the candle sticks formed above these clouds, are consider uptrend. Vice versa for down trend.
Relative Strength Index is an oscillator indicator. Which mens, whether up or down, the value of the indicator will always be within the indicator column.

With one trending indicator and one osciallating indicator, this will bring me a super convenient way to identify trends. So again, I'm going to list it down here.

Whenever RSI breaks above 70%, whilst candlesticks still formed above the RSI. There's enough reason to believe market is going downtrend soon.
Whenever RSI breaks below 30%, which candlesticks still formed below the BSI. So I guess it's a good time to horse.
Whenever candle sticks bounced off from Ichimoku cloud, and yet that point of time RSI is hitting the 50%, there' s agood chance that the trade will fly.

So, tentatively this is all I want to say. I will be searching for a colour filled up RSI to make a traffic light system for this CFD trading. Stay tune.

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