RSI Is Your Friend - What Non-Price Analysis Can Tell You #Forex
Friends,
Let me just start by making this statement, which has caused more reaction than I have ever cared, but it simply is true:
1 - RSI's bearish divergences do NOT foretell an impending decline in price. Instead, they are associated with sustained rise in price.
Conversely:
2 - RSI's bullish divergences do NOT foretell an impending rise in price. Instead, they are associated with a sustained decline in price.
Yes, I know. You have been told, taught and even paid for statements that come in direct contradiction to this, but let me tell you right now: Put your gun down, Google Positive Divergence in RSI (not Bullish Divergence) for instance, and you would be more apt to find a RSI signal associated with a consistent premonition in terms of signal than any of that bearish/bullish divergence.
I have given multiple lessons to private individuals or public audiences demonstrating that before any reversal, there are multiple bearish/bullish divergences, and that the reversal only comes true after a sustained numbers of the said divergences.
In contrast, a Positive/Negative Divergence in RSI only comes in a great while, and is typically associated with a deeper retracement, if not a reversal.
I continue to be dismayed that even professional traders keep on pointing at bearish/bullish divergences. I have to explain here that the trader is NOT completely wrong to point these out, but remember that these divergences are associated with a contrarian trend (i.e.: bullish with decline and bearish with rising prices for the most part).
As a predictive analyst/forecaster, and having worked, decorticated and peeled RSI studies for many years (I started in 1997, the year I entered medical school), I soon learned that RSI is and continues to be erroneously taught.
Another feature of my trading is that I do NOT trade off of price. As many of you might have heard from me: "Price is the dangling carrot at the end of the stick held by institutional hands". The institutional traders know every stop-losses, every positions and can decide to move a M5, M15, H1 or even a H4 chart against a widely held position of retail traders, wide the screen clean of these SLs and yet not impart much changes at the daily/weekly levels at which they trade for their liquid providers/banking clients. So, keep that in mind as well.
So, best is to use certain indicators. I use the RSI-14 set at HLC/3. Here is an old method I used to decide on entries:
Take a look at the bottom of the chart. See a trend? Do you also realize that all the lines are perfect parralels to one another (there are one steep and one soft-sloped). See how they keep on failing while price remains (recently) in a downward trend?
Now, of late, RSI is approaching its upper steep-TL boundary. Do you see the association with the price's own TL?
My point here is to use an indicator in the most discreet and alternative way. After so many years of doing research on RSi (lots of backtesting in several RSI values, and across many TF and markets), RSI can definitely be one of your best trading buddy.
By the way, the author of RSI himself has a few residual students who are now teaching. These students are teaching the first rule I mentioned above, so this is not something I made up, but something that comes right from the RSI author himself - Question is: Why do institutional trading firms continue to erroneously teach RSI and offer you to open an account there? Is this a misleading attempt, or simply a developing case of the blind leading the clueless?
Cheers,
David Alcindor
Predictive Analysis & Forecasting
Let me just start by making this statement, which has caused more reaction than I have ever cared, but it simply is true:
1 - RSI's bearish divergences do NOT foretell an impending decline in price. Instead, they are associated with sustained rise in price.
Conversely:
2 - RSI's bullish divergences do NOT foretell an impending rise in price. Instead, they are associated with a sustained decline in price.
Yes, I know. You have been told, taught and even paid for statements that come in direct contradiction to this, but let me tell you right now: Put your gun down, Google Positive Divergence in RSI (not Bullish Divergence) for instance, and you would be more apt to find a RSI signal associated with a consistent premonition in terms of signal than any of that bearish/bullish divergence.
I have given multiple lessons to private individuals or public audiences demonstrating that before any reversal, there are multiple bearish/bullish divergences, and that the reversal only comes true after a sustained numbers of the said divergences.
In contrast, a Positive/Negative Divergence in RSI only comes in a great while, and is typically associated with a deeper retracement, if not a reversal.
I continue to be dismayed that even professional traders keep on pointing at bearish/bullish divergences. I have to explain here that the trader is NOT completely wrong to point these out, but remember that these divergences are associated with a contrarian trend (i.e.: bullish with decline and bearish with rising prices for the most part).
As a predictive analyst/forecaster, and having worked, decorticated and peeled RSI studies for many years (I started in 1997, the year I entered medical school), I soon learned that RSI is and continues to be erroneously taught.
Another feature of my trading is that I do NOT trade off of price. As many of you might have heard from me: "Price is the dangling carrot at the end of the stick held by institutional hands". The institutional traders know every stop-losses, every positions and can decide to move a M5, M15, H1 or even a H4 chart against a widely held position of retail traders, wide the screen clean of these SLs and yet not impart much changes at the daily/weekly levels at which they trade for their liquid providers/banking clients. So, keep that in mind as well.
So, best is to use certain indicators. I use the RSI-14 set at HLC/3. Here is an old method I used to decide on entries:
Take a look at the bottom of the chart. See a trend? Do you also realize that all the lines are perfect parralels to one another (there are one steep and one soft-sloped). See how they keep on failing while price remains (recently) in a downward trend?
Now, of late, RSI is approaching its upper steep-TL boundary. Do you see the association with the price's own TL?
My point here is to use an indicator in the most discreet and alternative way. After so many years of doing research on RSi (lots of backtesting in several RSI values, and across many TF and markets), RSI can definitely be one of your best trading buddy.
By the way, the author of RSI himself has a few residual students who are now teaching. These students are teaching the first rule I mentioned above, so this is not something I made up, but something that comes right from the RSI author himself - Question is: Why do institutional trading firms continue to erroneously teach RSI and offer you to open an account there? Is this a misleading attempt, or simply a developing case of the blind leading the clueless?
Cheers,
David Alcindor
Predictive Analysis & Forecasting
