If you were to look at a larger time frame you would see that to the left is a previous accumulation area. It should get bumpy in there meaning there are likely buy orders at various prices in here. So in order to avoid selling into a buy zone, we want to let price get some distance away from this potential buy area before risking a short entry.
Think about it strategically. IF you chase the price and you are wrong, you will have little to none reaction time to close the trade before you are holding bags. However. if you allow price to get some distance if buying does start to show up, you can close the trade early without loosing as much capital. Understanding this takes a little practice but is really not difficult to see again once you see it.... Mind you , this is difficult to explain through text.... will attempt a tutorial chart to explain.
One way that you can use the RSI (at 7, NOT 14) is to use it as your own backstop. To put it simply:
If looking to sell:
RSI MUST be above the median line or above 75
If looking to buy:
RSI MUST be below the median line or below 25
My RSI channel is set to 25/75. Never mind the oversold/overbought lingo.
25 = the demand side of the channel
75= the supply side of the channel
Good luck!
Think about it strategically. IF you chase the price and you are wrong, you will have little to none reaction time to close the trade before you are holding bags. However. if you allow price to get some distance if buying does start to show up, you can close the trade early without loosing as much capital. Understanding this takes a little practice but is really not difficult to see again once you see it.... Mind you , this is difficult to explain through text.... will attempt a tutorial chart to explain.
One way that you can use the RSI (at 7, NOT 14) is to use it as your own backstop. To put it simply:
If looking to sell:
RSI MUST be above the median line or above 75
If looking to buy:
RSI MUST be below the median line or below 25
My RSI channel is set to 25/75. Never mind the oversold/overbought lingo.
25 = the demand side of the channel
75= the supply side of the channel
Good luck!