About a decade ago, I got something like 20-plus PM's from various Bright Traders who were just getting crushed. It seems like it had been SOP at the firm for quite some time for them to model one or two sigma deviations and to fade those levels faithfully. And these guys were just getting smoked. So my advice for anyone looking to trade any sort of oscillator (like RSI or a Stochastic) would be to wait for it to come off with confirming price action. Always and happily trade less range for confirmation. One of my mentors, David Ellis, was a monster top step trader in the S&P pit. If the RSI was in overbought territory and yet the market kept going up - he would buy it. He taught me that when markets defied TA with good volume and order flow from a number of different participants it was one of the most powerful high percentage entries you can make.
When markets go parabolic, or even just stay extended overbought for long periods of time, wait for oscillators to turn down then try to get back to previous high readings but fail. It's kinda counter-intuitive to think - shouldn't a market turn when the oscillator is highest. Yet markets almost never do, what we think they should. Here is how SPX looked heading into February/March drop. Notice RSI could never got back above 70 at the top:-
lmfao. there is more money at zero interest than ever before in history. its not fundamental and overnight they mark the mkt up or down and bust swing traders stops duh. its not fundamemtal ever and never will be again even if it was i mean if that was the case would the average chipotle store make 89k a year which is 243 dollars a day of net profit and yet that 1 location based on mkt cap divided by locations be worth 89 million dollars or 243,000 dollars per day to make 243 dollars profit. would you spend 89 million to get 1 store to male 89?000 in profit after taxes a year?? nope. but thats the fundamentalls of chipotle cmg with 2644 stores and what almost no profit per store. thats the reality of it each chipotle store averages 243 dollars of after tax profit per day. now many people make 243 a day at work so is each one of those people valued at 89 million in stock net worth??? nope not even close. i chose this post because again it shows how few realize counting backwards and knowing which bar is your last bar in the formula will allow you to understand that what you are saying is really. due to the mkt being significantly higher 13 days ago and that 13th day is still being used in my calculation of the 14 day rsi then i understand why the rsi wont budge above 70 because we would need an x move higher today amd yes you can solve for x easily in order to get the rsi above 70. now you can also based on what i just told you understand why as the mkt stays side ways day by day that the rsi will actually keep rising because those lower and lower days will keep falling off or out of the mathematics of the rsi. im not picking on you. hopefully you learned something.
hilarious when people look at the front end of the indicator when its the back end doing the heavy lifting!! look at how indicators are composed and the formula to understand how they really work. my God its incredible how easily people make bets with real hard earned money that dont understand how the 13th huge bar in q 14 period rsi will be the reason the rsi spikes when the last bar falls off and has nothing to do with the current situation of the mkt since 90% of all indicators work off of price or moving averages of price as denominators
I've been wondering about this actually and maybe didn't pay enough attention in calculus but if it's easy for you to solve for x needed to get RSI above 70, can you please show me how to do that?
Parbolic moves equals parabolic networth gains for the richest and wealthiest people on earth It’s been one of the most lucrative weeks in history for some of the world’s wealthiest people. The net worth of Amazon.com Inc. founder Jeff Bezos topped the once-unfathomable amount of $200 billion. Entrepreneur, inventor, provocateur Elon Musk added the title of centibillionaire when his fortune soared past $100 billion fueled by Tesla Inc.’s ceaseless rally. And by Friday, the world’s 500 wealthiest people were $209 billion richer than a week ago. The world’s 500 richest people have collectively grown their fortunes by $871 billion this year, a 15% increase, according to the billionaires index. https://www.bloomberg.com/news/arti...chest-people-smashed-wealth-records-this-week
It is not parabolic. It is just jealousy and your daily argument that if it can't go up 5% every week forever then it has to go down -99% tomorrow. There are other possibilites such as a slowing rate of growth, as companies go into their late stages of the life cycle.
I don't know how to. A book I have Technical Analysis for the Trading Professional by Connie Brown goes into it a little, without mentioning how to do the actual calculation itself, but the problem I see is it is a moving target. Will it touch 70 today, tomorrow, next day, when? So each day it doesn't changes RSI path until it finally makes it - all based on PA which after all is what really matters.