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Strategies & Market Trends : Technical Analysis- Indicators & Systems
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To: TechTrader42 who wrote (1477)6/13/1997 1:39:00 AM
From: Bruce A. Bowman   of 3325
 
Don't be too harsh on RSI(). Learning to use it is difficult, but can be rewarding. I've been in your spot and only recently feel like I'm making sense out of it. Until you get to the point that the indicator "talks" to you, it's a seemingly useless effort. Give these a try:

- Pay particular attention to divergences between RSI highs (lows) vs. corresponding price highs (lows).

- Do some trend analysis of the RSI using simple trend lines. It's kind of subjective at first, but...
- - a breakout thru an RSI trend line (up thru a line connecting lower highs or down thru a line connecting higher lows) is a very powerful indicator and
- - up or down trends in RSI are very good confirmers for continuation of current price trend, i.e. higher highs and higher lows of RSI confirm uptrending price and lower highs and lower lows of RSI confirm continued down trend of price.
- - divergences in trend, e.g. price increasing and RSI decreasing, will usually have RSI leading price but you have to be careful to look at enough bars to form an opinion.

- If you can't make sense of RSI in one time frame, switch to a different time frame and look again.

RSI(7) is a good starting point for viewing and manually graphing and I don't use a MA on RSI()... just the raw RSI data.

Bruce
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