Nifty Futures Trading
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RSI
Is a momentum indicator.It's maths is [100 - {100/1+ (U/D)}].Suppose i take Close as an Array & 14 as Period then each Close Up than its immediate previous is calculated as UP & each Close Dn than its immediate previous is calculated as DN.Now the Avg.(in that 14 Period) of these UP is represented in 'U' & Avg.(in that 14 Period) of these DN is represented in 'D'.
As it is self referencing the Present Bars Close to its Period (here we have taken 14) hence it is RELATIVE (means present Close ) relative to it's INDEX (self referencing it's own 14 periods ; different cluster of close-es ;as an Index from zero to hundred.)
Suppose Price is going down now what happens most of the closes would be down & candel's are mostly Black.Hence the RSI would denote a south ward journey.
Now comes the Cache looking at the chart we find Price's Hopeless behaviour,but slowly there will be few Up close which we will not notice much nor give importance but RSI will.
So it is an indicator gauging momentum IN THAT PERIOD.Now we also know Price ALWAYS follow Wave type Ups & Downs now the 'Cycle' believer will try to find out the Cycle's period to clone this Price's Wave cycle,the interval of which MAY be 14 or 9 or 144 we dont know.So a 14 or 28 or 9 period RSI will only show us Price thru it's SPECIFIC PERIOD WINDOW,(as those blind men's experience of the Elephant) which will Vary.
Plz recollect Saint's HH/HL analogy,even when Price trying to make a LH from bottom LL the RSI will suddenly become active,drawing our attention,same in case of making repeated HH the RSI will be above OB level.
So now we know the follies of RSI,these Divergence seems to Work in past charts.Say Price is now at 3011 & falling & RSI divergence is indicating a Rise in Price is coming can we buy there ? before buying tell me what would be my Stop ,some times in past charts we will find even after these divergences Nifty Fut has fallen by 100 points (i still remember Raja was showing RSI bullish divergence in Nifty Fut live chart in this thread) the Nifty Fut fell 92 points from there.It is prudent & better not to look at Price's journey thru a specified PERIOD'S prism.
Then how to use RSI.I have mentioned in the 'Kolkata Meet' seminar that i use RSI sometimes & always my Period is 9 (becoz after studying how the Mobile companies got rid of the 'Noise' factor in communication found out that it is always prudent to use Half-Cycle,than full cycle,now in all my cycle studies so far found out if there is a 360 degree cycle say 'O' then price mostly reacts sharly at 90 degrees & 180 degrees,means at 3'o clock & 6'o clock, here 9 becomes the most preferable choice).
A Price when coming down after making a LH from LL then if that Low is held & the subsequent positive attempt & surpasses the earlier LH then a 1st HH will be established.
In these scenarios the RSI will attempt & surpass the 50 mark in 2nd attempt then the 3rd time it surpasses the 50 i am a Buyer (details discussed at Kolkata Meet).
Other than this suppose we know a specific Price support/resistance point then the RSI can be used becoz chances/probabilty increases as Sunil pointed out.
Using Divergences can also be Profitable but in that case my view is WHAT is the Risk amount,any Risk not Quantified becomes difficult to handel the Money Mgmt. part.
Is a momentum indicator.It's maths is [100 - {100/1+ (U/D)}].Suppose i take Close as an Array & 14 as Period then each Close Up than its immediate previous is calculated as UP & each Close Dn than its immediate previous is calculated as DN.Now the Avg.(in that 14 Period) of these UP is represented in 'U' & Avg.(in that 14 Period) of these DN is represented in 'D'.
As it is self referencing the Present Bars Close to its Period (here we have taken 14) hence it is RELATIVE (means present Close ) relative to it's INDEX (self referencing it's own 14 periods ; different cluster of close-es ;as an Index from zero to hundred.)
Suppose Price is going down now what happens most of the closes would be down & candel's are mostly Black.Hence the RSI would denote a south ward journey.
Now comes the Cache looking at the chart we find Price's Hopeless behaviour,but slowly there will be few Up close which we will not notice much nor give importance but RSI will.
So it is an indicator gauging momentum IN THAT PERIOD.Now we also know Price ALWAYS follow Wave type Ups & Downs now the 'Cycle' believer will try to find out the Cycle's period to clone this Price's Wave cycle,the interval of which MAY be 14 or 9 or 144 we dont know.So a 14 or 28 or 9 period RSI will only show us Price thru it's SPECIFIC PERIOD WINDOW,(as those blind men's experience of the Elephant) which will Vary.
Plz recollect Saint's HH/HL analogy,even when Price trying to make a LH from bottom LL the RSI will suddenly become active,drawing our attention,same in case of making repeated HH the RSI will be above OB level.
So now we know the follies of RSI,these Divergence seems to Work in past charts.Say Price is now at 3011 & falling & RSI divergence is indicating a Rise in Price is coming can we buy there ? before buying tell me what would be my Stop ,some times in past charts we will find even after these divergences Nifty Fut has fallen by 100 points (i still remember Raja was showing RSI bullish divergence in Nifty Fut live chart in this thread) the Nifty Fut fell 92 points from there.It is prudent & better not to look at Price's journey thru a specified PERIOD'S prism.
Then how to use RSI.I have mentioned in the 'Kolkata Meet' seminar that i use RSI sometimes & always my Period is 9 (becoz after studying how the Mobile companies got rid of the 'Noise' factor in communication found out that it is always prudent to use Half-Cycle,than full cycle,now in all my cycle studies so far found out if there is a 360 degree cycle say 'O' then price mostly reacts sharly at 90 degrees & 180 degrees,means at 3'o clock & 6'o clock, here 9 becomes the most preferable choice).
A Price when coming down after making a LH from LL then if that Low is held & the subsequent positive attempt & surpasses the earlier LH then a 1st HH will be established.
In these scenarios the RSI will attempt & surpass the 50 mark in 2nd attempt then the 3rd time it surpasses the 50 i am a Buyer (details discussed at Kolkata Meet).
Other than this suppose we know a specific Price support/resistance point then the RSI can be used becoz chances/probabilty increases as Sunil pointed out.
Using Divergences can also be Profitable but in that case my view is WHAT is the Risk amount,any Risk not Quantified becomes difficult to handel the Money Mgmt. part.
Da, what you mentioned about Divergences is absolutely correct - even during my live discussions with Vineet in this thread abt divergences, we have realised that we cannot immediately enter trade on finding hidden divergences...
It has a very annoying & lagging effect - and ultimately it boils down to the price chart, price movement & price action - NOTHING ELSE IS SUPREME.
Over my very recent experiments, I found that if one has to trade with divergences, one will have to wait for a very good support/resistance level to come up (as the case may be), or wait for pivot points in BOTH price & RSI to break - but again, a bit tricky here.
Another thing is the time frame... Yesterday, I found bearish divergence in both 1min & 5min chart...
In normal situations too, I found that 1min RSI applies for the very immediate coming period (maybe within 5 minutes), while 5min RSI is the overall master but with a bit lag effect.
On the basis of 5min RSI, I had expected that today's opening will see not much upmove - but a decent downmove.
As you keep increasing your timeframe, RSI's effect comes surely but with more time gap & lag.
Like for positional trades sometimes, just choose a "virgin" round-figure nifty spot level and an over-bought (70+) RSI in 60min chart... I then have more confidence in shorting, even though lower TFs like 5min may not be over-bought or may be neutral.
the timeframe of the chart you choose for RSI decides the over-bought or over-sold effect on the next 2-3 bars of THAT timeframe.
for example, along with the divergence, 60min RSI as at close of yesterday was 72. Experience told me that today's atleast 1st two hourly bars (ie 10am bar & 11am bar) would be in red. We actually got 3 bars in red.
similiarly 30min RSI at yesterday's close was 95!!! check out 1st two bars of 30min chart... in red.
Similiar case with 5min chart...
So, in short, if one depends on the RSI as sole/main indicator, important thing to remember is the timeframe of the chart - and hence, any over-bought / over-sold condition will apply to next 2-3 bars of that timeframe. But, for my mental satisfaction, I like to combine upcoming CHARTICAL KNOWN SUPPORT/RESIS LEVEL (as case may be) for initiating trade.
Da, regarding that illustration you gave about price forminh LL LH and RSI trying to cross 50, and you will go long in its 3rd attempt.
Do you apply this setup & RSI(9) in 5min chart or 1min chart?
It has a very annoying & lagging effect - and ultimately it boils down to the price chart, price movement & price action - NOTHING ELSE IS SUPREME.
Over my very recent experiments, I found that if one has to trade with divergences, one will have to wait for a very good support/resistance level to come up (as the case may be), or wait for pivot points in BOTH price & RSI to break - but again, a bit tricky here.
Another thing is the time frame... Yesterday, I found bearish divergence in both 1min & 5min chart...
In normal situations too, I found that 1min RSI applies for the very immediate coming period (maybe within 5 minutes), while 5min RSI is the overall master but with a bit lag effect.
On the basis of 5min RSI, I had expected that today's opening will see not much upmove - but a decent downmove.
As you keep increasing your timeframe, RSI's effect comes surely but with more time gap & lag.
Like for positional trades sometimes, just choose a "virgin" round-figure nifty spot level and an over-bought (70+) RSI in 60min chart... I then have more confidence in shorting, even though lower TFs like 5min may not be over-bought or may be neutral.
the timeframe of the chart you choose for RSI decides the over-bought or over-sold effect on the next 2-3 bars of THAT timeframe.
for example, along with the divergence, 60min RSI as at close of yesterday was 72. Experience told me that today's atleast 1st two hourly bars (ie 10am bar & 11am bar) would be in red. We actually got 3 bars in red.
similiarly 30min RSI at yesterday's close was 95!!! check out 1st two bars of 30min chart... in red.
Similiar case with 5min chart...
So, in short, if one depends on the RSI as sole/main indicator, important thing to remember is the timeframe of the chart - and hence, any over-bought / over-sold condition will apply to next 2-3 bars of that timeframe. But, for my mental satisfaction, I like to combine upcoming CHARTICAL KNOWN SUPPORT/RESIS LEVEL (as case may be) for initiating trade.
Da, regarding that illustration you gave about price forminh LL LH and RSI trying to cross 50, and you will go long in its 3rd attempt.
Do you apply this setup & RSI(9) in 5min chart or 1min chart?
just to illustrate my above view about hidden divergences in higher TF charts:
but as I said, very easy to spot; but entry ultimately depends on the price action, price movement - break of key pivots or with known good chartical levels.
still experimenting with this -> pivot break in RSI movement chart MAY also provide a hint to trade initiation.
but as I said, very easy to spot; but entry ultimately depends on the price action, price movement - break of key pivots or with known good chartical levels.
still experimenting with this -> pivot break in RSI movement chart MAY also provide a hint to trade initiation.
tsunil learning a lot lot lot from you.keep posting and just indicate in one word why are you donig this.we will hunt.
some links
http://www.mypivots.com/calculators/pivot-point-calculator.aspx
http://www.traderknowledge.com/free-online-fibonacci-retracement-calculator.php
faith
some links
http://www.mypivots.com/calculators/pivot-point-calculator.aspx
http://www.traderknowledge.com/free-online-fibonacci-retracement-calculator.php
faith
L
dear sunil...
i have a feeling you got it wrong,please correct me...what you have in charts is an example of a regular bullish divergence and not a hidden bullish divergence...
plz correct me if i am wrong.imho,the regular bullish divergence and the Dragon Fly Doji gave a great entry for traders......
thanks,all the best and keep up the good work
i have a feeling you got it wrong,please correct me...what you have in charts is an example of a regular bullish divergence and not a hidden bullish divergence...
plz correct me if i am wrong.imho,the regular bullish divergence and the Dragon Fly Doji gave a great entry for traders......
thanks,all the best and keep up the good work
just to illustrate my above view about hidden divergences in higher TF charts:
but as I said, very easy to spot; but entry ultimately depends on the price action, price movement - break of key pivots or with known good chartical levels.
still experimenting with this -> pivot break in RSI movement chart MAY also provide a hint to trade initiation.
but as I said, very easy to spot; but entry ultimately depends on the price action, price movement - break of key pivots or with known good chartical levels.
still experimenting with this -> pivot break in RSI movement chart MAY also provide a hint to trade initiation.
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