- RSI and Stochastic Trading System - Trend Following System
- Stochastic + RSI, Double Strategy (by ChartArt) by
- Stochastic RSI - StochRSI Definition
RSI and Stochastic Trading System - Trend Following System
We know that “ divergence between price and an oscillator or other market indicator can often signal an imminent trend reversal in the near future.”
Stochastic + RSI, Double Strategy (by ChartArt) by
Stoch RSI is an indicator of an indicator that uses data from the popular RSI indicator. It can help you identify when a market is overbought or oversold.
Stochastic RSI - StochRSI Definition
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» Importance of Trend Following
As many traders use the RSI in a wrong way , there is a high probability that they will also use the StochRSI in a similar manner. Entering countertrend positions whenever the StochasticRSI indicates overbought or oversold conditions will only lead to losing positions. The RSIStoch is indeed useful for gaining an overview of the overbought/oversold conditions of the market but it should not be used as a trading signal without a confirmation.
In the Bitcoin chart above we can spot the visual differences between the simple RSI, the Stochastic Oscillator and the Stochastic RSI indicator.
The key to this system is taking the trades around the main pivot. We also have the advantage of looking differently at the StochRSI. We don’t trade oversold/overbought levels and we don’t chase tops and bottoms. We are searching for market strength.
Scalping may seem easy, but the reality is that it’s an advanced trading style. It requires very quick decision making, quick reflexes to react when setups are spotted, and the trader must be skilled at quickly executing a trade.
Don’t blindly enter trades on the first or even second sign of divergence. It’s almost always better to wait for a cross back up or down to normal RSI ranges and confluence from other trading indicators like MACD , OBV , candlestick patterns , and more.