Understanding RSI timeframes


#1

While I’m a complete noob in the matter, I’m having some thoughts about RSI timeframes in which ones should be more corelated to the other, like in direct impact If I could say?

For example, looking at the time frame of RSI @ 5 min on any given coin, if its at over 80 on its indicator value it should be a sign that its “overbought” and a inminent price drop should occur when both lines touch and it should be confirmed when they cross, right? well my question is:

What if in that given moment as I described, the 15min timeframe has the RSI almost to cross lines but in the bottom or “oversold” area, should I skip that swing on the 5 min since the 15 min is about to cross? Should I always obey what the longer time frame indicates I guess?

I’d feel more confident if swinging in the 5 min, when both 15min and 30 min are still on the downtrend, but that is not always the case.

That’d be the same case if I swing with the 15 min, use the 30 min as the confirmation and so on?

Help is appreciated, bear with my noobness, thanks!


#2

Remember, all indicators are a derivative of price/volume. They are not independent (in most cases). RSI is just that. Some things to think about i noticed from your message

  1. "and a imminent price drop should occur " - Markets do not have to do anything - Even if an indicator says it ‘should’. Remember, markets are probabilistic, so all this indicator is saying at this point is that price is relatively overbought so there is a higher probability of it reverting back down (mean reversion).
  2. When RSI ‘crosses’ its just a way of triggering when to enter. Ive seen many false crosses so do not take it as gospel

To answer your question directly - Higher time frames tend to be more robust in signal generation. So a higher time frame is more likely (remember think probabilities) to be valid, than a shorter one. So to deal with this, i try and use confluence, which means using many indicators and time frames to support my idea to stack odds into my favor. For example, if RSI was overbought on the 15m, 5m, 30m, and hourly and price ran into some resistance areas and perhaps i can see buy volume exhausting and some type of divergence of price and volume, then i stack all of those observations/data points into my hypothesis to take a trade. Does that make sense?

Remember RSI can remain overbought. Ive seen it many times and if you trade just from one indicator, you will eventually get blown up which is why you need a plan before you enter the trade with where your stop loss exit is and where your target(s) are. Obviously you want to take trades that reward you with at least 2 dollars for every 1 dollar risked.

Anyway, you are asking the right questions, but it all depends on the context. Indicators are tools, they are not buy and sell signals by themselves! In hindsight they may look like magic, but i can show you many occasions where they fail horribly.


#3

Thanks for the answer

Yes I understand what you are saying, should always use several indicators before a move, also the signal that can be “dragged” with RSI, like being overbought and the market continue to rise, it will just continue on the uptrend being and viceversa when its being oversold and still a strong wave of selling is going on.

I guess this is part of the difficulty it implies, otherwise we would all be making money on all markets :sweat_smile::rofl:

Then I should avoid the buying or selling on the 5m frame when the 15/30m are almost on the opposite side.


#4

Dont ignore the 5m time frame - Take it into account but be wary that the lower the time frames, the more noisy the signal and you are more likely to get false ones hence you use other time frames to support the idea.

Typically i start from a higher time frame, find an idea, then drop down time frames for execution on 5 minute charts. Small time frames are for execution and larger ones are to build ideas.


#5

Excellent, I liked this ! :+1:t2::ok_hand:t2:

Ty


#6

Yes. Zooming out always gives perspective…

On another note though, RSI is very solid for most coins… but Bitcoin… it beats to it’s own drum in many ways…


#7

Yes, when its trending i agree, but range bound i think RSI adds value. Math is math.


#8

now … wait for a downtrend to play it on the safe side I’d say


#9

Fantastic explanation of the Importance of not relying solely on one indicator or time frame, I feel like to many newbies are just jumping in balls deep with just one indicator/timeframe,getting lucky a few times and building up false hope.
Don’t get me wrong I made these mistakes and learned from them pretty quickly.
I also think it’s important for beginners to learn how to change strategies to suit different market conditions.
I am only a few years into being self taught and realise my training will never end :v:


#10

tips are appreciated too :grin:


#11

In my experience of trading markets for 10+ years is that price and volume are the most important tools . They tell you enough. That and watching order flow. It comes with experience but indicators are all just lagging indicators of price so i dont place much importance in them

  1. Price
  2. Support resistance/fibs
  3. Volume
  4. Price action with time/volume/order flow analysis
  5. Volatility analysis - Ie average true range, standard deviation etc

They are the only tools i use.

One mistake new traders make is that they switch from strategy to strategy. There is no perfect strategy. A strategy works in some market conditions and not others. Hence you master a couple of ‘setups’ that tailor to different market dynamics that give you a toolbox. You only need one or two setups to be consistent. Dont be the jack of all trades. Master one or two. Dont switch between strategies. They all suck at times. Draw downs are part of the game. Knowing when not to trade is half the battle.

Make mistakes, journal everything and figure out where your mistakes are consistently costing you money, remove those mistakes. Sometimes trading is not about making more money, but cutting out the mistakes which skews your expectancy positive over time.

My training has never ended. I have executed for large institutions with huge volumes of futures products and i am always learning something to this day.


#12

lmao I suck at this because I become anxious and impatient.


#13

Another skill set that you need to learn - Managing yourself. This is an important skill and one worth pursuing because it will help you throughout life, not just trading.

In order to do this you need to manage your expectations. So by creating a plan BEFORE you enter a trade with a planned exit and stop loss is key! If you have planned this out and ACCEPTED the risk, what are you anxious about? There is two outcomes, you reaching target or stopping out. Mastering yourself is the other half of the battle. Usually in trading you are the biggest enemy i have found.

Some resources that help managing yourself

  1. The Chimp Paradox - https://www.amazon.com/Chimp-Paradox-Acclaimed-Management-Confidence-ebook/dp/B006K26BEQ/ref=sr_1_1?ie=UTF8&qid=1518393823&sr=8-1&keywords=The+chimp+paradox
  2. The Ancient Art Of Stoic Joy - https://www.amazon.com/Guide-Good-Life-Ancient-Stoic-ebook/dp/B0040JHNQG/ref=sr_1_1?s=digital-text&ie=UTF8&qid=1518393848&sr=1-1&keywords=guide+to+the+good+life
  3. Meditation - Guided meditation is a good place to start. Learning to be present, so you can really analyse yourself better.

These books provide you with the knowledge of how your brain responds by default to anxious situations. Once you can meta analyse yourself, you can make better, logical and rational decisions based on science, not emotion. The stoic book is more about thought strategies you can implement to help yourself manage yourself and meditation is a tool to help you implement the data from these books.


#14

Can anyone say: B90X? :slight_smile:


#15

Oh yes, Sorry @peter

Peter has developed a wonderful program that is also worth looking at that touches on some elements i mentioned above. B90X!


#16

You need to change your photo to roo balls. I’m ashamed of you.


#17

Thanks, I really apreciate it!


#18

Done - Is that better @peter ? haha


#19

hahahah. yessss… yaaaassss!

gotta keep it going my man. it’s perfect!


#20

Just made another slight improvement. There we go. Perfect @peter :smiley: