Professional traders take vague statements about the status of the market and translate them into precise definitions that can be the basis for a trading strategy.
Go beyond fuzzy descriptions such as “uptrend,” “downtrend,” “trading range,” or “overbought and oversold.” Use mathematical rules to precisely define the condition of the market and then develop strategies based on those conditions.
Analyzing the RSI and understanding how it defines and interacts with trends reveals additional uses for the indicator. Because the RSI is bounded in a fixed range, you can experiment with specific indicator levels and test the outcome of different market scenarios.
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