NEO - #2 Continued -What Happened and was it Anticipated!
Nothing like waking up to not just one, but several assets getting crushed in the market. But our system was clear that this was a possibility as we previously posted. Yes we had ample warning. We even stated that a pullback could go further than anticipated and clearly marked it on our charts. Since that post NEO went up, so we adjusted our charts and retracement levels and looked to our other indicators to view what was happening. After our 1st retracement (adj) point triggered we assumed right on target. It appeared that NEO was on board with our thinking, and we could prepare for another leg up. But we had warned that there was yet another "ideal" retracement level that seemed improbable at the time, but we do not trade on the improbable, we trade our time tested system. NEO is proof that we must remove our emotions from trading and rely on our system of signals and indicators. So what was the signal? Which indicator foresaw this happening? Well several did but one in particular. The often misused RSI.
I see it posted all the time, RSI has entered overbought territory, they throw a trend line on there and tell you to get out. Sometimes their lucky but it's a coin toss at best. There is a correct way to use the RSI but how? Above I labeled the adjusted chart from our previously post with the 1st and ideal retracement levels. The RSI signaled the ideal retracement was in play and highly probable.
I have labeled a channel on the RSI charts cyan, and modified the RSI for 14 bars. This take time to tweak so do NOT use this until you get the hang of it. Those two lines signal where we can expect a trend change. I have labeled them BULL/beartop, and BEAR/bullbot. These are the signaling lines! To the far left we labeled BULL BRK. This means the RSI has signaled we may be changing from a bearish to bullish trend. To the right we have a double bottom right at the BEAR line. This confirmed our signal. NEO is starting to trend bullishly at this point even though the graph shows a minor dip. Great signal, so now I draw my breakout box you all have seen before and wait. As long as the RSI does not pass through the BEAR line I will buy a breakout. Now when the RSI signal broke the BULL level it's overbought sell right? NO. This is where it gets a little more complex, and to keep it simple it means the bull trend is still intact. As long as the indicator stays above the BEAR level, we are still in a bullish overall trend, regardless of the ups and downs. Even when we retraced from 5 to A we only touched the Bear level (circled), confirming the overall trend was intact. But then it broke through, the BEAR line. Buy right it's oversold? NO! The RSI is signaling "trend change" not over sold! We must now anticipate the ideal retracement line is play and boy it played out fast this morning. We got a double top to confirm this right before the retracement to E. WE HAD WARNING!
Please note, this is more involved then can be explained in a paragraph, and books have been written on interpreting the RSI indicator. I bring this up to show two things, #1 Most people use it in the wrong way. #2 we had a clear signal prior to the meltdown and ample opportunity to adjust our trade. Before implementing this I recommend research and reading first. Constance Brown has a great book on trend trading for those more interested in expanding their knowledge. To others be careful who you follow and what they throw up on a chart!
I see it posted all the time, RSI has entered overbought territory, they throw a trend line on there and tell you to get out. Sometimes their lucky but it's a coin toss at best. There is a correct way to use the RSI but how? Above I labeled the adjusted chart from our previously post with the 1st and ideal retracement levels. The RSI signaled the ideal retracement was in play and highly probable.
I have labeled a channel on the RSI charts cyan, and modified the RSI for 14 bars. This take time to tweak so do NOT use this until you get the hang of it. Those two lines signal where we can expect a trend change. I have labeled them BULL/beartop, and BEAR/bullbot. These are the signaling lines! To the far left we labeled BULL BRK. This means the RSI has signaled we may be changing from a bearish to bullish trend. To the right we have a double bottom right at the BEAR line. This confirmed our signal. NEO is starting to trend bullishly at this point even though the graph shows a minor dip. Great signal, so now I draw my breakout box you all have seen before and wait. As long as the RSI does not pass through the BEAR line I will buy a breakout. Now when the RSI signal broke the BULL level it's overbought sell right? NO. This is where it gets a little more complex, and to keep it simple it means the bull trend is still intact. As long as the indicator stays above the BEAR level, we are still in a bullish overall trend, regardless of the ups and downs. Even when we retraced from 5 to A we only touched the Bear level (circled), confirming the overall trend was intact. But then it broke through, the BEAR line. Buy right it's oversold? NO! The RSI is signaling "trend change" not over sold! We must now anticipate the ideal retracement line is play and boy it played out fast this morning. We got a double top to confirm this right before the retracement to E. WE HAD WARNING!
Please note, this is more involved then can be explained in a paragraph, and books have been written on interpreting the RSI indicator. I bring this up to show two things, #1 Most people use it in the wrong way. #2 we had a clear signal prior to the meltdown and ample opportunity to adjust our trade. Before implementing this I recommend research and reading first. Constance Brown has a great book on trend trading for those more interested in expanding their knowledge. To others be careful who you follow and what they throw up on a chart!
Bình luận:
I want to be clear I use this mainly to verify a trend is intact, or whether a trend is changing. This is how I use the RSI in my system and you should research it before adding it to yours. This is the most misused indicator I know and often leads to being in or out of the market at the wrong time.
Bình luận:
The defaults for the RSI are only a guide, each equity, commodity, coin etc must be backtested to find the proper upper and lower band levels along with the appropriate time frame. You can see I adjusted them for this article. It could take you a couple days to fine tune a good RSI strategy for one coin. So if you haven't done this, then it should only be used as an accessory not a primary.