WHAT IS RSI?
The Relative Strength Index (RSI),
developed by J. Welles Wilder, is a momentum oscillator that measures the speed
and change of price movements. The RSI oscillates between zero and 100.
Traditionally the RSI is considered overbought when above 70
and oversold when below 30.
HOW TO USE RSI IN
INTRADAY?
RSI
is one of the powerful indicators for DAY TRADER while taking intraday positions.
Generally RSI
is used to gauge the overbought and oversold levels. But actually earlier said RSI
is MOMENTUM
OSCILLATOR which helps the user to identify the momentum of script.
In RSI
there few levels are most important that are RSI@30
level RSI@50
level and RSI@70
level. Now RSI@50
level is the key level for all the script.
In recent time with
support of trading software it is very easy to plot RSI
on chart but crux of the indicator lies in the time frame in which it required
to be used for most efficient result. Here we are talking from INTRADAY POINT,
so in which time frame RSI
can be used for efficient result is 5 min chart. RSI
is such indicator that as per my view for DAY TRADER can be used only in 5 min
chart for successful trade.
Now to prove my point
will illustrate with actual trade data of 05/09/2017 of different SCRIPT.
Above chart is of
SUNTV dated 05/09/2017 in 5 min timeframe with default setting of RSI
plotted on chart. Here want to explain RSI@70
level that is important level to identify a share as overbought. We can see
that SUNTV RSI
is trading above level of 70 but when RSI
shown above chart with GREEN LINE and RSI
average shown in chart by RED LINE fall below the level of 70 one can take
short position in SUNTV @ 834/- with strict stop loss just above of INTRADAY
HIGH @ 839.50/- (Rs. 5.5/- Risk) now can
set TARGET @ 828.50/- according to risk
reward ratio.
One can use above technique to take short
position in any share with use of RSI
and STOCHASTIC
to double confirm the trade.
To Be Continued....
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