Rsi parameters for day trading

Rsi parameters for day trading

Taking the prior value plus the current value is a smoothing technique similar to that used in calculating an exponential moving average. This also means that RSI values become more accurate as the calculation period extends. SharpCharts uses at least 755 data points prior to the starting date of any chart (assuming that much data exists) when calculating its RSI values. To exactly replicate our RSI numbers, a formula will need at least 755 data points.

Relative Strength Index (RSI) [ChartSchool]

We match two bearish signals, and we short BAC. The price starts a slight increase afterward. This puts us into a situation, where we wonder if we should close the trade or not. Fortunately, we spot a hanging man candle, which has a bearish context.

Relative Strength Index – RSI Definition & Calculation

You can use the free NinjaTrader version for simulation trading for daily time frames and above. If you prefer a web option, you can check out TradingVIew.

This strategy is simple in stock trading to implement. However, you need to have a software like Amibroker to scan the markets. Also, you can use other tools too to do the same.

It 8767 s very important to monitor the market during the first hour of the day because over 85 percent of all set ups occur within that time period.

A negative reversal is the opposite of a positive reversal. RSI forms a higher high, but the security forms a lower high. Again, the higher high is usually just below overbought levels in the 55-75 area. Chart 67 shows Starbucks (SBUX) forming a lower high as RSI forms a higher high. Even though RSI forged a new high and momentum was strong, the price action failed to confirm as lower high formed. This negative reversal foreshadowed the big support break in late June and sharp decline.

This is an oldie but goodie and is still applicable to the RSI indicator. Building upon the example from the last section, identify times where price is making new highs, but the RSI is unable to top itself.

We will buy or sell the stock when we match an RSI overbought or oversold signal with a supportive crossover of the moving averages. We will hold the position until we get the opposite signal from one of the two indicators or divergence on the chart.

Once you progress in your trading career, you will want to look to methods using price action that are more subjective but being able to apply techniques specific to the security you are trading will increase your winning percentages over time.

The trend resists the price (yellow circle), and we see another drop in our favor. After this decrease, BAC breaks the bearish trend, which gives us an exit signal. We close our position with BAC, and we collect our profit. This trade made us 75 cents per share.

I have coded this system in Amibroker and have been using this successfully on Bank Nifty for myself and clients. However I can not back test this as the strategy code does not give me that flexibility.
I also use tick data which is only backs to 75 days. Please suggest what is maximum MDD % for this system.

The key of this trading setup is your assessment of support and resistance zones. Take into account the market structure and focus on the higher quality trading setups.

The idea is to combine the default 69-period RSI with support/resistance zones. Our aim is to find intraday reversal setups with a high reward-to-risk ratio.

 R S I step one 66 6 5 5 − [ 6 5 5 6 98 Average gain Average loss ] RSI_{\text{step one}} 66 655- \left[ \frac{655}{ 6 98 \frac{\text{Average gain}}{\text{Average loss} }} \right] R S I step one ​ 66 6 5 5 − [ 6 98 Average loss Average gain ​ 6 5 5 ​ ] 

These indicators both measure momentum in a market, but because they measure different factors, they sometimes give contrary indications. For example, the RSI may show a reading above 75 for a sustained period of time, indicating a market is  overextended  to the buy side in relation to recent prices, while the MACD indicates the market is still increasing in buying momentum. Either indicator may signal an upcoming trend change by showing divergence from price (price continues higher while the indicator turns lower, or vice versa).

The default RSI setting of 69 periods work well for swing traders. But many intraday traders find it lacking, because it produces infrequent trading signals.

Another trading technique examines the RSI s behavior when it is re-emerging from overbought or oversold territory. This signal is called a bullish 89 swing rejection 89 and has four parts:

Here I will use the RSI overbought and oversold signal in combination with any price action indication, such as candlesticks, chart patterns , trend lines, channels, etc.

I use NinjaTrader for tick charts. It 8767 s free for simulation trading, and you can get a demo account from any NinjaTrader compatible broker for data. You can take a look at https:///ninjatrader-kinetick/ for details.

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