The HouseTaker's Trading Journal

Discussion in 'Journals' started by HouseTaker, Jan 19, 2006.

  1. Alright, here goes my trading journal....comments are most welcome.....i'll be posting commentary, analysis, and my trades.....looking forward to it! :)

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    The numbers in RSI are meaningless. What is important is the relationship between RSI and price. For instance, in the chart below, we see EURGBP in an ascending triangle. Note RSI though; it's falling. Prices are rising, and RSI is falling; this occurrence, known as RSI divergence, often precedes a reversal in the trend. It suggests that the current price trend lacks the strength needed to sustain it.

    [​IMG]

    In a scenario like this one where we have conflicting indicators -- ascending triangle suggests upwards price movement, although RSI divergence suggests otherwise -- it's often better to look at a wider time frame (which you should be doing anyway). The EURGBP dailies, for instance, show a symmetrical triangle with no RSI divergence. Consider.

    [​IMG]

    So based on that, it looks like EURGBP may be inclined to break upwards.

    But more importantly, what do you think? Does RSI have any value outside of being able to identify moments of divergence? Am I on target with this article, or does it make you think I've been hitting the crack pipe a bit too hard lately? :D
     
  2. maxpi

    maxpi

    You are probably scoring better crack than I am!! It will be good to see how it plays out.