Good Afternoon , I am looking to use both the 2 and 3 SD Levels via BollingerBands , in Conjunction with another Indicator that " gives " strong Confirmation Signals " when the Market you are trading is in EXTREME Overbought / Oversold territory . I am considering using the RSI , with the EXTREME levels set to 80 and 20 ? OR Was thinking of using a Stochastic " Sling " type Indicator, that too, is set to the EXTREME levels / " Triggers " being set to the 80 and 20 levels ....... Maybe go with 90 and 10 levels instead of 80 and 20 ? I am NOT looking to use the combonation of these Two Indicators , for Entries necessarily , But want to use them together , to help " confirm / shore " up IMO , strong Support and Resistance levels . I trade pure Price Action and Price Patterns using nothing but the ATR , but have recently decided to test the use of 2 Indicators, that both show and signal when the Market being traded, has reached it's most Extreme of Levels Thank you for any advice and recommendations
I believe J. Bollinger recommended the use of RSI because you avoid multicollinearity. However, I think it was from the perspective of going with break outs. I am not too sure about fading the RSI. It is one of the better long side indicators. I would look for divergence. A stochastic with BB might be the same thing (multicollinear). You need to research how it's built.
Thank you xandman , Im going to plot both Stochastic and RSI superimposed on e on top of the other on my charts this evening , with BollingerBands set with both a 2 SD and a 3 SD
Don't superimpose the secondary indicators. It clutters your chart. Check out stockcharts for best practices. Btw with RSI, I think you are looking for a crossing at 50 rather than extremes.
If you are at all technically minded, engineering, coding, math & physics, etc, or just like to learn these things, I recommend you take a look at Amibroker: https://www.amibroker.com/ I could test what you are talking about in a few minutes over a huge number of stocks, futs and etfs. You can manually look at charts and simulate trades without it, but for the price it can do amazing things. I actually like Wealth-Lab better, but you need a Fidelity account and I use IB.
Common technical indicators are a crutch for traders on training wheels. (Sorry for the mixed metaphor) Assuming you are on a short term time frame - hours to a day or two - you don't need anything more than price related to what happened yesterday, or at most the day before. What were the highs, lows, closes and opens, and where are you right now? Concerning yourself with an indicator that is always lagging, and impacted by events in the past, isn't going to get you where you want to go. You want to be trading chaos, right now, not something based on a 10 or 20 or 30 day average.