Stochastic & RSI

<<Stochastic>>

  Stochastic oscillator is another amazing indicators used by many traders, its phenomenon and mechanism of action is pretty easy, it is an excellent indicator for periods of oscillation (or no trend periods).


How to use it?
there are 2 ways to do that:
1- As a divergence indicator (and we have talked about divergence with MACD before).
2- Add 2 levels to the indicator, namely 20 & 80, whenever the price makes a new top and the 2 lines of the indicator crossed each other above the 80 level and it is in no trend period (and remember this well, as it is an indicator acting perfectly in no trend time on any time frame), then you enter short (sell) and vice versa in the long (buy) situation.


Case 1:-

Case 2:-

N.B:- Stochastic may give false signals in trend periods, and this is the most deficient point in the indicators, so try to identify no trend periods and zones before you apply its signals.

<<RSI>>

    Again RSI is another indicators on which big traders depend greatly!

it acts like stochastic but it is more popular, RSI is found on trading charts from expert traders.

How to use it?

there are 3 ways to do that (firstly you have to add 3 line levels 30, 50 and 70):

1- As a divergence indicator.

2- Used as an average indicator for saturation of price either oversold or overbought, so you can buy whenever the price makes a new bottom and the indicator line is near to level 30, this means that the price is overbought and you can enter a buy position, vice versa for the 70 level.

3- strong entry points can be obtained from cross of the powerful level 50, if it is from downwards to upwards you enter long and vice versa.