The value moves between 0 and 100
General rules, Sell when market is overbought
General rule is buy when market is oversold
The above general strategies are very inappropriate, because, in a strong uptrend, the market can remain up for a long time
Similarly in a strong downtrend, the market will be down over a long period of time
If you had bought at circles, then you would have made a loss, since it continued uptrend for a long time. hence this strategy does not work in a trending market
Use RSI with MA
Use 200 EMA
Above MA is uptrend
Below downtrend
Like below
Whenever you enter such trade keep stop-loss at the swing low
Keep Target near Swing high
Sell Trade
Price starts to consolidate for 2-3 candles. This indicates an imminent change of direction
Take a short position, with stop loss above the swing high, and place a target at previous swing low
Trading Divergences, strong sign of reversal
Bearish Divergence (price higher high, but RSI lower low)
Bullish Divergence
There could be fake divergence, so check for confirmation
Many people would have bought here
After a little pause , the price continues to fall
How to avoid fake Divergence. See there is a bearish divergence below but we will not go short.
Instread create short term trendline
Draw a trendline and wait for price to break the trendline
When price successfully breaks the trendline then we create a short position
Short sell occurred after the entry
Keep stop loss above the swing high
Keep target at the swing low
Bullish Divergence on 5 min USDJPY
Plot short term trendline and wait for it to break
Price rallied upwards once it broke the trendline
RSI hit overbought zone
Price at a resistance level before
The level also acted like a support
Short trade would have resulted in profit
