Hey ,I just wanted to get an opinion on RSI or Stochastic? Who uses what any why? I have enjoyed my baby pips schooling so far but would like to hear traders opinions?
Regards
Hello Chip
Given the standard parameters for RSI and Stochastic.
In trending markets RSI is more useful and in ranging markets Stochastic is more useful.
you can use both as an additional tool to confirm/fine tune your trades
Example: you would not want to go long when the RSI is overbought and/or giving bearish divergence. It basically can be used as a filter for bad trades. You would not want to go short when stochastic is oversold and in extreme areas.
Please note that even though RSI and Stochastic can be used to fine tune your trades, it is not wise to use them as your main tool for entry and exits, since in bullish trending periods prices tend to remain in overbought areas, and vice versa (during bearish trending periods, prices tend to remain in oversold areas)
Divergences usually give the strongest signal for both indicators. It is also possible to draw support & resistance and trend lines on RSI which are usually broken in RSI before they are on the price chart.
That really depends on your trading strategy/approach. Figure out what works best for you and don’t trade what works for others.
The “Stochastic RSI” indicator, developed by Tushar S. Chande, may interest you.
It’s basically an oscillating stochastic applied to the RSI indicator. It measures the value of RSI relative to its own high/low ranges, over a specified number of periods, so a reading of, for example, 0.2 would mean that the current RSI is 80% below the highest RSI and 20% above the lowest RSI over the specified period. In terms of “x” periods, the StochRSI is RSI(n) - RSI Lowest Low(x) divided by RSI Highest High(x) - RSI Lowest Low(x). It’s included as standard in some charting packages.
It can avoid some of the problems inherent in entering trades on the basis of so-called “overbought” and “oversold” conditions (which can actually persist for rather a long time).
i combine these indicators. when it has same signal. this is great signal for us. i learn more about it. i think when we use each indicator we need get it. and using it with high level.