Overhyped indicator!

From what I have seen, RSI in strong market trend almost always gets useless. It remains at the same level – overbought/oversold for such a long time, and gives out false signals. With such unreliability, isn’t it better to avoid using RSI or any indicator for that matter for trading?

There’s another @Richard_Able-Trading, who would say quite the opposite, and that the more of them you have the higher the probability of success.

My own stance is that the trick is in knowing when the market is trending, and when it’s going sideways. The indicator is used differently in both cases.

But totally agree with ya, most indicators I think are much ado about nothing.

It is a lagging indicator. Cant be used solely to determine a trade. I agree there are better as well

The one value the RSI has - according to No Nonsense Forex - is as follows: delete the 30 and 70 line indicators and replace with a 50 line. This line is then used as a trend indicator - above the 50% ,a bullish trend and below the 50%, a bearish trend. For what it’s worth.

Combined with MACD & PSAR, used as a confirmation signal.

6 Likes

There is no sense complaining that indicators don’t give signals or give late signals or give false signals. Signals do not come from indicators.

1 Like

What do you mean by false signals and unreliability?

My advice: Learn how the indicator arrives at a number, and then plots that number using a line. The indicator does exactly what it is designed to- plot a line that represents candle closings against a certain lookback period.

There is nothing inherently false or unreliable about any indicator…

4 Likes

That’s stating the obvious. All indicators are lagging. They are plotted using historical data…

Equally, indicators are not used to indicate a trade or predict the future.

They are used to indicate change in the market and when used correctly and sequentially you can increase your probability of price hitting your take profit before your stop loss

1 Like

@Redangreame
Yes I could not agree more. The RSI is the most ‘overhyped’ indicator as @Johnscott31 says ‘Most indicators are much ado about nothing’.

Having said that, I do like the 8EMA

That’s not exactly what I said.

My point is this:

Let’s start by discounting anything other than what we can see.

That’s all the information we have.

So that leaves us with a choice of:

Pure price action and trend lines

Price and indicators, trend lines etc…

When you look at trading like you would any other endeavour with regards to speculation you work with the info you got to increase odds and probability.

Horse racing
Boxing
Poker
Trading

All of which have an uncertain outcome all of which you use previous info to increase odds of winning your bet(trade)

So by default if you have more info (price and indicators) AND you know how to use it you have a better chance and higher odds of price hitting your profit target before your stop loss consistently

More success with more number of indicators ??? That’s perplexing, as the charts would be with so many signals.

I’ve tried the timeframes between 2 and 6, removing from the default 14, but still found it not working as well for longer positions.

Yes I too have tried the 5 and 8 EMA strategy and found it simpler relatively.

Okay, try the MACD set up of 3-10-16 for earlier entry signals.

1 Like

Okay, I haven’t tried this setting yet, will do

Well, indicators do not predict the future or signals, they only show valuable information about the market behavoiur in a past period of time.

2 Likes

RSI indicator is a powerful tool, it totally depends on which timeframe you are setting though.

As does price movements…

1 Like

I do recall once reading a newspaper article about stock picking. One guy put up the FT on a dartboard and bought the three shares that his darts hit. He said they did better than his financial advisor. Not sure I believe the story, but some folks just say “use only the price action”, but do not go on to describe in any more detail what that means.

All indicators, by their nature, represent past trends. If you ever find one that represents future trends, please let me know. You can see this effect just by looking at SMA (20) and SMA (50) and seeing that the SMA (50) is always lagging the SMA (20).

1 Like

Actually I too believe that simple price action is the best approach to trading. Surely less complicated and really more effective.

Agree with you here. Indicators as opposed to what have been perceived of them, don’t provide any buy or sell signals. As a trader, it’s us who have to interpret the signals and determine the entry and exit points that match our trading style.