RSI

Nipper

Junior member
24 0
#1
Being relatively new to TA I have found the RSI to be my favourite indicator. I would like to know what your thoughts are as to buying signals. Much of the literature I have read says an upward movement through an RSI of 30 is a good buying signal. However at a Chris Manning seminar recently he claims that stocks should never be bought at RSI's below 50. Has anyone any thoughts/preferences on this?!
 

Uncle

Established member
671 2
#2
From my recollection of a Chris Manning seminar I attended, he advocates a 20 day RSI and a buy over 50.

Beware of using this indicator in isolation -or any other indicator. I use a 14 day RSI in conjuntion with at least 4 others, and sometimes more for verification.

Try out different parameters to suit you trading periods by back testing against other indicators.

Remember the trend is your friend and also there is NO holy grail.

Best wishes

John
 
#3
Chris Manning advocates using a 21 day RSI, and to use the RSI line rising through the 50 as an initial screening for stocks.

What you then need to do is look at other indicators as well to back up this signal, but let the actual price force you into a buy or sell. This last part is the most important - never just use an indicator to buy or sell.

It's like being at a road junction waiting to pull out, and an oncoming car indicates it is turning left. You need to wait until it actually starts to turn left before you pull out. If you always remember this, you're well on the way to making 'perfect' trades.

Skim
 

Nipper

Junior member
24 0
#4
Thanks for your feedback - would you say that Shire (SHP) is looking good at the moment based on your own favourite indicators?
 

ChartMan

Legendary member
5,580 46
#5
Generally yes, with the following proviso-
The stock is under the 20 day moving average, and is very volatile.Also volume has been falling off.wait for the 5 day and 20 day averages to cross over would be a good idea- should be tomorrow (Monday).

Martin
 

Nipper

Junior member
24 0
#6
Thanks, I agree with this analysis. Take a look at NIS (results on the 12th) and also Cable and Wireless looks good for £11 plus IMHO. Any thoughts?
 

Uncle

Established member
671 2
#7
Nipper...Am curious as to why, if you are following Chris Mannings theory of the 21 day RSI moving up through 50, you choose Shire Pharm, when it is positioned at 46.42 (14 day 46.91) and not therefore having broken the 50 line.

The indicators on my chart showed a possible buy at close on the 6/12, when the 21 day RSI was positioned at 39.93 (14 day 36.38)

Waiting for the RSI to break 50 can lose you profit, especially if short term trading, and for me, any break above 30 is sufficient to create an interest, and incidentally is considered to have moved out of oversold territory.

I would emphasise once again this indicator should not be relied on in isolation, but used in conjuction with others.

Best wishes John




[This message has been edited by Uncle (edited 09-12-2000).]
 

Uncle

Established member
671 2
#8
Cable and Wireless has twice broken the upper BB in the last three days and i see no possible buy at this time.

Northgate shows nothing other than sideways movement, so do not see this as a possible buy either.

In fact both stocks referred to indicate how vital it is to use a number of indicators in tandem.

Yes there will always be the exception to the rule but always better to be safe than sorry.

Not sure which indicators you are using and what parameters you have set, but am sure if you experiement a little by back testing you will find a number of indicators that suit your trading style.

Best wishes

John

[This message has been edited by Uncle (edited 09-12-2000).]
 

nkruger

Established member
855 76
#10
There is no holy grail of trading. Somewhere, somehow, a cruel illusion that it can be done perfectly was started. It does an incredible job diverting peoples attention from developing imperfectly profitable systems.
For me, that one sentence sums up this whole trading game. Well done, mate.

Nick
 

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