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RSI Divergence 

 RSI shows you the strength (momentum) of a market move and helps you find overbought and oversold conditions. We use the indicator to look for divergences -- instances when prices make consecutive highs or lows while losing momentum, as indicated by the RSI. When combined with an accurate Elliott wave count, RSI divergences can help you see if a trend is ending -- or if a new one is about to begin.

RSI divergences are better seen than explained. In the chart of the Shanghai Composite above, the two green dots on the price chart point to two consecutive new lows. Now look at the green RSI lines -- see how they are pointing up while prices moved down? Although the market hit new lows, it did so with less momentum than before. That's a divergence, and, in this case, it signified the end of the trend.
Now look at the two red dots at the top of the next upward trend. This time, the market made two small consecutive highs. The RSI, however, tells a different story. The momentum of the highs was far less than during the bulk of the rally. This divergence suggested that the trend was ending -- and, in fact, it did as prices fell sharply.

Technical Analysis

Much Much written about the analysis, renowned analysis. Yet very few have capitalized the market. What makes that difference? Trillion dollar question.  If your answer is Discipline, you are right.

There are trends, trends between the trends, time frames between the time frames, cycles between the cycles, prices between the prices. 

So  holding is much important in trading, trade the margin that you can afford to hold. You might be surprised why this guy is going geeky out here; instead of talking about charts and candles, Fibonacci and RSI, harmonics and Elliott's wave, support and resistance, pivots and S/90 crossover. LOL, i m not here to teach you all that crap, ofcourse you all know what is technical analysis.

You are not happy! OK OK i m gonna expose the best trading strategy.

I would like to cal it FibbSI

1. Look for 4 period RSI
2. Put levels at 70 and 30.
3. Look for M or W RSI pattern above 70 or below 30
4. Wait till the RSI bounce back from the 50 level
5. For Sale the RSI should just go below 70, For buy RSI should just go above 30
6. This is called RSI BAMM, researched by Scott Carney, Technical Analyst and owner of      harmonic trader dot com
7. There are other methods of analysing the harmonic pattern, we will discuss about that very soon.

People are looking for Holy Grail, but i would say keep practicing on demo account, know your trading style, if you lose money try to find out what makes you losing money. Try to get the answers, if you can not answer talk with people, go to blogs and forum, interact with people. Try everything best or worst indicators, try to interpret the indicators in your own style, not what suresh uprety says. Suresh Uprety simply talks about his trading style and good for him only. Know who are you first and look for most favorable instruments like EURUSD, USDJPY, XAU etc.

Characteristics of Waves

Calculations within the Elliott Wave Theory resemble a road-map. Every wave has a set of characteristics. These characteristics are based on market behavior of masses. 

In the Elliott Wave Theory, a special attention is paid to individual description of each wave. Besides, there are certain laws used for proportional formations of Elliott waves (Fig. 3). These laws enable proper definition of where the wave starts and how long it is. The wave lengths are measured from high to low of the corresponding wave.

WaveClassical Relations between Waves
20.382, 0.5, or 0.618 of Wave 1 length
31.618, 0.618, or 2.618 of Wave 1 length
40.382 or 0.5 of Wave 1 length
50.382, 0.5, or 0,618 of Wave 1 length
A1, 0.618 or 0.5 of of Wave 5 length
B0.382 or 0.5 of Wave A length
C1.618, 0.618, or 0.5 of Wave A length

Figure 3

The above classical relations between waves are confirmed by actual ones with a 10%-error. Such error can be explained through short-term influences of some technical or fundamental factors. In whole, the data are rather relative. Important is that all relations between all waves can take values of 0.382, 0.50, 0.618, 1.618. Using this, we can calculate relations between both wave heights and wave lengths. Let us consider characteristics of each wave:
  • Wave 1

    Happens when the «market psychology» is practically bearish. News are still negative. As a rule, it is very strong if it represents a leap (change from bear trend to the bull trend, penetration into the might resistance level, etc.). In a state of tranquillity, it usually demonstrates insignificant price moves in the background of general wavering.

  • Wave 2

    Happens when the market rapidly rolls back from the recent, hard-won profitable positions. It can roll back to almost 100% of Wave 1, but not below its starting level. It usually makes 60% of Wave 1 and develops in the background of prevailing amount of investors preferring to fix their profits.

  • Wave 3

    Is what the Elliott's followers live for. Rapid increase of investors' optimism is observed. It is the mightest and the longest wave of rise (it can never be the shortest) where prices are accelerated and the volumes are increased. A typical Wave 3 exceeds Wave 1 by, at least, 1.618 times, or even more.

  • Wave 4

    Often difficult to identify. It usually rolls back by no more than 38% of Wave 3. Its depth and length are normally not very significant. Optimistic moods are still prevailing in the market. Wave 4 may not overlap Wave 2 until the five-wave cycle is a part of the end triangle.

  • Wave 5

    Is often identified using momentum divergences. The prices increases at middle-sized trade volumes. The wave is formed in the background of mass agiotage. At the end of the wave, the trade volumes often rise sharply.

  • Wave A

    Many traders still consider the rise to make a sharp come-back. But there appear some traders sure of the contrary. Characteristics of this wave are often very much the same as those of Wave 1.

  • Wave B

    Often resembles Wave 4 very much and is very difficult to identify. Shows insignificant movements upwards on the rests of optimism.

  • Wave C

    A strong decreasing wave in the background of general persuasion that a new, descreasing trend has started. In the meantime, some investors start buying cautiously. This wave is characterized by high momentum (five waves) and lengthiness up to 1.618-fold Wave 3. 

Unfortunately, Elliott's waves are well observed in the "old" market, but they are rather dimmed for the future. This is why practical use of the Elliott Wave Theory is often difficult and requires special knowledge.

Technical Indicators and Oscillators

The variety of technical indicators is huge. The goal is to give them reliable signal input and output, without subjective interpretation. Classical figures, the trend lines and levels of support and resistance, sometimes we only give references subjective. However, to avoid a subjective point of view based on technical indicators and oscillators is not always achieved. Below we describe briefly the most widely used technical indicators:

Moving Averages The moving average is one of the most famous technical indicators, and there are classic standards that are derived from this indicator: “If the closures are below the moving average of 200 sessions, the trend is bearish,” “If the closure are above the moving average of 200 sessions, the trend is bullish. ” The simple moving average of 200 sessions indicates the trend bullish or bearish. If all the price is above the moving average of 200 sessions, the currency is appreciating; If you are under, say that is depreciating.

RATIO OF CHANGE (ROC) indicator is a very simple, but not so lacking in usefulness. Typically used for a period of 10 or 14 sessions. This oscillator is useful for detecting extremely overbought or oversold currency, visually comparing the behavior with the past.

DIVERGENCES IN oscillators: In addition to identifying a state of overbought or oversold, an oscillator allows the study differences. Bullish divergence occurs when two successive minima in the declining market correspond to two successive minima increasing the oscillator. And we have a bearish divergence when two successive maxima in the growing market correspond to two successive maxima decreasing the oscillator.

Normally carried a difference a change in trend or a loss of strength in the current trend. The divergence is a reasonably good indication of weakness in the current trend and usually is followed by a period of calm. But in any case gives a clear signal that the trend will change. We insist: it is only an indication.

RSI: It’s one of the most popular oscillators, and we owe to J. Welles Wilder who also developed many other technical oscillators during the 70s. Normally used an RSI of 14 periods, but are also widely used for the 9 and 25. This oscillator is useful for identifying market turns and trend channels. Lines 30 and 70 that define the state of overbought or oversold.

STOCHASTIC: The stochastic oscillator is commonly used with short periods and is based on when prices tend to rise, the closures are located near the top of the price range of the day. Similarly in the case Bassist: closures approaching the bottom of the price range. It should be borne in mind that, just that the trend in falling prices, we are in an area above line 75 and below the line 25.

MACD: The convergence-divergence of the average movie. It is used especially as an indicator of trend (bullish or bearish). Despite the popularity of this indicator, the signals are not as reliable as it seems. Usually gives an account of successes and failures 1 to 2 or worse. Often, it begins to output even when the current trend continues. The MACD is most useful with the weekly charts, which gives a clear and reliable signals. We insist that the MACD is a trend indicator, not overbought or oversold. Furthermore, if the tendency to be lost, it is very possible that we MACD indicate shift. And, in case of a sharp turn in the trend, the message the MACD is delayed. The conclusion is that the MACD is relative, but its great advantage lies in its simplicity.

CCI (Commodity Channel Index “): This oscillator uses a statistical system and gives us an idea of the price changes with respect to a central value. If fluctuations in the prices we see as a chaotic movement around half we can identify overbought or oversold levels. Is used, normally a period of 14 sessions. The ICC was seen as an overbought or oversold oscillator and its greatest value is to identify major trends in corrections.

ON BALANCE VOLUME (obv): This is one of the oscillators used by the market volume in its formulation. To calculate, the procedure is as follows: it begins with the oscillator in the value 0. If the price rises compared to the previous meeting, this volume adds to the oscillator, if the price falls, the volume is subtracted. As you can see, the calculation is extremely simple. Use of this oscillator is that it is linked to differences. The intention is to indicate turns in the trend, based on a low volume that accompanies the increases in the market shows weakness and exhaustion of the movement (the reasoning is similar to the bassist).

Contrary view: The Principle of “contrary opinion” can be defined as: “When a large majority of investors in the market are of the possible future development, the stage of consensus will not be fulfilled.” The objective is to identify those states with a strong consensus and act in the opposite direction. B. Humphrey Neill was a pioneer of this theory in the’50s, and later James Sibbett applied the theories in the 60s. One indicator of sentiment strongly bullish market means that a large majority of investors have opened buying positions. The remaining number of operators is small so that the buyer can continue to pressure pushing prices up. Ie, “money is short” to enter the market.

NEWS AND REACTION OF THE MARKET: It should be noted the market’s reaction to fundamental news. If prices do not have a reaction to good news, this is a sign of weakness. Bad news can, then, down to the market quickly. The case is similar environments bassists. These findings are particularly significant in situations where there are overbought or oversold indicator of market sentiment.

Recapitulating: each oscillator is a fraction of information and each has a different character. The market always has an inherent tendency to bottom (bullish, bearish or lateral) and small variations in the trend. Within these two time frames, we must define the state of overbought or oversold.

As explained below (in the chapter entitled “Trading Systems”), is healthy with the information you give us three oscillators:

a) One side of the market trend.

b) One side of the overbought or oversold in the trend

c) One side of the ‘nervous’ of the market.

The objective is to locate areas of supports and bull markets and oversold areas of resistance and overbought markets bassists. If you act in this way will help ensure that you get a good profit, much better than if you’re in the market following the breakdown of resistance. Remember, this is buy cheap and sell dear. A small market is oversold when the bull is a buying opportunity. If the market then turns into a trend, you can leave the stop without making a big handicap. But if a break of resistance is a false signal, it is likely leave it damaged. 

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