If it's used properly!
Uneducated People get rekt on it.
Be smart and read this 🧵..
All things Stoch RSI:
• Common Misconceptions
• Measuring Strength
• How to benefit from it
Enough time wasted, let's dive in ↡
🔹 What Is Stoch RSI
The Stochastic RSI is a derivative of the RSI.
In simple words:
• It's RSI on steroids
• A momentum oscillator
• Can show underlying strength of a trend
• Help you spot reversals
Easy right?
Misconceptions
The classical read says:
Above 80 - overbought
Below 20 - oversold
There's no such thing as overbought and oversold.
As long as there are more buyers than sellers:
↠ Number go up!
Vice versa with oversold. ↡
Don't ape or jeet when it's oversold/bought.
Look at it as a visualization of strength/momentum.
Use it to:
• See if momentum is fizzling out
• Spot reversals
But how? 👇
Momentum
As you can see in this clip:
• The indicator shows 'oversold'
• Price continues to drop
• It drops further and the Stoch RSI stays flat
This shows:
• Strong downwards momentum
• No sign of reversal
• Sellers in controll
Oversold? LOL
But as mentioned above you see clear signs of momentum.
Now, what you want to watch in this case:
• Is price reaching a S/R zone?
• How those PA unfold in that case (strong bounce)?
• What does the indicator show you ?
Let check it ↡
Spotting The Reversal
Price had a nice reaction coming into that demand zone.
See how the indicator starts to angle upwards?
↠ That's a sign of momentum shift!
• Strong move from the indicator to the upside
• Indicator follows PA
So ape/jeet when momentum shifts?
NO!
This tool is super powerful if used properly.
But in the end it's simply an additional confluence factor.
You want to use it in combination with other tools.
Volume etc.
1. PA
2. Volume
3. Momentum
My three boxes a good entry should tick.
Check my reversal 🧵 for more..