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Beginners question, indicators RSI

mrb23771mrb23771 Posts: 10
edited August 2016 in Beginners Questions
I'm an absolute beginner. I use a demo account with iq option so I try to learn with monopoly money. Please don't laugh, I had to refill my account and bring it back to 100 euro to make it more realistic for me. I ended up with 12000 euro on my demo account, maybe I should think the other way around to be successful :)

I'm am trying to learn to work with indicators. As the name is, they are just indications no guarantee whatsoever that the price goes up or down.
I'm also learning to look at de signs of a bullish or bearish trend reversal with candlesticks.

So today I think I learned something new but quite important, but if not, please correct me. I use a 30 minutes screen and regularly switch it to 3hr and a day to see the overal trend. I try to look at the overal trend to see if and when the bollinger band is broken where not actually in a strong up or down trend.

Then I look at the candlestick pattern to notice if an uptrend or downtrend is in a reversal.

Today I foresaw a strong downtrend quite well, however, what I've been mistaken with is when a reversal happened to an uptrend. I was fooled by some candlestick patterns which looked like a bullish trend reversal. However, for quite a long time it kept falling.

What I noticed was that the RSI was for that period in a very strong oversold position. I know, indicators are indicators, but is it for me right to consider that when a RSI gives a very strong undersold position the asset, in this case eur/usd could have a tendency to have a very strong downtrend?

Comments

  • OkaneOkane Posts: 1,281 admin
    Hey!
    Yes indicators are just what they are called, a tool for indicating price direction.

    Candlestick patterns are good but to be honest, if you don't understand price action they don't mean much...
    Never base your trade based on how a few candlesticks look. Instead focus on the bigger picture.
    RSI can be oversold and price still move down with no regards to it. Or the other way around.
    The best way I can help you is to introduce you to price action, check this thread and everything in it:

    Price Action Trading
    Check my first post there and once you start grasping things, at the end of my first post there is a link to
    one of my price action strategies too I recently published. Check them out. This will take you a few weeks to master
    but once you do this a whole new world will open for you when it comes to trading!
  • TobiasRobinsonTobiasRobinson Posts: 45 admin
    I like indicators as a tool to confirm my original thoughts, as opposed to using them to trigger trades on their own.
  • OkaneOkane Posts: 1,281 admin

    I like indicators as a tool to confirm my original thoughts, as opposed to using them to trigger trades on their own.

    Yes exactly, this is how indicators should be used in first place.
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