or mail me iin gmail id satya.pinku

What i am trying to find out pivot after the divergence …………. suppose this moves failed and if pivot low breaks then it may good move at least 1 :1 ratio (watching prev data casualy )

You can say i m trying to find **value pivots** where we can increase our risk bit more etc even tried by seeing only price and got some patterns which posted

Again one more doubt some where it is said longer the divergence if succesfull then it will be a longer new trend is it a myth or realy happens if so what is the logic of divergence for longer time

i know asking too much silly question but when you free plz answer

Regards

Satya

Right observation.

There would be traders, trading divergence, but I could not make much use it. :(

Looking at charts as series of zig-zag (waves) making swing highs and lows was interesting to understand the price action.

But the useful part came only with Saint Sir's Flow methods of trading those pivots :)

Keep up the good work and let us know, about your interesting observations.

Thanks

Rajesh

Edit: If you are interested will send you some links

]]>This is my understanding thanks for your help

Regards

Satya

default is as follows:

select study->relative strength index

study & parametres

avg type -> e (exponential)

avg period -> 7

rsi period -> 14 (this i have changed to 3 now)

show over bought/sold check box is checked by default

overbought-> 70

oversold -> 30

how to get centre line 50 ?

and wt others default parametres i have to changed ?

looking forward to the reply

thank you

harsh

Thanks yes when free then please post some chars

Regards

Satya

I will try to repeat it.

We are used to looking at the price action in terms of pivots. The price moves in a zig-zag motion.

In an uptrend we keep getting rallies (a rally ends by printing a PH) and pull backs (it ends by printing a PL).

Now as the uptrend gets old/tired/exausted the rallies keep getting smaller, this is the time the ossilator will show you divergance.

Thus the divergence shown by an ossilator (which has a lag) is nothing but a delayed information about us getting smaller rallies in an uptrend or smaller declines in a downtrend.

The very same information is available from the price charts directly without lag :)

What do we do with this information is totally upto us.

When rallies keep getting smaller we will get into sideways action or we may have reversal or even a continuation after a halt.

I have not looked them up but you can check HDFC charts, last weeks sideways action after a strong up move, should give you some kind of divergance.

Another example could be current aban chart (hourly) its stalling and the rallies are getting smaller, so maybe it should also show some divergance (again have not checked it up on the charts)

The use of RSI for confirming Pivots was a very very innovative way of doing things, its a great discovery by Prabhjeet, I do use it, the way he has discribed.

If you are still interested I will upload few charts with RSI(14) and zig-zag plotted on the price chart, you can see it visually.

Thanks

Rajesh

unless untill we have a great rally 3 which also absorbs the loss of decline 2 in RSI calculation then we may not have a divergence

plz reply when ever you free if possible with a nifty chart

which will be a great help

Regards

Satya

Regards

Satya

really greaat work……thank u for clearing the cobwebs…….nd thanks fr explaining the formula as well….:)

thanks satya and prabhjeet……

regards

neeraj

]]>One more simple way to Identify Pivot which we may use with RSI or without RSI is to Paint Bar

Paint all bar with HH and HL then previous Bar ColorTan

Paint all bar with LH and LL then previous bar ColorViolet

paint all bar with HH and LL then previous bar ColorBlue (OutsideBar)

paint all bar with Lh and HL then previous bar ColorRed (InsideBar)

See Picture

Thanks

]]>If you have a facility of calling satya yesterday, please do tell him todays rates ;)

Thanks & Regards

Rajesh

Measure the points in upmove. rally 1 & rally 3 as you say,

Lets say, rally 3 makes a HH as compared to rally 1, but

if rally 3 points are less than rally 1 points, then you have a divergence

For e.g.

Rally 1 = 20 points, decline 2 = 10 points, rally 3 = 15 points, RSI will show divergance

Thanks

Rajesh

Regards

]]>I am realy greatfull to you introducing RSI to flow traders infact working on Divergence and Pivot and getting confuse by the logic of divergence my doubts are

If we take uptrend and we have a rally called 1 and then a decline called 2 and then a rally above peak of 1 we call it 3

and lets say we have -ve divergence here by RSI14

first when rally 1 occured RSI also moves up indicating total gains > lotal loss for last 14 period which is fine

then we have decline 2 and we have RSI also decline now when the rally 3 occure towards peak of rally 1 if RSI fails then we have a - ve divergence

But i think if we look at RSI calculation it takes 14 period into consideration but while we have rally 3 occuring when we calculate RSI it takes prev 14 period into consideration and if we have some or total bars of decline 2 in the RSI calculation while in rally 3 its obvious that we get less rsi value unless untill in rally 3 we have closes far away from prev days close

So thought RSI divergence is obvious to occure as per its calculation so why we give so much importace to it ????

but find some time we have no divergence ……..

again while checking RSI with 60 min flow it seems divergence work most of cases so confused i know i m missing some where

need your guide

Regards

Satya

As you have clearly stated it better to use High lows for RSI than closes, that is my view as well but let me also bring up one thing, though RSI Close is nowhere near as accurate as RSI High lows but still 80 - 90 % times it would give correct signals.

Now coming to your question of Divergence, well the answer lies in your explaination itself i.e. **RSI measures the momentum in relation to previous bars** , so the Divergence appears when we have New Pivot Highs (in uptrend)being made but not with same momentum like they were being made previously, this means that upmove is weakening but it may not have ended soon.

Divergence can be a powerful tool if used with Pivots, suppose we are in an uptrend and RSI begins to show Negative Divergence, now we would not think like novices and start shorting right away, this divergence just puts an Orange light for us but the Green light would be when this we break the Pivot lo, in case of Divergence you can expect a pretty sharp and prolonged Downmove when this uptrend breaks and Vice- versa for Downtrend.

Waiting for your views as always

]]>I would be glad if I can solve any more doubts, will also put some charts of my studies tomorrow

Dear prabhjeet will eagerly wait for your studies on RSI and one of my doubt is why divergence occures what is the logic of this though little bit idea but have lot of confusion ……………. plz reply in u r free time

Regards

Satya

Regards

Satya

This Gain is derieved by previous c lose and todays close

Like if we have todays close is greater than yesterdays close then we have gain = Todays close-yesterdays close

Similarly we calculate losses also

Suppose we take 14 day RSI close then we will find total no of loss and gain and average them

Average Gain = Total of Gains during past 14 periods / 14

Average Loss = Total of Losses during past 14 periods / 14

And claculate RS= Avg.Gain/Avg Loss

And we calculate the RSI as following formula

We use this formula to make RSI ………………………………………..

So logic of RSI becomes it’s a indicator which indicates curreent state of momentum if average gain mean close above prev days close is greater than the averageloss mean close below prev days close RSI will increase indicating bulls are in cotnrol and momentum in higher side

So in our case if we replace “LOW” instead of close we get RSI for lows ……………

We define loss = if we have a low which is less than prev days low then( prev days low –todays low )

Similarly for for gains…………………

and we calculate the RSI low for a specified period

Now looking at the calculation you can see there is a huge difference between RSI(close) and RSI (low)

And RSI(high)

Now we start our experiment ,,,,

Take a hypothetical situation when we have large spike down but we close much above from the low in this case we must have different RSI values for lows and close as we are closing near the high may be above ydays close RSI(close) will show its reading bit above …………. But where as our low is much lower than prev days low then RSI (low ) will show much lower readings

To show this example have manupulated the marked candles low to a hypothetical low and see the difference RSIclose don’t tell us its valid pivot according to theory but RSI Low tells it’s a valid pivot low according to theory

Charts ………………

Regards

Satya

thnx…

regards

neeraj

]]>Thanks

Regards

Satya

and i will look into the low and high…..as using icharts…low high not dere……..

thanks and regards

neeraj :)

]]>Keep it up.

Regards,

Dhinakar

Thanks Kraiser and your active participation is what we all are looking for here

]]>All the eye- balling of charts has shown to me that if you have the facility of using RSI high or low values, do use them. The best Pivot lows are seen using RSI Low and best Pivot hi is seen using RSI high, using RSI close is just a compromise, it doesn't give true picture. When using RSI close even a Bearish Red candle after a Green candle will show us a Pivot lo, but for our Pivot to be valid, we would want the lows to be lower than subsequent candles, hope I am clear

]]>great post.

But let me confess, that was not my question, or atleast never thought in my mind why 3 or why 5 or why 14. So no credit for me.

Great questions lead to great answers. And thats how I learnt flow systems on TJ.

I was inactive there, because of all you all guys, all my questions used to get solved.

Kaiser.

]]>I would like to add to the above post of Prabhjeet. In fact it is a way of saying the same in different words.

Whenever we are looking for pivots, we look at the immediate bars around it. We are not interested in the price action of 10-15 bars before that bar and 10-15 bars after that bar. Similar would be the case for RSI. A RSI of 3 should be sufficient to show the price action happening in the immediate neighborhood, then why bother about 14.

Prabhjeet, in case I am wrong or have written completely out of context, let me know. As I don't want there to be any confusions because of this post.

Kapil

Well this is one factor that came to me after a lots and lots of Chart watching and trying every parameter I could. According to Saint's original Pivot definition we took the hand example and a Pivot was formed when we had a decline after a rally or vice- versa, now when I am using 50 line as reference for suppose a long position I would want the stock to have a decline that will take RSI below 50, that means we have had a fair decline and the stock may try to find value buyers, now somebody starts buying the stock so RSI will also strengthen and go above 50, that means the correction is over.

Now we have an important difference here from Saint's method of identifying Pivot. Here even if a Pivot hi has not been taken out but RSI has already moved above 50, we will not wait for a Pivot hi to be taken out, just move your stops below Pivot lo recently formed by RSI.

In simple language , when using RSI , we want Healthy correction for forming a Pivot, tiny-miny retracements will not do

]]>Being a person from Medical field I just run on seeing any mathematical formulas but what my uneducated mind tells me is that as we keep on increasing periods from 2 to 14 the amount of retracement needed to mark a Pivot below 50 would keep on increasing, that means if we use 14 instead of 3, we will be able to capture only very large trends only but there will be many more loosing trades as compared to 3, but downside of using 3 is that the profits per trade will be much smaller.

I myself had reached the figure of 3 after lots and lots of Eye- balling and experimentation. For me using 14 was too much of a stress hence using 3, if anyone is comfortable using 14 they can go ahead according to their liking

]]>I will be trying to answer some of the doubts as per my understanding because I have been using RSI since long and am convinced about its use with our Pivots

]]>but u knw for agressive minor pivots…..we can luk down if in 30 min charts there is a dip…am sure that minor pivots on 60 are major on 30…so a dip :)

Regards

Neeraj

]]>Best Wishes,

Smart_trade

]]>Really a great stuff with charts. Will keep me busy on coming holidays. ]]>

Very well explained,

Thanks to Sunil, for his live comments on RSI in Traderji.

Raju.

Regrds

Satya

Will check…

Thanks Neeraj…

Kaiser…

]]>in high low IMO luks complicated den what i am using……

compare dis chart

Regards

Neeraj

]]>3 days we use fr pivot validation :) 3 days makes pivot thing clearer……..14 i already hav cautioned ……dun use with 60 min flow……trying to do so u will hurt ur valuable positions…….nd will make it really tough for u to take decision….i hav gone thru same phase….70 overbought and me gng long..shit……u knw…psychology thing comes in…coz our method will say go long…and RSI will say overbought….so will confuse u biggggggg time……

although u can try it in intraday 1min 5 min charts if u do……sunil is d person i knw who Trades intraday using RSI….nd is doing it perfectly….

14 days divergences i knw less……but it goes like dis….if price making new high but rsi is nt…..it is negative divergence….and same fr opp……any1 using this stuff can clarify….

Regards

Neeraj

]]>Check this chart.

For uptrend check blue rectangles and Red RSI

For downtrend check red rectangle and blue RSI

I get a confirmation by the (pivot like formation on RSI)

Kaiser

]]>Shouldnot be difficult to really understand this divergence business if you look up RSI's treatment on the net.

Personally would like to limit the study to its limited applicability on pivots.

Also an interesting area would be to study RSI on 3 period (60 min bars) based to high prices when long and on low prices when short vis-a'-vis RSI based on closing prices which is available on the trading software of the brokers — and results — if any significant difference in results i.e., any pivots getting by undetected.

This area of study would be beneficial.

Bee

]]>nd abt ur oder post :D really i wud ask sum 1 to clarify….i just knw abt d indicator…. nt d formula :)

and wat u talking abt … those divergence etc…are part of 14 day rsi …. here that i posted is actually 3 days tweak only :)

the divergences and RSI etc…are used by tsunil in nifty futures thread…he hav even posted relating to RSI in the setups discussed and traded in nifty futures thread……

regards

neeraj

]]>i may be posting out of context

Regards

Satya

Regards

Satya

may be yes ……….. another doubt is price increasing or making higher high but RSI fails what does that mean how it looks in chart ??

ok i know these are silly questions but totaly new to RSI hope some one clarifies …….will try to post a chart for my doubt

Regards

Satya

Relative Strength Index (RSI)

Introduction

Developed by J. Welles Wilder and introduced in his 1978 book, New Concepts in Technical Trading Systems, the Relative Strength Index (RSI) is an extremely useful and popular momentum oscillator. The RSI compares the magnitude of a stock's recent gains to the magnitude of its recent losses and turns that information into a number that ranges from 0 to 100. It takes a single parameter, the number of time periods to use in the calculation. In his book, Wilder recommends using 14 periods.

The RSI's full name is actually rather unfortunate as it is easily confused with other forms of Relative Strength analysis such as John Murphy's "Relative Strength" charts and IBD's "Relative Strength" rankings. Most other kinds of "Relative Strength" stuff involve using more than one stock in the calculation. Like most true indicators, the RSI only needs one stock to be computed. In order to avoid confusion, many people avoid using the RSI's full name and just call it "the RSI."

Calculation

100

RSI = 100 - -—-

1 + RS

RS = Average Gain / Average Loss

Average Gain = [(previous Average Gain) x 13 + current Gain] / 14

First Average Gain = Total of Gains during past 14 periods / 14

Average Loss = [(previous Average Loss) x 13 + current Loss] / 14

First Average Loss = Total of Losses during past 14 periods / 14

Note: "Losses" are reported as positive values.

To simplify our explanation of the formula, the RSI has been broken down into its basic components which are the RS, the Average Gain, and the Average Loss.

To calculate RSI values for a given dataset, first find the magnitude of all gains and losses for the 14 periods prior to the time where you wish to start the calculation. (Note: 14 is the standard number of periods used when calculating the RSI. If a different number is specified, just substitute that number in for "14" throughout this discussion.)

It is important to understand that the RSI is a "running" calculation and the accuracy of the calculation depends on how long ago the calculations started. The first RSI value is an estimate - subsequent values improve on that estimate. You should calculate at least 14 values prior to the start of any values that you will rely on - going back 28+ periods is even better.

To start the running calculation, the First Average Gain is calculated as the total of all gains during the past 14 periods divided by 14. Similarly, the First Average Loss is calculated as the total magnitude of all losses during the past 14 periods divided by 14. The next values for the "averages" are calculated by taking the previous value, multiplying it by 13, adding in the next Gain (or Loss), and then dividing by 14. This is Wilder's modified "smoothing" technique in action.

The RS value is simply the Average Gain divided by the Average Loss for each period.

Finally, the RSI is simply the RS converted into an oscillator that goes between zero and 100 using this formula: 100 - (100 / RS + 1).

Here's an Excel Spreadsheet that shows the start of an RSI calculation in action.

When the Average Gain is greater than the Average Loss, the RSI rises because RS will be greater than 1. Conversely, when the Average Loss is greater than the Average Gain, the RSI declines because RS will be less than 1. The last part of the formula ensures that the indicator oscillates between 0 and 100. Note: If the Average Loss ever becomes zero, RSI becomes 100 by definition.

Regards

Satya

RSI for 3 day period increases if average gain > Avg.Loss similarly RSI decreases when avg loss >Avg.gain

Our pivot defination also goes like this

for pivot low we should have a decline then a rally now by RSI we can filter out these decline and rally from shallow moves what u said in u r post

hope i understand the logic

Regards

Satya

so hav tried only close 1 only…..

looking forward for prabhjeet's post on close and a few charts…. :)

]]>Excellent post

Thanks

Rajesh

If u r trying to catch up the tops and bottoms using RSi …. u r WRONG …… in range bound mkts rsi works differently…. in trending it works differently……

if u want to b good in timing and book profits at the top or bottom using everbought and oversold zone using all that u wud hav read in stuff abt rsi using 14 days…..WRONG again…….

READ DIS…

posted by saint sir in d foundations…..opened my eyes…..

Finding the Holy Grail.

Technicians regularly fall into periods where they tend to favor one or two indicators over all others. No harm in that, so long as the favored indicators are working, and keep on working. But the analyst should always be aware of the fact that as market conditions change, so will the efficacy of their indicators. Indicators that work in one type of market may lead you badly astray in another. You have to be aware of what's working now and what's not, and be ready to shift when conditions shift. There is no Holy Grail indicator that works all the time and in all markets. If you think you've found it, get ready to lose money. Instead, take your trading signals from the "accumulation of evidence" among ALL of your indicators, not just one.

but this RSI 3 days is basis for validating…and not actually a indicator…it is tweak of rsi……

**RSI ONLY of 3 DAYS and 50 as centreline……..and to validate potential pivots only**……..this will usually work all time….no matter what market….as pivot will always involve a retracement……which is basis of every pivot……

but if u using RSI the original way … tops and bottom fishing…THINK AGAIN….else u will just end playing around and ruin the positions….

we r simpletons here……so no trying of complex things atleast in 60 min flow……timing…selling on top or bottom…hell wid it…

Regards

Neeraj

]]>Kaiser you are right, 3 period/length RSI with high and low is what Prabhjeet had recomended.

Using it with High and Low is ideal, but when the feature is not available like in case of icharts etc, we can always use close.

Thanks

Rajesh

PS: The good pivots by this method are fondly called as Healthy Pivots and others un-healthy ones :)

(with both Saint Sir and Prabhjeet beings docs, no wonder this terms will catch up)

But to be honest when I read some post regarding RSI by Prabhjeet on TJ, I understood it quite differently. And from that day I am also keeping RSI in my chart.

It was something like,

I set RSI(5) of Low price (not close)

I set RSI(5) of High price (not close)

If long, Check the RSI(5) of Low.

One can easily find out the previous low in RSI. and if you see that low of RSI, it would fantastically match with the pivot point on chart. (Gives confirmation). Have been benefited much.

May be Prabhjeet can comment.

Or else I will post some chart tonight.

Kaiser.

]]>hoping for ur inputs on dis :)

Regards

Neeraj

]]>Saint

]]>i use icharts so….i simply set the default number of days which is 14 to -— > 3

so DAYS = 3

now the lines…….default 1's are 70 and 30…where there is a line………..please no line of 70 and 30………only 1 line 50…….that is the centre line………

so LINE only 1 that is at 50 mark ……..

now do what we do in the flow…

1) try to identify the pivot…..

2) look at rsi … A) if we are looking for pivot lows….the RSI will dip below 50 and go back to above 50 ….. nearby is also correct….so basically go with the eye….. B) if we r looking for pivot highs.. the RSI will go above 50 and den come back to below 50 ……

3) you will get your answer about a healthy pivot……..:)

4) **this is only for the flow at its purest….and following the 60 minute pivots only…..this will not help in gap situations……and cant help agressive 1's and in 2 bar rule…….**

Now the sideways movement … this RSI indicator hav helped many times to identify a valid pivot in RSI movement….to wheather a cool off actually took place in sideways or not…….RSI will dip below 50 and kool off during sideways and den resume above 50……basicall cool off = pivot … uptrend —> kool off —> form pivot —> den back to ongoing trend…..

nothing better den a picture…….will post some in upcoming posts……..

Regards

Neeraj

]]>rsi is bit of a advanced approach .. but if understood correctly its easy to use…..

rsi needs screen experience…..i mentioned rsi here coz i think it is very much required in gold trading….it is very important and essential to know about this here….

different time frame hav diff. rsi…….if we r 60 min flow traders….we concentrate only on 60 min flow rsi…..

were 60 min flow rsi is 50 ….dat is not overbought not oversold……..15 min timeframe may show 70 as rsi which is overbought…….

what is a decline on 15 mins time frame may not b visible on 60 min charts……..

so b aware of this fact….and use only 60 min rsi while trading 60 min flow…..

dun get confused and paniced by 30 min rsi n all…….

there are sum settings in rsi…..that is no. of days……now 14 is the default 1 ……that shows rsi based on 14 days…for pivot identification we use 3 days

as prabhjeet mentioned : For me a Pivot should show some retacement that is clearly visible, not just a spike of 1 bar.

so dis is also visible on rsi … as rsi indicates selling and buying strengths….

study thoroughly prabhjeets above posts they say it all…..study rsi … u will get to understand what all this is about……..

rsi also hav sum exceptions…….those exceptions will b points where ur eye will tell a different story…..and indicator will not giv perfect readings above 50 or below 50 dat we use……i will try to post charts……do a bit of analysis….using EYEBALLS INDICATOR…..u will know…….go with the eye as saint sir always says…..

so u look at charts……look for VISUAL pivots…..look at rsi…….u will knw and get the feel what to do…..

regards

neeraj

]]>hi satya…..didnt post in the other thread coz…dun wanna mix up … only pivots..and the rsi…..stuff dere shud b only pivots….simple stuff….wanted dat to b preserved fr pivots only……nd rsi and pivots here……wat say :) greaat stuff frm u

posting old post here….. all about pivots ……. frm our very own TJ…..

dis is what i have read ……….

go thru dis for details about rsi…….

here is d link 4 discussions relating to rsi that i am posting ahead…u cn study deeply 4m here

http://www.traderji.com/equities/25356-live-discussion-saints-60-minute-flow-59.html

Originally Posted by **prabhjeetrana**

RSI actually measures the Overbought (reading above 70) and oversold (reading below 30) levels for any entity we are trading.

But here we dont use RSI to catch tops and bottoms as most people try to use. Here we are using the basic tenant of Saint's theory that in an Uptrend we have progressively higher pivot lows and vice versa for Downtrend.

Now when I am using RSI in Uptrending stock, a stock will keep on moving up and RSI will be above 50 now if the stock declines for sometime the RSI will dip below 50 and then it will start to rally again and if we have a healthy rally the RSI will again move above 50 so that marks a Pivot low for me.

Now why I use RSI for filtering Pivots is because sometimes in an Uptrend we get a decline that is very shallow and we tend to get whipsawed taking the Pivot break of such Shallow Decline, hence RSI will give us signal only when we get a healthy decline.

Secondly it solves the problem of which sideways movement to use as Pivot, when we have a slightly longer consolidation the RSI will dip below 50 and if it manages to rise above 50, that would be a valid Pivot, if it stays below 50 wait for it to rally above 50.

Some people may not agree with 50 line for using Pivot deciding levels, you may try 60\40 or 70\30 levels for deciding Pivots, but I am ok with 50 levels.

If you want more laid back approach use RSI of more than 3 which I have used and if you want to make it more agressive you can scale it down to 1 but I have found RSI (3) ok for me.

Please dont try to prove this view correct or incorrect, if you backtest it, you will certainly see its useful but it may not suit everybody's personality. It suits me so I am using it

Regards

Centerline Crossover

The centerline for RSI is 50. Readings above and below can give the indicator a bullish or bearish tilt. On the whole, a reading above 50 indicates that average gains are higher than average losses and a reading below 50 indicates that losses are winning the battle. Some traders look for a move above 50 to confirm bullish signals or a move below 50 to confirm bearish signals.

regards

neeraj

]]>