Using the RSI for divergences
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The RSI is in general, not a tool that I'm a big fan of because its only valid when price is ranging. The exception being when it's showing a divergence from price action, as that is typically quite a powerful tool when in either an uptrend or a downtrend.
I copied this chart from CryptoTrendy (he's on TradingView and Twitter- you should follow him), and it's too good not to share.
A bearish divergence is when the RSI is printing a lower high but price is showing a higher high, and bearish is just the opposite. While just about every trader knows about oscillator divergences, I had never back-tested them on BTC before and the results are astounding.
In 2017, nearly every single time we showed bearish div on the daily in the oversold range, we had an average 30% drop in price.
You can do the same in a bear market to anticipate counter-trend price action, which also helps keep a lid on irrational hope that could lead you to stay long longer than you should.
I copied this chart from CryptoTrendy (he's on TradingView and Twitter- you should follow him), and it's too good not to share.
A bearish divergence is when the RSI is printing a lower high but price is showing a higher high, and bearish is just the opposite. While just about every trader knows about oscillator divergences, I had never back-tested them on BTC before and the results are astounding.
In 2017, nearly every single time we showed bearish div on the daily in the oversold range, we had an average 30% drop in price.
You can do the same in a bear market to anticipate counter-trend price action, which also helps keep a lid on irrational hope that could lead you to stay long longer than you should.
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the last bullish divergence we encountered that gave the 44% rise (and our last mini alt season) was driven in large part by a huge volume of late shorts (12k BTC on Bitfinex alone). This time around there really aren't any late shorts to speak of so I'm not expecting a big bounce (revised target $6,800). In fact, just the opposite has happened as there are a lot of late longs and about 30% more longs than shorts. So we're set up to dump down to 4.7k to 4.3kAnmerkung
typo on original post. bearish div is when RSI prints lower high and price hits higher high. BULLISH div is when RSI prints higher low, and price hits lower low
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