RSI - rocket behind the price!

Everyone knows RSI.

But very few benefitted from it!

Why?

Because, as Aristotle once said

"Nobody loves the man whom he fears!"

People fear RSI - so they don't love it!

Why do they fear RSI?

Well, what else can they do when they got their fingers burnt while trading with RSI!

RSI is one of the first technical indicators every new trader studies when he/she starts trading

Also, RSI is one of the first technical indicators he/she tries

Initially it seems to work but very soon "it" lands you in wrong or too premature trade!

Why does this happen?

Why do they burn their fingers?

Well because they got the meaning of RSI totally wrong!

How?

Well they always thought RSI was "Oversold" or "Overbought" indicator!

That is wrong!

Price can continue to rise much after rsi hits "Overbought" territory!

Similarly, price can continue to fall much after rsi hits "Oversold" territory!

Rather, much of the action takes place in the "over" zones!

So?

What really does RSI indicate if not "overbought" or "oversold"??

Well, it is basically a momentum indicator!

It tells you the force behind the price movement!

It tells you how much thrust is left in the rocket to keep moving till it starts to fall under gravity!

That is why I say that if price retreats much less than rsi, then price has lot of fizz left in it!

That is why "failure swing point" indicates that the berlin wall is about to collapse!

..and so on

In the words of Cho Sing Kum

"For many people the very reason they learn Technical Analysis is the blind obsession of only wanting to know when to buy buy buy and when to sell sell sell. Nothing else is important to them. This group of people, they will fail repeatedly. For with this blindness, this ignorance, they will never be bothered to understand the mathematics, what they measure, how they behave, basically the original intention and interpretation of the indicators.The Relative Strength Index is never an overbought/oversold indicator."

Momentum can explain almost all the behavioural tantrums of rsi and hence that of the price!

"Oversold" & "Overbought" can probably explain none!

Always take rsi as the rocket behind the price.

This will help you understand the price movement very clearly!

The behaviour of the rocket hints about the movement of the "shuttle columbia".