I like a random trader’s POV that technical analysis with chart elements including both the price (candlestick) and indicators are simply to signal a timing for trade opportunities. And they itself has no meanings until a trading strategy takes them into account.
“Overbought””oversold” are just terms defined when RSI and some other indicators reach certain conditions, but themselves have no meaning, we can call it “Buyer’s heaven” if we like, but it is not a heaven. The price can go up or down in any RSI conditions. They are “wrong” because they have no actual meaning or effects on the price movement, but they are “correct” descriptions in a trade strategy that factors in extended up or down swings.
I believe among the top reasons of traders failing is hoping to use “leading” indicators to predict price movement as the basis of trade entry. Remember the conditions are just defined conditions based on observed price movement, the timing for trade opportunities is not analysed yet. No matter it is a candlestick pattern, MA cross or what, we can see the actual entries are setups that is completed as price finished moving, hence it is always lagging (or “reacting” to price movement).
If spend some time to study other strategies, the observations would be most if not all would start with a condition (HHHL, or oversold, retest S/R, etc) followed by a completed setup (indicator cross, engulfing candle, etc) that is lagging. A simple strategy can be RSI in oversold (condition) and open a BUY position when RSI return to >30 (lagging signal = price already moved back up in last candle)
what I see is some strategies lack a lagging element, so they are entirely predicting the price and HOPE to catch a good entry point. The risk of failure is higher IMO, at least from what I trade and learn. I really like lagging indicators because Price Action is mostly leading ones. No need to be first to catch the swing, be second is also very good and get those first batch to test the poison first
“Overbought””oversold” are just terms defined when RSI and some other indicators reach certain conditions, but themselves have no meaning, we can call it “Buyer’s heaven” if we like, but it is not a heaven. The price can go up or down in any RSI conditions. They are “wrong” because they have no actual meaning or effects on the price movement, but they are “correct” descriptions in a trade strategy that factors in extended up or down swings.
I believe among the top reasons of traders failing is hoping to use “leading” indicators to predict price movement as the basis of trade entry. Remember the conditions are just defined conditions based on observed price movement, the timing for trade opportunities is not analysed yet. No matter it is a candlestick pattern, MA cross or what, we can see the actual entries are setups that is completed as price finished moving, hence it is always lagging (or “reacting” to price movement).
If spend some time to study other strategies, the observations would be most if not all would start with a condition (HHHL, or oversold, retest S/R, etc) followed by a completed setup (indicator cross, engulfing candle, etc) that is lagging. A simple strategy can be RSI in oversold (condition) and open a BUY position when RSI return to >30 (lagging signal = price already moved back up in last candle)
what I see is some strategies lack a lagging element, so they are entirely predicting the price and HOPE to catch a good entry point. The risk of failure is higher IMO, at least from what I trade and learn. I really like lagging indicators because Price Action is mostly leading ones. No need to be first to catch the swing, be second is also very good and get those first batch to test the poison first
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