Thread: RSI and Stochastic Indicators: How to master them in forex?

I give you a tip that is worth gold: set the RSI at 14 and see how it behaves in each type of market. Then switch to 9 or even 21 and compare. You will see that there is no perfect configuration, it depends on the asset and time frame. With the Stochastic equals, adjust %K and %D to 5.3 for example, and test. But do nothing without previous backtesting. Each indicator behaves differently according to the instrument.

The RSI uses it to detect downward divergences in roofs and upward divergences in floors. It works quite well if you know what you are looking for. Yes, it requires practice. If you launch to operate only because you see that "the RSI is in 80", you are doomed to stop loss.

Honestly, it's funny when people blame the RSI or the Stochastic for their losses. As if the problem wasn't their lack of discipline! Indicators aren't the problem. It's the trader who wants a little drawing to tell him when to come in and out without understanding what he's doing.

The best thing about RSI and Stochastic is that they are easy to read, the worst thing is that all novices use them the same. And that�s why they fall into the same traps. Try to use these indicators as a way to confirm what the price is already showing you, not as an absolute guide.

My favorite configuration for the RSI is 7 periods in 1H chart. It gives me faster signals and adapts better to my scalping style. For the Stochastic, I prefer 8.3.3 and only use it when I see clear consolidations. No trending use, there is no use for anything.

The RSI can help you find weakness in a trend. If you see that the price continues to rise but the RSI no longer accompanies it, careful, that you can come the turn. With the Stochastic something similar happens to me, I use it only when I am operating ranges. If there is strong tendency, I ignore it completely.

For those who want guides, at BabyPips they have basic articles that explain very well how RSI and Stochastic works. That�s where I started. After that, it�s best to see hundreds of graphics and practice. That�s just how they really behave.

There is a lot of myth with these indicators. That if overselling means immediate purchase, that if overbuying is safe sale... pure tale. In practice, the RSI may be overbought for days while the price continues to rise. Learn to read it in context or it will empty your account.

Stochastic is like an alarm, it sounds when there is something weird, but it doesn't tell you exactly what to do. If you combine it with analysis of Japanese candles or key levels, there you can make good use of it.

It took me a long time to understand the RSI until I stopped seeing it as an input signal. I started using it as a filter, and that changed everything. Now I only come in if the RSI confirms my previous technical analysis.