Bollinger Bands and RSI Essay Example | Topics and Well Written Essays - 1250 words

Bollinger Bands and RSI - Essay ExampleAs the report stresses the purpose of an RSI is to compare the magnitude of recent gains to recent losings in an attempt to determine overbought and oversold conditions of an asset. The RSI is best used as a valuable complement to other indices, for in and of itself it is susceptible to the fact that large surges and drops in the price of an asset will affect the RSI by creating false buy or deceive signals. Different RSI settings can allow traders to get more completed market readings ab turn out different strategies that they might wish to use. Swing traders might want to set the measured period at 15 days, while those buying to hold for longer times might want to make it equal to 30 or even 50 days. In this analysis the author has make the Bollinger Bands our trade trigger and the RSI our trading confirmation. The two indices must be simultaneously within their respective domains where we desire them for a given buy or sell position, or we ignore the trade signal and hold everything. He has used this strategy so that the noise created by volatility indicated by the Bollinger Bands gets reduced by the high pass filter of the RSI reading. Simply put, he is looking at once at an individual falls performance and at that stocks industrys performance. The author has taken an aggressive approach in our analysis. This was a result simply of following the strategy that we had laid out we were not attempting to be overly aggressive nor overly conservative and we were not tossed to and fro by emotions.