Trading Workshop

The Relative Strength Index (RSI) is a widely used momentum oscillator that helps assess the strength and potential reversals of a price trend by calculating and comparing the magnitude of recent price gains to recent price losses over a specified period. RSI Calculation 1. Calculate the price change (gain or loss) for each period 2. Calculate the average gain and average loss over the specified period. 3. Calculate the relative strength (RS) by dividing the average gain by the average loss. 4. Calculate the RSI using the formula: RSI = 100 - (100 / (1 + RS)) Interpretation The RSI provides insights into the prevailing trend of the asset. RSI reading above 50 indicates that the bullish tendency is stronger than the bearish tendency, and a reading below 50 indicates that the bearish tendency is stronger than the bullish tendency. RSI above 50 indicates a bullish trend RSI below 50 indicates a bearish trend Specifically, reading above 70 suggests that the asset is overbought, indicating a potential price reversal or correction. Conversely, a reading below 30 suggests that the asset is oversold, indicating a potential price bounce or recovery. However, as mentioned in the previous "Stochastic Oscillator" post, the extreme zone does not mean a trading signal. Instead, one should wait for confirmation such as breaking above/below the oversold/overbought region. Furthermore, similar to other indicators, a signal line (moving average) can be added to provide insight. When the RSI crosses above the signal line (Golden cross), it generates a bullish signal, suggesting that the asset may experience upward price movement. Conversely, when the RSI crosses below the signal line (Death cross), it generates a bearish signal, indicating a potential downward price movement. Divergence Indicators may move in a reverse direction of the price trend: "Divergence." The divergence of oscillators suggests that the trend may reverse soon. However, as always, confirmation is crucial; you cannot solely enter the trade depending on divergence but should confirm with price action and other indicators. Real Chart

The Stochastic Oscillator is a popular momentum indicator used to assess the strength and potential reversals of a price trend by comparing the closing price of an asset to its price range over a specified period. It consists of two lines: the %K line and the %D line. • %K Line: current closing price about the price range over a specific period • %D Line: moving average of the %K Line helps smooth out its fluctuations and provides additional insights Both %K and %D Lines "oscillate" between 0 and 100. How the Stochastic Oscillator is calculated Golden Cross and Death Cross When the %K line crosses above the %D line (Golden cross), it generates a bullish signal, suggesting that the asset may experience upward price movement. Conversely, when the %K line crosses below the %D line (Death cross), it generates a bearish signal, indicating a potential downward price movement. %K and %D lines combined could produce signals Overbought and Oversold A stochastic Oscillator reading above 80 is considered overbought and below 20 is considered oversold. However, it is important to note that the stochastic reading in the oversold region does not mean a "buy signal." Instead, it is still considered bullish while in the overbought level and bearish while in the oversold level. The trend is expected to end (weaken) and potentially reverse (turning point) when the stochastic oscillator breaks above/below the overbought/oversold level. Oversold DOES NOT Mean "BUY" Divergence Indicators may move in a reverse direction of the price trend: "Divergence." The divergence of oscillators suggests that the trend may reverse soon. However, as always, confirmation is crucial; you cannot solely enter the trade depending on divergence but should confirm with price action and other indicators. Divergence could be helpful finding trend reversals Overall, the Stochastic Oscillator provides traders with insights into the momentum and potential turning points of an asset, helping them make informed trading decisions.

Ichimoku Cloud, also known as Ichimoku Kinko Hyo, is a technical analysis tool developed by Goichi Hosoda, a Japanese journalist, in the late 1930s. Ichimoku Cloud is used to assess the trend direction, support and resistance levels, and potential trading signals. The term "Ichimoku" translates to "one glance" or "at a glance" in Japanese, which reflects the primary goal of the indicator—providing a comprehensive view of the market in a single chart. It consists of several components that work together to generate trading insights. The key components of the Ichimoku Cloud are as follows: 1. Conversion Line: average of the high and the low over a short period (usually 9) 2. Base Line: average of the high and the low over a mid-period (usually 26) 3. Leading Span A: average of Conversion and Base Line shifted mid-period (same as that of Base Line) to the future. 4. Leading Span B: average of the high and the low over a long period (usually 52) plotted ahead. 5. Cloud: The area between Leading Span A and B. The thickness of the cloud reflects the volatility and potential support/resistance of the market. 6. Lagging Span: closing price plotted backward for a specific number of periods (usually the same as that of Base Line). It helps traders assess the current trend's strength by comparing it to past price action. By analyzing the relationship between these components and the price action, traders can identify various trading signals, including trend confirmations, support and resistance levels, and potential reversals. The cloud is handy for determining trend direction and providing dynamic support and resistance levels.