LTCEUR 13 FEB 2021 1615 hrs ( RSI centerline use)RSI is only an adjunct to volume. It is not needed. However after getting a grasp on supply and demand trading or Wyckoffs accumulation versus distribution concepts RSI can be very useful. I use it as a personal backstop and situational awareness tool.
RSI here us set to 7 versus 14. The overbought and oversold are re-designated to the Supply and demand lines. The demand line is set to 25 versus 30 and the supply line is set to 75 versus 70. Then there is the centerline at 50.
You may have to practice with it but what I have found is that accumulation and re-accumulation often occur below the centerline (as highlighted). Once RSI is below centerline you are looking for notable volume spikes that confirm that accumulation phase has initiated (sopping volume/climatic volume). This helps in two ways: it keeps me from staring into space for hours by setting an alert at the centerline level (on repeat during work) and it prevents me from entering into a long trade that may already be overextended .
distribution phase and re-distribution generally happen above the 50 level (during a downtrend).
But above all else volume, supply and demand are the priority to understand and internalize. Once you are confident with volume, all the indicators are the same: mostly useless.
Sources of education:
Richard Wyckoff
Tom Williams Volume spread analysis VSA/ Master the Markets
Pete Faders VSA*
Read the ticker dot com
Wyckoff analytics
Dee Nixon
Avoid buying into weakness/supply/resistance
Avoid selling into strength/demand/support
Avoid entry when price is in middle of a range (phase B)
When you set a target and wait for price to get there (proactive/decreased risk)
When you enter a trade when its already on its way to a target (reactive/increased risk)