[Trading strategy with RSI and ICHIMOKU]- Steemit Crypto Academy- Homework post for Professor @abdu.navi03 by @syedarhamamir
Hey Steemit!
Here is my homework post for Professor @abdu.navi03. It was a great lesson, and I hope you will enjoy reading my post.
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1-Put your understanding into words about the RSI+ichimoku strategy
The bitcoin market, is quite volatile as we all know, making it difficult for traders and price forecasts to anticipate the market's direction as well as the asset's future price. But, to help traders overcome this difficulty, technical indicators tools including such chart patterns, pricing indicators, price movements, and other methods are utilised to forecast the market's future move. However, the issue persists: none of the indicators provide 100 percent flawless and dependable trading indications. As a result, traders risk losing money if they initiate trades based on the incorrect indication. To overcome this issue, a number of different combinations of more than one signal are used simultaneously to estimate future price movement and market trend. The combo between RSI and Ichimoku cloud indicator is one of them. Look more closely at this pairing.
In the unpredictable cryptocurrency market, the RSI (Relative Strength Indicator) and Ichimoku clouds indicators are utilised together to make effective trading selections. This set of indicators is particularly important for traders since it allows them to predict future trends, momentum, existing trends, resistance, and support levels. When used collectively, these indicators are quite useful, but when used separately, they can give erroneous signals. During a trending market, the RSI indicator does not deliver the correct signals and does not display volume. Ichimoku clouds, on the other hand, provide delayed signals that are extremely valuable.
Those indicators can be combined to help traders make good trades. We can acquire trade signals fast and make trades earlier with this combination, ensuring good earnings. Likewise, we may filter out erroneous signals generated by particular indicators in order to avoid trading losses. Furthermore, these combination of indicators may be utilised to identify earlier uptrend and downtrend signs, allowing traders to profit.
2-Explain the flaws of RSI and Ichimoku cloud when worked individually
The Relative Strength Index (RSI) may provide accurate recommendations at times, but it can also provide erroneous or misleading signals that can be harmful to traders. The RSI line may sometimes approach the Overbought area (over 70), indicating an impending decline, but the price continues to rise. Similarly, the RSI line may reach the Oversold area (below 20), signifying an impending positive trend, but the price may continue to fall. These sorts of signals may be harmful to traders since they might lead them to make judgments based on false information, resulting in a loss.
In fact, in big timeframe charts, RSI identifies both Overbought and Oversold regions, however it does not offer the correct indications in short timeframe charts. As a result, RSI may be favourable in long-term trading but not in short-term trading. This is an RSI disadvantage. Furthermore, the RSI does not provide any information regarding the volume entering the market.
The RSI indicator also has a flaw in that it does not operate in a trending market. It is particularly effective in the Ranging market since the market stays within a certain range, but it does not perform well when the price follows a trend. During an uptrend, for example, the asset's price rises and the RSI rises over 70, indicating that there is a buyer's control on the market. This indicates the likelihood of a downward trend. However, the market continues to rise, putting traders at risk of losing money owing to false signals. Let's take a look at this chart below.
The RSI is indicating the Overbought zone in the preceding figure, which is a hint of a decline, however this does not occur. Because the market continues to rise, the signal is termed a Fake Signal. This demonstrates that when utilised alone, the RSI indicator may be damaging to traders.
Ichimoku Cloud is a useful technical indication since it provides a lot of information about the market, such as support, resistance, trend, plus momentum. It is composed of five lines are stretched out on the chart to create a cloud. These lines are quite valuable for technical analysis, although they do have certain disadvantages.
The most significant and significant downside of a Ichimoku Clouds indicator is just that it provides trade indications more later than other indicators. The indicator may deliver trade signals too late, indicating that trend already has followed before the indicator's signal. For example, a bullish trend may begin in the market, but the breakout just at support and resistance level arrives too late, allowing traders to lose out on gains or entry opportunities. Take a glance at the diagram below to get a better understanding of the topic.
You can see that the trend has shifted from bullish into bearish in the above graphic. An uptrend ended and a downturn began, however the collapse on the Ichimoku cloud's support line happened too late, and traders lost out on the chance to profit. These delayed indications may sometimes be detrimental to traders.
3-Explain trend identification by using this strategy (screenshots are required)
A bullish trend is defined as a market trend during which the price for assets continues to rise. We must pay attention to both the RSI and the Ichimoku clouds indicators throughout a bullish trend. The RSI line creates the double high on the Overbought (over 70) level before the commencement of the Bullish trend. The Overbought level's double top indicates that Bullish trend is about to begin. At the same moment, the price movement breaks through the Ichimoku clouds' resistance line, and the cloud begins to move just under the price action. We can see whether there is a Bullish tendency in this manner. Take a glance at the graphic below to get a better understanding of this subject.
A bearish trend is indeed a market trend during which the cost of assets continues to decline. We must pay attention to both the RSI and the Ichimoku clouds indicators during a bearish trend. The RSI line creates a double high just on Oversold (under 30) level before the commencement of the Bearish trend. The double high just on Oversold level signals the commencement of a Bearish trend. At the same moment, the price movement breaks through the Ichimoku clouds' support line, and the cloud begins to move just above price action. We can see whether there is a Bearish tendency in this manner.
4-Explain the usage of MA with this strategy and what lengths can be good regarding this strategy (screenshots required)
Look the chart below, which uses the MA indicator in conjunction with RSI+Ichimoku clouds method.
The Bullish trend indication is offered by the RSI and Ichimoku clouds, as well as the MA indicator, as seen in the preceding chart. In the Overbought zone, you can observe a high on the RSI line, which seems to be a Bullish trend indication. You can also observe that the breakout happened on the cloud's resistance line, and the cloud began to move below the price action, indicating a Bullish trend. A breakthrough on the Sliding Average line to a upside occurred, and the MA line began moving underneath the price action, indicating a Bullish trend indication. As a result, MA may be used to forecast market trend reversals and impending trends.
When the MA indicator is used in conjunction with the strategy, it is advised that the Maximum length be specified. The rationale for this is because the Ichimoku indicator already has an MA line with a short length that provides tiny price movement indications and protects traders from losses. Therefore, it is suggested that the technique be used with a lengthy MA line.
It can be noticed in the picture that I employed a 100-length MA line with a method that produces the optimal Bullish signal. Traders may adjust the duration to suit their trading strategy and tactics, although with the RSI and Ichimoku techniques, it is suggested to utilise the maximum length.
5-Explain support and resistance with this strategy (screenshots required)
After a negative trend, a support line or level is a point on the chart whenever the value of the assets begins to move higher. It's the moment at which the trend shifts from bearish to positive. The price may cut through the support line, therefore traders should be cautious when entering trades at this time.
After a positive trend, a resistance line or level is a point on the chart when the value of the assets begins to go downward. It might be regarded as the bullish-to-bearish trend reversal point. The price may cut through the resistance line, therefore traders should be cautious when entering trades at this time.
Trending Market
A rising market is a market circumstance where the value of the asset follows a certain trend. This trend may be either Bullish (Upward) or Bearish (Downward). The Ichimoku clouds may be used to identify support or resistance levels in this sort of market. RSI does not assist in establishing support or resistance points in trending markets since it only works correctly in Ranging and Sideway markets.
In a trending market, the Ichimoku clouds may be quite useful in establishing support and resistance levels/points. The location of a cloud in the graph may be used to establish these support or resistance points. The cloud may be up or down price movement, and it could be either green or red in hue. The space between both the cloud as well as the support/resistance point may also be used to determine the strength of a resistance or support. The greater the distance between both the cloud as well as the point, the more powerful the point/level.
- Support:
When the Ichimoku cloud is below price action line in a moving market, support points may be discovered. The cloud would be green in hue, which is another indicator of the support points. It is seen in the screenshot below.
These points might be seen as potential entry opportunities for investors.
- Resistance:
When the Ichimoku cloud was above price movement line during a moving market, resistance points may be discovered. The hue of a cloud will be red, which is another way to identify the support points. It is seen in the screenshot below.
For traders, these points might be considered exit points.
Sideways Market
The value of assets fluctuates between particular ranges or levels in a ranging market.The value of the assets stays inside a boundary, and in this sort of market, identifying support and resistance may help traders make better trading choices by understanding where the support or resistance points are.
The RSI indicator may be used to identify support and resistance points in a range or sideways market. The RSI indicators' Overbought and Oversold areas may be useful in finding Resistance and Support points, respectively. The RSI line will continue to oscillate between 30 and 60, assisting traders in identifying support and resistance areas. Look at the picture and see how I back up my assertion.
6-In your opinion, can this strategy be a good strategy for intraday traders?
Intraday trading refers to trading done by short-term traders during a single day. The trader are often known as scalpers since they consistently make lucrative judgments by staying in the marketplace for a brief time. The RSI and Ichimoku approach is very beneficial to such traders, allowing them to make lucrative and efficient judgments.
The RSI indicator's Oversold as well as Overbought regions may operate both support and resistance levels, and these levels can assist traders in making successful trading choices. However, when the RSI indicator is insufficient to provide excellent indications, the Ichimoku clouds is utilised in conjunction with the RSI to enhance the signals generated by the RSI indicator. Ichimoku clouds also are useful for weeding out false/fake signals generated by RSI. A breakthrough in clouds or Oversold/Overbought zones in the RSI might provide trend reversal signs to traders.
Both these indicators assist traders in identifying market entry and exit opportunities, and intraday traders may use this method to any period to get lucrative and effective indications from these indicators. No indication or method can accurately anticipate the crypto market, and this approach is no exception. Traders may sometimes utilise Moving Averages in conjunction with this method to enhance their trading selections.
7-Open two demo trades, one of buying and another one of selling, by using this strategy
I took a long position using RSI + Ichimoku Clouds strategy. In the screenshot, it can be noticed that the RSI has crossed its Moving Average towards the upside indicating a bullish trend. In confluence to it, we can see the price action breaking the Ichimoku Clouds towards the upside indicating a bullish trend. I placed my Target at a good risk-to-reward ratio and my stop loss below the Ichimoku cloud.
By using RSI + Ichimoku Clouds, I took a short position. The following chart shows that RSI crossed its Moving Average towards the downside indicating a bearish trend. You can also see that the Price Action broke the Ichimoku Clouds towards the downside, this indicates a bearish trend. I placed my Stoploss above the Ichimoku Clouds and my Target at a good risk-to-reward ratio.
The RSI indicator alerts us about Overbought as well as Oversold zones, which are useful for traders when making trading choices, however it does not operate well in moving markets. The Ichimoku clouds are made up of many moving averages that form clouds, and they are particularly useful in anticipating trends and reversals. The indications, however, are too late. In such a turbulent market, the RSI and the Ichimoku clouds indicators are coupled to make more lucrative and accurate judgments. Finally, I'd like to thank Professor @abdu.navi03 for this amazing lesson.
@steemcurator02
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