Technical Analysis | RSI MACD and Bollinger Bands

welcome back everyone david here in our last technical analysis video we talked about candles smas and fib retracements if you haven't seen it go check it out after this video in this video we're going to be talking about rsi macd and bollinger bands let's get you up to speed on these so you can start using them in your trading strategy to help identify potential trends so you can capitalize and make some money before we start please like the video and subscribe if you haven't already also if you don't have a brokerage account check out my referral link to weeble in the description so you can get two free stocks valued up to two thousand dollars when you open up an account and deposit your first 100 all right let's get into the video [Music] let's start with rsi rsi stands for relative strength index and is a momentum indicator for a stock it measures the magnitude of recent price changes to help determine if a stock is overbought or oversold rsi is displayed as a line graph ranging from 0 to 100 but what does it mean and how can you use it typically an rsi above 70 and holding up there is a signal that a stock is becoming overbought think of overbought meaning overvalued this may indicate that there may be a reversal or a corrective pullback coming up on the other hand if a stock is reading below 30 on the rsi it means the stock is oversold or undervalued and could be looking to break out upwards meaning you might want to buy calls or shares for a quick swing trade to make some money on the uptrend the way rsi looks is going to be based on the time frame you have your candle set to typically rsi is set to draw its information from the previous 14 periods but if you're on a one minute chart that's 14 minutes and if you're on a daily chart that's 14 days remember any indicator that is based on a period will look different on a daily chart versus a one minute chart versus a four hour chart etc time frame of the chart matters if you're using 50 sma on a daily chart that's 50 day moving average when you switch to a one minute chart that's now a 50 minute moving average that's why they look different when you change charts another thing to consider with rsi is what is the overall trend of the stock movement during an uptrend you can expect the rsi to stay above 30 and should reach 70 relatively frequently when looking at rsi in a downtrend you can expect to see it not reach 70 and more frequently dip below 30. understanding this can help you to spot a possible upcoming reversal if there is currently an uptrend but you see the rsi unable to reach 70 on a few consecutive price swings and then see the rsi move below 30 that could indicate that the uptrend is weakening and could mean the stock may have a reversal or a pullback the opposite of the situation can be applied to a downtrend about to move bullish if a stock won't fall below 30 on the rsi and then climbs above 70 then that downtrend may have started to weaken rsi is a very useful tool to add to your toolbox so start practicing with it or even look back at historical data to see what rsi was doing before and during big shifts now let's look at macd and a strategy to get you started with it this is another momentum indicator that is used quite often if you don't know it stands for moving average convergence divergence this indicator uses the relationship between two exponential moving averages the 26 period ema and the 12 period ema we can delve deeper into exponential moving averages in a different video for now let's just look at what the macd can tell you and how to use it the calculation done for the macd creates a line right here then a 9 day exponential moving average called a signal line is created as shown here you can also notice the histogram bars here these bars indicate how much separation is between your two lines this histogram is placed on what is called the zero line right in the middle when the macd and signal line cross it can be an indication that the stock price may be about to change direction if the macd crosses above the signal line like this it can be an indication of an upswing meaning you should buy when the macd crosses below the signal line like this it can be an indication of a downtrend incoming meaning you should sell to capture your profit it's important to note that macd does not show when a stock is overbought or oversold so using rsi in conjunction is a very good idea since the macd might tell you everything is dandy when really the stock is highly overbought and primed for a corrective price change like i said in our last technical analysis video always use more than one indicator for technical analysis it will increase your odds of not getting burned as often you can also use the histogram of the macd to identify potential buy and sell opportunities when the histogram is below the zero line down here and begins to converge up towards the middle it means it could be a good time to buy when the histogram is above the zero line and begins to converge down towards the middle it could mean it's a good time to sell now that we have looked at a few ways to use macd let's take a look at bollinger bands so i need you to think back to your stats class on this one does anyone remember the empirical rule well if you never took stats or just forgot the empirical rule states that you can expect to find 95 percent of your data within two standard deviations of the mean it's pretty simple well this is literally what the bollinger bands are the center line here is a moving average and the upper and lower bands here and here both represent two standard deviations from that moving average applying the empirical rule we can assume that our price of the stock will stay within these bands 95 of the time so how is this useful well let's say we have been riding a stock on a wonderful uptrend and we see on the bollinger bands that the stock just started trading above our top band some traders will now wait for the price to close back below the top band as a confirmation of the stock not increasing anymore and then sell the reason for this is that if we apply a mean reversion strategy we can assume that the price will most likely start moving towards its moving average after its kind of breakout which is that middle band this is one strategy for capturing profit using the bollinger bands so how do we use the bands to find a good entry point well we can wait for a stock to start trading below its bottom band and then wait for it to close above the bottom band and use that as confirmation to establish a new position some traders will use the moving average as a price target and exit point and some will use the top band as their price target and exit point one thing to note about bollinger bands is that while mean reversion strategy can work well sometimes a stock will trade along its upper or lower band for a significant period of time before moving towards its mean trading based purely off bollinger bands can sometimes work out but i don't recommend it as i've said a few times always use more than one indicator and be sure to look at market trends as well when coming up with a strategy i hope you all learned something from this that you can apply to your next trade remember to leave a like subscribe and follow the links in the description to our website where you can get on the list to beta test our social investing app before it releases while you're there you can take a look at the two-week free trial to our twice a week newsletter with the team's upcoming marketplace and you can take a look at some of their technical analysis on them also be sure to check out our spam free facebook page where you can share and connect with other traders before we all get on the personify app together thanks for watching everyone now go make your money work for you and i'll see you next time

Channel: PersonaFi

Views: 281

Rating: 5 out of 5

Keywords: bollinger bands, technical analysis, macd, RSI, PersonaFi, rsi indicator, rsi trading strategy, rsi strategy, macd indicator, macd trading strategy, macd indicator explained, macd strategy, macd explained, rsi explained, rsi for beginners, relative strength index, macd trading, how to use macd, macd indicator strategy, how to use macd indicator, bollinger bands trading strategy, bollinger bands indicator, how to use bollinger bands, bollinger bands explained

Id: JDsMwQnXswQ

Length: 8min 12sec (492 seconds)

Published: Tue Jul 06 2021