Dont let the rally fool you. RSI predicted a 120 day trade 100%.
BTCUSDT
Key points here to look for:
To enter the trade and use this formula I needed the first candle to close BELOW the 50 day #EMA Moving average as well as have a closing of BELOW 50 in the RSI. This took place on November 16th.
I would enter most likely on the next day closing as long as it is still below 50 on the RSI.
On the closing of November 17th, it happened. So here is how it played out.
Nov, 16th Closing RSI was the first one below 50. It closed at 44.75
Nov, 17th Closing RSI was also below 50. It closed at 45.55!
keep that last RSI in mind. we are going to need it for the formula. It'll tell us EXACTLY how far to set the take profit.
At this point I did the following:
1. Place my entry at the opening of the next day (Nov 18th)
2. Set my stop-loss on the swing high of Nov 10th. Which also happens to be where the "Bear" #WilliamsFractal appears. This is the most recent Swing High.
3. I looked at the closing #RSI value of November 17th.
4. Did my RSI formula, which is loosely for the purpose of this writing:
Bear Setup:
50 - 41 RSI = a 1:3 Ratio. But you still need to add in the decimals and single digits.
This RSI was 45.55. This number breaks down to 40 and 5.5 ( i dropped the last number)
Yeah, i know, it sounds crazy right?
RSI of 50 - 40 is equal to a 1:3 Ratio
Whats left over is the 5.5 right? so that's what you use for your Ratio as well. If 40 gives you a 1:3 and you add in the 5.5, you get
1 : 3.55 ( on your SHORT tool it shows up as a ratio of 1 to 3.55 )
Set your tool on your entry
Stoploss goes to that swing high
take profit goes to 3.55
Now if you look at the chart attached, youll see that the take profit candle is EXACTLY at the last candle before price went into consolidation.
This is the very first candle where pricing opened AND closed in an oversold area on May 11th.
This was a 120+ Day move with a 52.50% gain without pricing even coming close to the stop-loss.
This was ALL based on a single indication i got from an RSI reading and a fractal.
DONT LET THE RALLY FOOL YOU (Luqidity grab)
The point that im making here is you need to know the formula your RSI is telling you to do.
Stop with this guess work of the 1:1.5 or 1:2 ratio and trust the math. Market sentiment and news media aside, the math doesnt lie...EVER.
I kow theres articles and other websites sending out news saying "HEY BTC is on a rally up." Then next they are like "OH NO, $150m in positions liquidated as people jumped into the rally up."
Well yes, all this activity that took place on May 30th and June 1st was a liquidity grab.
Dont let this bump fool you. THe price is NOT done falling.
Weeks ago (april 25th) i posted on someone elses BTC analysis that they were wrong and BTC will go down to about 30k based off my formula and the RSI signal. They insisted its going BULLISH because of a single day bullish candle closing but the next day April 26th its was an engulfing Bearish candle that ate everything. What they didnt realize is that stochastic RSI was in a downtrend but stil just about to break below the 50 level on the RSI with nice wide bands. Shame shame shame.
THe bottom line is this. Follow your RSI formula.
Ill have to post up an image of how it works because doing it typing, doesnt give it enough justice.
I actually use my RSI with a ZERO level in the center to make things easier so
1-10 = 1 : 3 ratio
10-20 = 1 : 4 ratio
20 - 30 = 1 : 7 ratio
30 - 40 = 1 : 8 ratio
Usually after this point, its either overbought or oversold and you should NOT be entering a trade, not even with a trailing stoploss.
This formual uses up the TENS places of your RSI.
If you have any single digits (1 - 9) you just add them to the end
If you have any decimals, you drop the 100th place and move the decimal over.
Example
RSI = 55.75
Formula equals ( 1 : 3.75 )
RSI = 38.29
Formual = 1 : 4.71
This formula will give you the ENTIRE move less the momentum in the end of the move. You can use this to find the LOWEST point in a swing of any size. The one take-away is that all you MAs must be of equal distance from each-other and not in a major UP or DOWNTREND. They must be pretty much FLAT.
Questions about the formula, please ask below.