02-16-2014, 02:00 PM
In the thread about the short dip in early 2014 here, Be Here Now added this comment about the Relative Strength Index.
I don't use technical indicators. I've always been turned off by those graphs with squiggles and lines drawn on them. Half the time they seem drawn arbitrarily, not consistently connected to any points or events on a chart, just to show some pattern or movement.
So, after Bob Johnson on SA mentioning it and now BHN mentioning it here, I ambled over to Investopedia and read a little more about it. Basically, it's a ratio of up vs. down closings for the last 14 days according to the article I read. The full formula is located here on the Investopedia web site.
To me it seems a short-term indicator. If I wanted to do a lot of trading, which I don't, this may be one tool in the toolbox.
Where I see it could be useful is a confirmation that it's a good time to buy when I'm looking at initiating or adding to a position. Since I'm not inclined to sell much, I don't think it would have as much an influence on my sell decision. Usually I only sell to improve the portfolio or there's too much uncertainty around a particular company.
So, my questions are:
1.) Do you use RSI in making buy & sell decisions and has it been a fairly reliable indicator?
2.) What about other levels? Suppose you were interested in the stock and it met your other criteria. Would you hold off buying if the RSI was 40? Does the trend tell you anything?
I haven't looked at too many charts with the RSI displayed so I don't have a feel for it yet.
(02-15-2014, 08:03 PM)Be Here Now Wrote: I used the RSI (relative strength index) technical indicator to identify, as close as one can in these things as they happen, the best time to buy both. For those who are not familiar with the RSI, readings below 20 are short term highly oversold, and readings above 80 are short term highly overbought.
I don't use technical indicators. I've always been turned off by those graphs with squiggles and lines drawn on them. Half the time they seem drawn arbitrarily, not consistently connected to any points or events on a chart, just to show some pattern or movement.
So, after Bob Johnson on SA mentioning it and now BHN mentioning it here, I ambled over to Investopedia and read a little more about it. Basically, it's a ratio of up vs. down closings for the last 14 days according to the article I read. The full formula is located here on the Investopedia web site.
To me it seems a short-term indicator. If I wanted to do a lot of trading, which I don't, this may be one tool in the toolbox.
Where I see it could be useful is a confirmation that it's a good time to buy when I'm looking at initiating or adding to a position. Since I'm not inclined to sell much, I don't think it would have as much an influence on my sell decision. Usually I only sell to improve the portfolio or there's too much uncertainty around a particular company.
So, my questions are:
1.) Do you use RSI in making buy & sell decisions and has it been a fairly reliable indicator?
2.) What about other levels? Suppose you were interested in the stock and it met your other criteria. Would you hold off buying if the RSI was 40? Does the trend tell you anything?
I haven't looked at too many charts with the RSI displayed so I don't have a feel for it yet.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan