Do RSI and Bollinger bands really work? // RSI indicator strategy, Bollinger bands trading strategy


Do RSI and Bollinger bands really work? // RSI indicator strategy, Bollinger bands trading strategy welcome to looking at the markets with
David Moadel Today we’re going to talk
about do RSI and Bollinger bands really work so let’s talk about that bollinger bands vs-rs I as a swing
trader I use the 14 . RSI and that stands for
relative strength index with over 70 being overbought I consider over 70 to be over box and
under 30 being oversold and bollinger bands at the standard settings with the
candlestick piercing the top band as overbought and the candlestick piercing
the bottom band is oversold in other words if i use the daily charts so if a particular candlestick Pierce’s
up above the top bollinger band then i would consider
that to be overbought or expensive and if it Pierce’s below the lower Bollinger
Band then i would consider that to be
oversold or relatively cheap or inexpensive Bollinger Bands tend to give
a lot more overbought and oversold signals then RSI so if you’re looking to
trade more often then you might want to use Bollinger Bands if you want to be a
little more careful little more conservative trade less off and then you
might want to look at the RSI instead of that unlike RSI bollinger bands can
contract or squeeze indicating that a big move or a breakout is likely to
happen so that might be an advantage of bollinger bands over RS I here’s a word of caution though and
we’re going to talk more about this don’t count on bollinger bands or RSI
don’t count on either one during major news events such as bricks
it that was a recent one earnings reports
and I’m talking about right before the earnings report fed announcements and so
on so we’ll look at some examples and some features of bollinger bands and RSI
again use daily charts so each of these candlesticks represents one trading day
and this is for SP why the etf that tracks the S&P 500 and I like to trade
this one a lot so let’s look at the Bollinger Bands
first as we can see the Bollinger Bands work very well sometimes check it out it bounced right off of
this one so if you bought right here right when it pierced the lower
Bollinger Band you would have made some money if you bought right here would
have made some money and what some people like to do is they might buy at
the lower band and then it’s as soon as it hits the top band they might sell okay now remember we pointed out that I
don’t you don’t want to count on these indicators working during major news
events upcoming major news events here’s a perfect example of this was the
brexit scare I remember that that was recent and
during these news events upcoming major events the pride of the candlestick or the
price action oftentimes we’ll just break right
through the bollinger bands and so the band’s become I I don’t want to say
meaningless but they become less useful ok because it’ll just be us right it’ll
just break right through them alright so be aware of that that’s a good example of not counting on
bollinger bands or RSI for that matter working because you’ve got some major
news event coming right up soon now notice that on the RSI you get
overbought and oversold signals less often there are fewer of them on the RSI
you got one here you got one here you got one here but they’re long periods of
time when you don’t get any overbought or oversold signals we finally get you
finally get an oversold signal right here if you look at this whole chart
here there’s only one oversold signal you would only buy one time if you were
to use only the RSI and if that’s the way you want to invest then that’s fine
if you’re the type of an trader or investor who wants to wait for extremes
and you don’t mind waiting for months at a time before making a trade then the 14 . RS i might be for you if
you want more yeah if you want your overbought and
oversold signals to happen more often then Bollinger Bands might be for you because
you can see you’ve got a signal here got a signal here and this one worked out
quite well actually bounced right off of it you got a signal here here here here
here and here so it depends on your trading time frame and help patient you
want to be with your trades let’s look at apple we see some features here bollinger
bands we pointed out earlier that bollinger bands have a nice feature that
RSI does not have which is that bollinger bands can squeeze when the
distance between the two that you have the top and the bottom top and bottom
band get closer together then that means that there’s been a lot of sideways or
contained you know range action you know it’s a lot of sideways movement
recently and that means that you might expect a break out to the upside or
downside but you can expect more movement fairly soon oftentimes here’s a
perfect example with apple of a Bollinger Band squeeze right here they contracted followed by a big break
out you know and and that doesn’t always work yeah you can have a squeeze not followed
by a breakout but that is a possibility here’s an
example of an earnings report and as you can see it was a big mess for apple on
that day in late late april i believe it was a 26th of april or there abouts and
again you know it you can’t count on bollinger bands working on those days it hit it it pierced the bottom band and
you might think well I should buy here because it’s relatively inexpensive but
that was right before in earnings report which was a big mess it could have gone up very sharply but
it went down very sharply and so that’s why I don’t count on these types of
indicators working when there’s a news event or earnings report coming up now
we also notice before i read this notice that on the RSI the price can stay and
over so oversold territory for a while just because it goes it goes into
oversold territory doesn’t mean it’s going to
come right back out ok you have to be patient with these
things that can also go into overbought territory for a long time now I wrote
here a note that some traders will buy when the RSI curls up out of over out of
the Oversoul region and that that’s a good way to do it you might not want to buy right when it
pierces the Oversoul region you may not be made you might want to
wait until it’s been in the Oversoul region and then the RSI starts curling
up out of it back into the middle that’s a good place to buy often times
and as you can see it worked perfectly here it went up after that here’s another
example gld which represents the price of gold attracts gold prices and on this
one the Bollinger Bands worked quite well not every time but it seems to have
worked pretty well here you can see if you would shorted here or bought puts
here you would have boom you would have made some money and
if you would wait even longer you would have made more money and then you could
have a sold your puts or covered your short position and then you could bought
gld or but calls when it hit the bottom band here and you would’ve made a little
bit of money and then you could have bought here and you would have made some
money could about here what made some money could have sold
here or shorted or bought puts here you would have done ok would have done well and definitely
hear it pierced right about here and it went a little bit above but if you just
hold on you would have done quite well if you
had a lot puts here or just shorted gld out right ok or here same thing if you had bought
puts here or shorted gld you would have done well it doesn’t work every time as you can see sometimes it will pierce the top band and then
just keep going but even here if you had bought puts
here and just waited a little bit and I’m assuming see here’s the thing if you had bought
weekly puts expiring in a few days right here you might not have done so
well but if you had bought long-term puts going five or six months out like i
like to do and then just held on see it went down so you would have done better now let’s
look at the RSI as you can see very few overbought or oversold signals are given
by the RSI here there’s one here ok but from let’s say
here all the way to here for almost you know like three fourths of this entire
period of time here if you had just relied on overbought
oversold using 30 and 70 r17 30 on the RSI you would have gone for a long time
doing nothing which is okay it is not really nothing wrong with that if you
have the patience for that so what’s the takeaway well there are several here I believe
bollinger bands and RSI work fairly well I’ll be it not perfectly as
recommendations or suggestions of when to buy or sell now if you’re thinking about buying a
stock but you’re not sure what’s a cheap or expensive price for that stock bollinger bands and RSI are good place
to start ok so if you’re looking at a stock or an
ETF or whatever for the first time and you don’t know
you know what’s what’s considered cheap what’s considered expensive you know
when do I by when do I sell if you just have no clue what all the first thing
you want to do is really research that stock or ETF or currency or whatever you want to research it thoroughly get
to know it very well but then if you’re not sure what a good prices what’s cheap
was expensive bollinger bands and rs I can be a really
great place to start they can give you guidelines or
recommendations and that’s all that that’s all they are are just guidelines
or recommendations they’re not commands to buy or sell and finally i don’t recommend relying on
them before upcoming news events or earnings reports well if you’d like more help with this I
can certainly assist you my name is David Modell and if you want
to contact me we can discuss finance options stocks indicators like we talked about
today and we can make a trading plan or investing plan for you so you can be
more successful you can contact me anytime my email address is David Modell @
gmail.com and by the way if you like my videos please feel free to give it a
thumbs up leave a comment I’m always glad to hear from you thanks
a lot and hope to talk to you soon yeah

24 thoughts on “Do RSI and Bollinger bands really work? // RSI indicator strategy, Bollinger bands trading strategy”

  1. I am begginer,and I found a lot of people do RSI/BolingerBands strategy,where I find candlestick breaks higher or lower bolinger and do a trade,is that good for beggining?

  2. If you are looking for an combined indicator for Metatrader 4 or Metatrader 5 which give you an alarm in case of RSI and Bollinger Band being in good position please have a look on following links:
    https://www.mql5.com/en/market/product/20233#full_description
    https://www.mql5.com/en/market/product/20155#full_description

  3. What kind of time periods are you looking at for the RSI? The RSI chart can look very different depending on the timeframe you set.

  4. I just started learning how to trade and want to practise Bollinger bands and RSI indicators..thanks David for the education knowledge. Alvin here from SIngapore.

  5. I am loving your work previously with MACD and now with RSI and BOLLINGER BANDS, Keep going, Can I have a nice video on Elliot Wave Please!

  6. Hello David.  Thanks for this Video.  I am relatively new.  These indicators are live meaning they form as you are trading.  Are there "forecast charts?"  Or am I looking at the wrong charts?

  7. It would seem to me that fewer trades using RSI means that you would have to be trading many different things in order to make any money. You would also have to watch the charts on those many different things. Am I right in thinking that Bollinger bands would be easier to use for a day trader?

  8. What timeframe should I use when I'm working with Bollinger bands and RSI to be more profitable ? I know it's up to me, but when I use Bollinger bands combined with RSI, on different timeframes, it might show different directions ( on a 5 minutes chart to be in a way and in a 4 hour timeframe or more to show me an opposite direction, reffering the same Forex pairs). Can you explain me what timeframe should I use for better results ?

  9. I have tried to trade overbought and oversold and it forces me to be very patient and i don't like that…with the bollinger band, i can have more signals.Adding the 3 days rule…my trading plan is getting closer and closer to a winning trading plan.
    Thank you

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