Lightyear FX: Financial Analyst, Financial Media Person, Amateur Research Trading Technical Analysis. Stay on top of the latest cutting-edge technology information and share the most in-depth industry insights with you. The following content is from Just2Trade.
1. RSI indicator stock selection method
1) How the RSI indicator is calculated
RS (Relative Strength Value) = the number and average value of the closing index in a certain period, and the number and average value of the closing index in a certain period
RSI (Relative Strength Index) = 100-1001+RS
The formula for calculating the RSI is actually a percentage of the total fluctuation caused by the price increase in a certain period, the larger the percentage, the more obvious the strength, and the smaller the percentage, the more obvious the weakness. The value of RSI is between 0~100, after calculating the RSI value of a certain day, the smoothing algorithm can be used to calculate the RSI value after that, and the curve formed by the RSI value on the coordinate chart is the RSI line.
RSI indicators also include daily RSI indicators, weekly RSI indicators, monthly RSI indicators, annual RSI indicators and minute RSI indicators, etc., which are often used in the stock market to judge the daily RSI indicator and weekly RSI indicators, although their calculation values are different, but the basic calculation method is the same. With the development of stock market software analysis technology, investors only need to master the basic principles and calculation methods of RSI formation, and do not need to calculate the value of the indicator, and more importantly, use the RSI indicator to analyze and judge the stock market.
2) The RSI value is overbought and oversold
When the RSI value exceeds 80, it means that the entire market is too strong, the power of the bulls is much greater than the power of the bears, the power of the two sides is very different, the bulls win, the market is in an overbought state, and the follow-up market may have a pullback or reversal, at this time, investors can sell stocks.
When the RSI value is lower than 20, it means that there are more selling orders than buying orders in the market, and the bears are stronger than the bulls.
When the RSI value is around 50, it means that the market is in a state of consolidation, and investors can wait and see.
3) Crossover
Generally, there are two types of RSI, long-term and short-term, short-term RSI refers to RSI with relatively small parameters, and long-term RSI refers to RSI with relatively long parameters. The crossover of the long-term and short-term RSI lines can be used as a way to judge the market. A bullish market where the short-term RSI is greater than the long-term RSI, and vice versa. When the short-term RSI is in the oversold area below 20 and crosses the long-term RSI from bottom to top, it is a buy signal. When the short-term RSI crosses the long-term RSI from top to bottom in the overbought area above 80, it is a sell signal.
4) Morphology
Pattern analysis is widely used in RSI, which can be used as a buying and selling signal based on reversal patterns such as head and shoulders top or bottom, double head or bottom in the overbought or oversold area.
5) Divergence
When the stock price is lower than one wave, and the RSI is higher than one wave, the bottom diverges, and the stock price is easy to reverse and rise. When the stock price is higher than one wave, but the RSI is lower than one wave, it is a top divergence, and the stock price is easy to reverse and fall.
6) Trend line
Connect the two consecutive bottoms of the RSI, draw a tangent line that slopes from left to right, when the RSI falls below this tangent, it is a better sell signal, connect the two consecutive peaks of the RSI, draw a tangent line that slopes from left to right down, when the RSI breaks through this tangent line upwards, it is a better buy signal. In fact, this is only a short-term trading signal, and the medium-term effect is not very good.
2. KDJ index stock selection method
1) The calculation method of the KDJ indicator
First, find the immature random value, which is calculated as follows:
RSV＝Ct-LtHt-Lt×100
式中：Ct——第t日收盘价
LT - the lowest price of the day in T
HT - the highest price of the day in T
The RSV value always fluctuates between 1~100
Today's K value = 1/3 of the current day's RSV × + 2/3 of the previous day×'s K value
D value of the current day = K value of the current day ×1/3 + D value of the previous day ×2/3
At the beginning of the calculation, the initial values of K and D can be set to 50
2) Value range
In the technical analysis graphic coordinates formed by the KDJ indicator, the value range of the ordinate is 0~100, and the K value and D value fluctuate up and down in this range, but the value range of the J value is not limited. Generally speaking, when K value and D are in the area above the vertical axis of 80, it is an overbought area, and the indicator shows that the trend may be bearish at any time, and should take a sell operation; when the K value and D value are in the area below the vertical axis of 20, it belongs to the oversold area, and the indicator shows that the trend may be bullish at any time, and a buy operation should be taken. When the K value, D value, and J value are located in the area of about 50 ordinate, it means that the trend is not obvious, or the price trend is in the bullish consolidation stage.
3) Deviation from judgment
When the stock price trend is higher than the peak, but the stochastic indicator is lower than the peak, or the stock price trend is lower than the peak, and the stochastic curve is higher than the bottom, these two phenomena are called top divergence and bottom divergence, respectively. The top divergence phenomenon is generally a signal that the stock price will reverse at a high level, indicating that the stock price is about to fall in the short and medium term, which is a signal to sell, and the bottom divergence phenomenon is generally a signal that the stock price will reverse at a low level, indicating that the stock price is about to rise in the short and medium term, which is a signal to buy.
Like the divergence of other technical indicators, the accuracy of the top divergence is higher than that of the bottom divergence. When the stock price is at a high level and KDJ is above 80, it can be considered that the stock price is about to reverse downward, and investors can sell the stock in time;
4) The position and direction of the KDJ curve
Hold on to bullish signals
When the KDJ curve breaks through 80 upwards, if the KDJ curve has been running above 80 area, it means that the stock price is in a strong rising market, which is the KDJ indicator to send a signal to be raised, if the stock price also relies on the short-term moving average, this holding signal is more obvious. At this time, investors should resolutely hold the stock in the short term.
When the three curves in the KDJ curve run upwards at the same time, it indicates that the stock price is in a strong upward trend, which is also a signal from KDJ to hold on to the rise. As long as the K and J lines in the KDJ indicator do not fall below the D line, and the D line always runs in the upward direction, investors can hold the stock all the way up.
Wait-and-see signal
When the KDJ curve breaks through 50 downward, if the KDJ curve has been running below 50, it means that the stock price is in a weak downward market, which is the signal of the KDJ indicator to hold the currency to rise, if the stock price is also suppressed by the short-term moving average, this wait-and-see signal is more obvious. At this time, investors should resolutely wait and see.
When the KDJ curve is in the middle and high levels, if the three curves diverge downward at the same time, it means that the stock price is in a weak downward market, which is also a wait-and-see signal issued by the KDJ indicator. At this time, investors should resolutely hold the stock and wait and see, this kind of holding signal is more obvious. At this time, investors should resolutely hold the stock in the short term.
5) KD line crossover breakthrough judgment
According to the principle of fast and slow moving averages, when the K value is greater than the D value, it indicates that the current trend is upward, so when the K line breaks through the D line from the bottom to the top, it is a buy signal; on the contrary, when the D value is greater than the K value, it indicates that the current trend is downward, so when the K line falls below the D line from the top to the top, it is a sell signal. The crossover of the K-line and the D-line occurs above the 80 line or below the 20 line, which provides a more accurate buy and sell signal.
3. Bollinger Bands indicator stock selection
1) Investors use the Bollinger Bands indicator to select stocks, mainly to observe the size of the opening of the Bollinger Bands indicator, and pay more attention to those stocks whose openings are gradually becoming smaller. Because the opening of the Bollinger Bands indicator gradually decreases, it means that the rise and fall of the stock price gradually decreases, and the forces of the long and short sides tend to be consistent, and the stock price will choose the direction to break through, and the smaller the opening, the greater the strength of the stock price breakthrough.
2) After selecting the stocks with a small opening of the Bollinger Bands indicator, do not rush to buy first, because the Bollinger Bands indicator only tells us that these stocks will break through at any time, but it does not tell us the direction of the stock breakout, if the stock and the stocks with the following conditions are more likely to break upward.
The fundamentals of listed companies must be good, and such a main force can attract a large number of followers when it is lifted.
On the candlestick chart, it is best to stand on the 250-day, 120-day, 60-day, 30-day and 10-day moving averages.
To see where the current stock price is, it is best to choose stocks with relatively low stock prices, and be more careful with those stocks that trade sideways at high levels or in rising and falling positions.
3) The 5-minute Bollinger Bands indicator can be used to determine the buying time of ultra-short-term investors, when the 5-minute BOLL indicator suddenly appears to open the expansion characteristics, and the stock price quickly breaks through the upper band of BOLL suppression, it means that the time to buy ultra-short-term is coming. At the same time, we should also pay attention to the opening expansion strength of the 5-minute BOLL, the greater the opening expansion strength, indicating that the main force is strong and the short-term rise will be greater. If the opening expansion is not strong, it often implies that the rise is limited, and it is also necessary to pay attention to whether the trading volume is rapidly enlarged when the opening expansion of BOLL occurs in 5 minutes, and the stocks with abundant volume rise strongly.
4) Pay special attention to stocks with a gradually smaller opening of the Bollinger Bands indicator. Because this pattern indicates that the rise and fall of the stock price gradually becomes smaller, the strength of the long and short sides tends to be the same, the stock price will choose the direction of the breakout, the smaller the opening, the greater the strength of the breakthrough. Stock market experience proves that the stock rises, the Bollinger Bands fall, divergence, do not buy at that time. When the stock falls, the Bollinger Bands rise, you should pay attention, and by the third time, the stock rises, and the Bollinger Bands indicator rises, which is the time to buy the stock.
4. Comprehensive application skills of BIAS indicator
1) The principle of market measurement of deviation rate
The principle of market measurement of the deviation rate is based on one of the three assumptions of the moving average analysis theory: the direction of the moving average is based on the trend indicator of the stock price trend, because the moving average is the trend indicator of the stock price, when the stock price deviates from the trend indicator due to short-term fluctuations to a certain extent, the moving average will produce a certain pull, so that the stock price returns to the original trend path, and the deviation rate represents the percentage value of the stock price deviation from the trend indicator.
2) The calculation method of the deviation rate index
Taking the daily deviation rate as an example, the formula for calculating it is:
N-day BIAS = (day's close - N-day moving average) ÷N-day moving average×100%
3) Key points of research and judgment of deviation rate
The deviation rate can be divided into positive deviation rate and negative deviation rate, if the stock price is above the average line, it is positive deviation, if the stock price is below the average line, it is negative deviation, and when the stock price intersects the average line, the deviation rate is zero. The greater the positive deviation rate, the greater the short-term profit, the higher the probability of profit taking, and the greater the negative deviation rate, the higher the probability of short covering.
When the deviation rate between the stock price and the 10-day moving average reaches +8% or more, it is overbought, which is the time to sell, and when it reaches below -8%, it is oversold and is the time to buy.
When the deviation rate between the stock price and the 30-day moving average reaches +16% or more, it is overbought, which is the time to sell, and when it reaches -16% or less, it is oversold, which is the time to buy.
Due to the impact of the fierce battle between long and short stocks, the deviation between the stock price and various average lines is easy to be high, but the number of occurrences is not much.
It is normal for the deviation between the stock price and the average to reach the maximum percentage of the deviation between the stock price and the average line, and it will move closer to zero, or even below or above zero.
The surge in the bullish market and the plunge in the bearish market can lead to an unexpected percentage of deviations, but they occur very rarely and for a short period of time, which can be considered a special case.
In the general upward market, if you encounter a negative deviation, you can buy at the falling price, because the danger of entering the market is small.
In the general downward trend, if you encounter a positive deviation, you can hold the recovery and sell at a high price.