If you look at a stock chart displayed on a trader’s trading terminal, you are most likely to see lines running all over the chart. These lines are called the ‘Technical Indicators’. A technical indicator helps a trader analyze the price movement of a security.
Indicators are independent trading systems introduced to the world by successful traders. Indicators are built on preset logic using which traders can supplement their technical study (candlesticks, volumes, S&R) to arrive at a trading decision. Indicators help in buying, selling, confirming trends, and sometimes predicting trends.
Indicators are of two types namely leading and lagging. A leading indicator leads the price, meaning it usually signals the occurrence of a reversal or a new trend in advance. While this sounds interesting, you should note, not all leading indicators are accurate. Leading indicators are notorious for giving false signals. Therefore, the trader should be highly alert while using leading indicators. In fact the efficiency of using leading indicators increases with trading experience.
A majority of leading indicators are called oscillators as they oscillate within a bounded range. Typically an oscillator oscillates between two extreme values – for example 0 to 100. Based on the oscillator’s reading (for example 55, 70 etc) the trading interpretation varies.
A lagging indicator on the other hand lags the price; meaning it usually signals the occurrence of a reversal or a new trend after it has occurred. You may think, what would be the use of getting a signal after the event has occurred? Well, it is better late than never. One of the most popular lagging indicators is the moving averages.
You might be wondering if the moving average is an indicator in itself, why we discussed it even before we discussed the indicators formally. The reason is that moving averages is a core concept on its own. It finds its application within several indicators such as RSI, MACD, Stochastic etc. Hence, for this reason we discussed moving average as a standalone topic.
Before we proceed further into understanding individual indicators, I think it is a good idea to understand what momentum means. Momentum is the rate at which the price changes. For example if stock price is Rs.100 today and it moves to Rs.105 the next day, and Rs.115, the day after, we say the momentum is high as the stock price has changed by 15% in just 3 days. However if the same 15% change happened over let us say 3 months, we can conclude the momentum is low. So the more rapidly the price changes, the higher the momentum.
14.1 – Relative Strength Index
Relative strength Index or just RSI, is a very popular indicator developed by J.Welles Wilder. RSI is a leading momentum indicator which helps in identifying a trend reversal. RSI indicator oscillates between 0 and 100, and based on the latest indicator reading, the expectations on the markets are set.
The term “Relative Strength Index” can be a bit misleading as it does not compare the relative strength of two securities, but instead shows the internal strength of the security. RSI is the most popular leading indicator, which gives out strongest signals during the periods of sideways and non trending ranges.
The formula to calculate the RSI is as follows:
Let us understand this indicator with the help of the following example:
Assume the stock is trading at 99 on day 0, with this in perspective; consider the following data points:
| Sl No | Closing Price | Points Gain | Points Lost |
|---|---|---|---|
| 01 | 100 | 1 | 0 |
| 02 | 102 | 2 | 0 |
| 03 | 105 | 3 | 0 |
| 04 | 107 | 2 | 0 |
| 05 | 103 | 0 | 4 |
| 06 | 100 | 0 | 3 |
| 07 | 99 | 0 | 1 |
| 08 | 97 | 0 | 2 |
| 09 | 100 | 3 | 0 |
| 10 | 105 | 5 | 0 |
| 11 | 107 | 2 | 0 |
| 12 | 110 | 3 | 0 |
| 13 | 114 | 4 | 0 |
| 14 | 118 | 4 | 0 |
| Total | 29 | 10 | |
In the above table, points gained/lost denote the number of points gained/lost with respect to the previous day close. For example if today’s close is 104 and yesterday’s close was 100, points gained would be 4 and points lost would be 0. Similarly, if today’s close was 104 and previous day’s close was 107, the points gained would be 0 and points lost would be 3. Please note that, the loses are computed as positive values.
We have used 14 data points for the calculation, which is the default period setting in the charting software. This is also called the ‘look-back period’. If you are analyzing hourly charts the default period is 14 hours, and if you are analyzing daily charts, the default period is 14 days.
The first step is to calculate ‘RS’ also called the RSI factor. RS as you can see in the formula, is the ratio of average points gained by the average points lost.
Average Points Gained = 29/14
= 2.07
Average Points Lost = 10/14
= 0.714
RS = 2.07/0.714
= 2.8991
Plugging in the value of RS in RSI formula,
= 100 – [100/ (1+2.8991)]
= 100 – [100/3.8991]
= 100 – 25.6469
RSI = 74.3531
As you can see RSI calculation is fairly simple. The objective of using RSI is to help the trader identify over sold and overbought price areas. Overbought implies that the positive momentum in the stock is so high that it may not be sustainable for long and hence there could be a correction. Likewise, an oversold position indicates that the negative momentum is high leading to a possible reversal.
Take a look at the chart of Cipla Ltd, you will find a lot of interesting developments:
To begin with, the red line below the price chart indicates the 14 period RSI. If you notice the RSI’s scale you will realize its upper bound to 100, and lower bound to 0. However 100 and 0 are not visible in the chart.
When the RSI reading is between 30 and 0, the security is supposed to be oversold and ready for an upward correction. When the security reading is between 70 and 100, the security is supposed to be heavily bought and is ready for a downward correction.
The first vertical line marked from left shows a level where RSI is below 30, in fact RSI is 26.8. Hence RSI suggests that the stock is oversold. In this particular example, the RSI value of 26.8, also coincides with a bullish engulfing pattern. This gives the trader a double confirmation to go long! Needless to say, both volumes and S&R should also confirm to this.
The second vertical line, points to a level where the RSI turns 81, a value which is considered overbought. Hence, if not for looking at shorting opportunities, the trader should be careful in his decision to buy the stock. Again, if you notice the candles, they form a bearish engulfing pattern. So a bearish engulfing pattern, backed by an RSI of 81 is a sign to short the stock. What follows this is a quick and a short correction in the stock.
The example that I have shown here is quite nice, meaning both the candlestick pattern and RSI perfectly align to confirm the occurrence of the same event. This may not always be true. This leads us to another interesting way to interpret RSI. Imagine the following two scenarios:
Scenario 1) A stock which is in a continuous uptrend (remember the uptrend can last from few days to few years) the RSI will remain stuck in the overbought region for a long time, and this is because the RSI is upper bound to 100. It cannot go beyond 100. Invariably the trader would be looking at shorting opportunities but the stock on the other hand will be in a different orbit. Example – Eicher motors Limited, the stock has generate a return of close to 100% year on year.
Scenario 2) A stock which is in a continuous downtrend the RSI will be stuck in the oversold region since the RSI is lower bound to 0. It cannot go beyond 0. In this case as well the trader will be looking at buying opportunities but the stock will be going down lower. Example – Suzlon Energy, the stock has generated a return of negative 34% year on year.
This leads us to interpret RSI in many different ways besides the classical interpretation (which we discussed earlier)
- If the RSI is fixed in an overbought region for a prolonged period, look for buying opportunities instead of shorting. The RSI stays in the overbought region for a prolonged period because of an excess positive momentum
- If the RSI is fixed in an oversold region for a prolonged period, look for selling opportunities rather than buying. RSI stays in the oversold region for a prolonged period because of an excess negative momentum
- If the RSI value starts moving away from the oversold value after a prolonged period, look for buying opportunities. For example, the RSI moves above 30 after a long time may mean that the stock may have bottomed out, hence a case of going long.
- If the RSI value starts moving away from the overbought value after a prolonged period, look for selling opportunities. For example, RSI moving below 70 after a long time. This means the stock may have topped out, hence a case for shorting
14.2 – One last note
None of the parameters used while analyzing RSI should be treated with rigidity. For example, J.Welles Wilder opted to use a look back period of 14 days simply because that was the value which gave the best results considering the market conditions in 1978 (which is when RSI was introduced to the world). You may choose to use 5,10,20, or even 100 days look back period if you wish too. In fact this is how you develop your edge as a trader. You need to analyze what works for you and adopt the same. Please note, fewer the days you use to calculate the RSI, the more volatile the indicator would be.
Also, J.Welles Wilder decided to use 0-30 level to indicate oversold regions and 70-100 level to indicate overbought region. Again this is not set in stone, you can arrive at you own combination.
I personally prefer to use 0-20 level and 80-100 level to identify oversold and overbought regions respectively. I use this along with the classical 14 day look back period.
Of course, I urge you to explore parameters that work for you. In fact this is how you would eventually develop as a successful trader.
Finally, do remember RSI is not used often as a standalone indicator by traders, it is used along with other candlestick patterns and indicators to study the market.
Key takeaways from this chapter
- Indicators are independent trading systems developed, and introduced by successful traders
- Indicators are leading or lagging. Leading indicators signals the possible occurrence of an event. Lagging indicators on the other hand confirms an ongoing trend
- RSI is a momentum oscillator which oscillates between 0 and 100 level
- A value between 0 and 30 is considered oversold, hence the trader should look at buying opportunities
- A value between 70 and 100 is considered overbought, hence the trader should look at selling opportunities
- If the RSI value is fixed in a region for a prolonged period, it indicates excess momentum and hence instead of taking a reversed position, the trader can consider initiating a trade in the same direction.
Nitin, I was looking at Infy charts after Friday (7.11.14) closing. The stock hit 52 wk as well as all time high on 7th November. The last six candles on daily chart showed gap up opening and higher closing. Bollinger band suggests envelope expansion indicating trending stock. I think that they are indicators of strong bullishness in the stock. However, I also found that the RSI is near 76 and MACD is higher than signal. These indicate bearishness. I could not find any definite single or multiple candlestick pattern to trade. How should one interprete such chart for position trade?
Rule of thumb – when in doubt, avoid 🙂
Also, I would wait for Infosys to retrace a bit especially with low volumes to go long.
Hello karthik,
What is it with volumes? Quite new to trading.
Here is a chapter dedicated to Volumes – http://zerodha.com/varsity/chapter/volumes/
Dear sir,
You use a term “retracement” frequently, like volume retracement, price retracement. I did not get it, could you please explain it in trading context.
Regards
If a stock moves from 75 to 100 – then this leg is called the upmove. Invariably, stocks make a strong upmove, give up little gains – maybe drop from 100 to 90 and then move up again…to say 120. This drop from 100 to 90 is referred to as retracement.
what is the rsi period for intraday trades
You can use the default parameters (14 and 21) and check if they match your risk appetite. Do note, when you use RSI on intraday charts, the default parameters change to match intraday frequency….meaning 14 & 21 would be 14 mins and 21 mins…and not 14 and 21 days.
sir charts dont get updated automatically we have to keep pressing the refresh button
Gets updated automatically on Kite.
IS IT NECESSARY VOLUME SHOULD BE LOW OR WHAT IS LOGIC OF BEING VOLUME LOW?
Volume should be higher than the 10-day average. Have explained in the volume chapter.
Sir,
Please let me know good Technical analysis software in which i can draw all the things that u have mentioned in your Techinal Analysis module
Hi Raman,
You can use amibroker which is a paid one. The price ranges between 18000 to 25000 depending on the edition you want.
If you want to have a free software, you can use Fibotrader. Obviously the paid one is more user friendly than the free softwares. I don’t have any idea on our upcoming software ‘PI’. So even i request Karthik sir to comment on this. Hope it helps.. 🙂
Here is a sneak peak into Pi. It is in beta stage, there are close to about 1000 people using it. Hopefully the finial release should be around the corner.
The same is discussed here in this chapter Raman.
Hi Karthik,
Can you please throw some more light on the look back period?
Lookback period is simply the number of days data you wish to include in your calculation. For example a standard RSI indicator has a 14 day lookback period. You could change it to 21 if you wish.
A 5 day SMA has a 5 day look back period…so on and so forth.
Lets go the materials in versity, only then I can comment.222
Sorry, dint quite get that Subhadeep. Can you kindly elaborate?
Hi Karthik,
Could you have a look at the TVS Motors charts especially the last 5-6 trading sessions. The stock is trading near its all time high, which was 266.7 achieved a couple of trading sessions ago and so a sort of resistance exists around these levels, there is a dark cloud formation if we look at the last two trading sessions,looks like there is a double top pattern formation in place, the selling on Friday is not accompanied by increasing volumes(I believe it was profit booking before the weekend/expiry with doubts on NIfty’s movements) , indicators (RSI,MACD) doesn’t say much other than showing good strength. How do we approach this scenario, given that there is a possibility of making a new high accompanied with a breakout or a possible move towards the downside?
Almost all the things you have mentioned is true –
1) Double top formation
2) Resistance
3) Dark Cloud formation
4) Low Volumes
Except for the volumes part, the stock is suggesting a short trade (it click most of the checklist items). I would be happy to short and be quick to book profits as well. The only reason I’d be quick to book profits is the absence of impressive volumes.
Thank you Karthik, for the validation. I have another question for you. Could you have a look into the charts of Small Cap’s like Aimco Pesticides, Waterbase, Freshtrop fruits etc. Here a peak was formed where volumes where high at those levels and over a period of time the volumes are decreasing and the chart shows a fall which is flat like a consolidation. Could you tell us what stage is the stock in (ie, accumulation, distribution or other)?
Kirthan ,thanks for presenting brilliant question.I am also waiting for some experts reply.
Hey,
Material is quite lucid.. Thanks a lot for such an effort for Investor Education… I would like you to put up some explanation on Divergences in RSI and how to use them as trading opportunity… It will be really good and great opportunity one can get if we identify the divergence right… I am attaching one chart of current correction which if userd along with Trendline provided good shorting opportunity in Nifty.. See the impact of divergence…
Thanks. I understand lot of people like using divergence techniques. Will probably include this in the subsequent sections.
Can u plz add diversion in current topic or RSI
Thanks for the suggestion Pavaneet, will look into this.
+1 for Coverage on Divergence
i feel indicator + stock pattern together will show future direction better
Yes, thats the reason why I also have indicators on the check list 🙂
I WANT TO KNOW ABOUT DIVERGENCE . CAN YOU PLS EXPLAIN THE CHART . THEORETICALLY PERFECT DIVERGENCE HAPPENED . AS I AM NOT ABEL TO UP LOAD THE CHART , PRESENT SITUATION IN NIFTY DAILY . WITH RSI INDICATOR .
Sure, I will write about divergence sometime soon. Thanks.
i want to know about fixing the for long or short , using resistance and support.
The same have been explained in detail here – http://zerodha.com/varsity/chapter/support-resistance/
Hi Karthik,
Where can we find the historical quarterly earnings of a company and can the stock price vs earnings be plotted on PI. Or is there any other place where I can find the same data?
Generally speaking: Where can I find old data related to fundamentals?
There are few sites that give out this information, try – Morningstar India, Moneycontrol, screener.in, economic times website etc. As far as I know you cannot plot the stockprice vs earnings on any software. However google finance has a nice feature which marks all the important dates (along with a quick 1 line explanation) on the the chart, suggest you give it a try.
Dear sir,
Can you please advice techniques which are useful for Indtraday.
Please start by buying 1 or stocks and holding it till close…also to begin with don’t get into multiple buys and sells in the same day.
In the evaluation process i read as— if s and r is more than 4 percent away from stop loss, stop evaluating in the chart. this i am unable to understand. kindly brief me.
Meaning if the stock price is at 100 and the support for the stock is at 96 or more then it maybe touch to trade the stock as the placement of SL (based on support) will be quite far.
Hi Karthick,
What percentage is good for support & resistance based stop loss?
Thanks in advance.
There is no % as such, the support itself acts as a SL.
“If the RSI is fixed in an overbought region for a prolonged period, look for buying opportunities instead of shorting”
How long exactly will be that prolonged period if I am using a 14 day RSI(like 4 days, 5 days or more than a week)?
There are times when the RSI is stuck in a range for over 3-4 weeks. This according to me is a prolonged period.
i cannot expand indicators row.(RSI MACD ETC.). earlier it was possible so that i could draw trendlines. now it is a problem.please clarify
Expand where? as in which software?
earlier i was able to expand RSI, MACD rows in intraday chart available in nest chart. now i cannot do it.now it is too small row almost impossible to draw lines on them. i can draw lines on chart but not on rows as mentioned.
Ashok, this seems to be a software issue, can you please contact your broker regarding this? If you are with Zerodha then you can call +91 80 40402020 and get this sorted. Thanks.
Dear Karthik,
I am posting here a chart of nifty ,In that there are two lines in RSI indicator.
Of which, one is RSI14 but other line I don’t understand. Please guide. & can we add it in
chart on our Pi and how ?.
Regards.
Haridas.
RSI(C,14,S,9) indicates a RSI plotted on 14 day closing prices (C). S,9 indicates that a simple 9 day moving average is being plotted on the 14 day RSI. For queries related to Pi, I would suggest you get in touch with Srini – [email protected] .
Thanks Karthik
Have a good day!
dear kartik sir,
u have mentioned about the rsi in 0-20 and 80-100 as oversold and overbought regions resp.but what abt the rsi that is in a prolonged period of say in the range of 40-60.how to read these stocks.
As per RSI, such stocks do not really head anywhere. So its best to look for candlestick patterns.
Sir,
Could you pls let me know which indicator is better to look between RSI and stochastic
Both are used under different circumstances..so cant really compare.
Sir,
If we have two scenario, pls suggest which one should we prefer for buying the stock
scenario 1- Stochastic/RSI both are around 25 and then one bullish candle like marbouzo/hammer/bullish engulfing
scenario 2- Stochastic/RSI bot are about 50 but EMA crossover of 3 days is above 8 days and it is going upwards which suggests positive trend
Scenario 1 seems like a better setup.
Sir,
Which indicator according to you is better between EMA crossover and Bollinger bands
EMA is momentum and BB is volatility based, cant compare both.
Dear Sir,
What is the difference between volatility and momentum?
Very loosely put, Volatility is the daily movement of the scrips. Momentum is the rate of change of stock’s return. If the stock is trending high meaning it makes higher high, then its said to have a positive momentum. If it makes lower low on a daily basis, then its said to have a -ve momentum.
which is the best indicator / combination of indicator
1) for pure intraday trading ?
2) for short term (1 or 2 week ) holding ?
3) for medium term ( 1 month to 1 year ) holding ?
4) for long-term more than 1 year ( fundamental will be best for this , i assume ) but any technical indicator to re-affirm our selection ?
Clearly mapping indicator to a given time frame is quite a challenge. But if you insist – for intraday something like a stochastic/MACD should help. For longer periods I would suggest you use moving averages.
exchanges issue daily highest gainers & losers .
can this data be used as an indicator of some sort ? if yes , how ?
for example , is it good strategy to long on stocks that gained the most the previous ( expectation being being uptrend will continue ) & similar for the stocks that lost the most the previous day ?
or should be do completed opposite expecting a retracement or a correction ?
It would be difficult to judge the strategy without validating it. Hence the best way to validate this would be to backtest the thesis. Download the daily closing data and run a query to fish out highest gainers/losers and check how they performed the following day.
there is any difference b/w out technical analysis and united states?
what type of skills required to be a trader and how to know i become a good trader?
Patience, attention to details, discipline, and a constant quest to learn and improvise.
What is the relevance of vix,open interest in options and how can we understand the positions of fii’s in option whether they are long or short….generally we call them fii’s but how many institutions registered under fii’s tag do they take separate views and trade or any kind of understanding between them?
Theoretically option price derived from equities but nowadays due to high volumes in Fno and huge time and monetary implications equities price is derived by the options price esp.shorting data,is it correct?
Suggest you read through chapters 15 to 20 in options module, its completely dedicated to understanding Volatility. It is very difficult to estimate FIIs are long or short in the market as they usually do arbitrage trade (which requires them to be both long and short at the same time). There are many FIIs registered in India, I guess SEBI has the entire list put up on their website.
Also remember, spot dictates the derivative market and not the other way round.
Karthik my target is to earn 2-3% on weekly basis. Please suggest me a strategy.
My TA always goes wrong. 🙁
Thanks in advance. 🙂
2-3 % a week is about 10% a month or 120% a year!! Not possible my friend. Please read section 1.3 here – http://zerodha.com/varsity/chapter/background/
What is logic behind interpretation of RSI?
Have explained that in the chapter Hitesh.
Sir can u please suggest some syrategy for intraday commodity.? Which indicator is best suited for this suggest with a lookback period ?? And how much time grame chart is most benefecial to make profit?? Pls guide as i m new in trading
These are generic questions Anurag, difficult to give you an exact answer. Also, please note there is no 1 good answer for this…you will have to experiment and arrive at what really works for you.
Hi Karthik,
Here are two charts of nifty spot both are 30 min. But why there are difference in RSI value
of both charts at SAME time. In GF charts it showing 91 and kite showing around 70.
Sorry Karthik not able to attach chart file , This is on 27/06/2016, time 1 pm
No problem.
This is because of the ticks – not all of them are captured at the same time. There is a detailed explanation for this on tradingqna, trying to dig it up for you. Will repost the link soon.
Hello Karthik sir,
Am not able to see any charts/screenshots uploaded by the readers in comment section. I tried a couple of browsers but still the problem remains. Please suggest…
I guess in one of the recent updates, the media images got a little mixed up. Let me see what best can be done. Thanks.
Hi, somewhere you mentioned the name of a particular book which can help us i forgot the name of the book and author.
Not Sure which book you are referring to 🙂
Karthik the book that you have written about is it intelligent investor or ultimate investor and please help me with the name of the author aswell.
It could be Intelligent Investor, have not read the Ultimate Investor 🙂
Can you please tell me how to find an undervalued and overvalued companies stock.
A simple 2 stage DCF will help you identify this from a fundamental perspective. You can also use indicators such as RSI and MACD to get a technical perspective (for short term trading).
Hello Karthik, I need some help with one of the indicators – Stochastic Momentum Index, listed in KITE. That indicator works for me very well. I want to use it for 4 Hr time frame to confirm the trend, unfortunately 4Hr timeframe is not there in the KITE. So, is it possible to let me know which parameters are to be used to model that formula in AMIBROKER, please? I would really appreciate and thank you
I’ve not used Amibroker much, so cannot comment. But why don’t you try this in Pi?
Hello Karthik: What is the formula used for calculating Stochastic Momentum Index in Pi? The one I tried in Excel does not match for simple average smoothing. Could you please guide?
I’m not sure, Sebastine. It is a 3rd party charting engine and the formulas are hard coded.
Hi Karthik,
If the RSI is fixed in an overbought/oversold region for a prolonged period, we need to look for Buying/Selling opportunities. However, can you suggest the definition of prolonged period? Example: The RSI for a stock is in the overbought region for the past 15 days. So can 15 days be considered as a Prolonged period? Bottom-line – How many number of days can be considered as Prolonged Period? If the definition is subjective, what factors of the stock should be considered for evaluating the period?
It certainly is subjective, hence I can only speak for myself. I consider 15-25 days as prolonged period.
Karthik sir,
Wanted to ask you regarding market indicators.
Is price relative/relative strength tool which compares the underlying security against the merger market average available in most technical Softwares? And why do they range between negative and positive territory
Sorry to disappoint but I’m Not sure about this ‘merger market average’, I myself have to dig deeper into this topic. If in case you have any material then please do share it with the community here. Thanks.
Hello Karthik,
As mentioned in the tutorial that if the RSI starts moving away from oversold/overbought value from prolonged period of time, look for buying/selling opportunities respectively.
My doubt is what if it continues to stay between the value 30-70 over a prolonged period of time. in both cases, it satisfies the above condition.
Thanks
In RSI we look for values below 30 or above 70. In between period we ignore.
hello karthik sir
when module 9 and 10 available for us?
Soon hopefully. I have been caught up in few other things and its taking away some time and focus. Will get back on track very soon and complete these modules.
BEST OF LUCK
HELLO KARTHIK SIR,
PLEASE SUGGEST ME FEW BOOKS FOR TECHNICAL ANALYSIS AND CAN I AM ABLE TO LEARN TRADING WITH TECHNICAL AT HOME
OR I SHOULD JOIN ANY COURSE.. PLEASE GUIDE ME
I’d suggest you please read through the contents on Varsity. Its good material that we have here and should be more than sufficient to get you started.
thanks
sir what is the difference between RSI and SMOOTH RSI please provide one example please so i can understand easily thanking you
Smooth RSI is something I’ve not heard off. Will try and research and put my learning notes sometime soon.
Please provide smoothed RSI. It’s not available in zerodha chart too.
Sir how to use esi for intra day trading
ESI? Not sure, Pravesh.
which indicators is best for intra day and swing trading please guide me i am not able to decide?
Simple Moving averages helps. Give it a try.
Thanks for kind details
How will I know RSI value fixed for a prolonged period?
Thanks
You will have to look for the daily change in value. You will know when RSI is sticking around the same value over few days/weeks.
Thanks
Plz clear my next query on next chapter15th
Hi sir,
Can we use rsi indicator in individual stocks??
Yes, you can.
hi, I was looking for StochasticRsi oscillator in pi, where can i find it ?
Its available, please write to [email protected] for queries related to Pi.
hi,
Looking for an indicator to see the price difference ratio or say spread between two stocks with mean line in between along with 2 standard deviation lines
what I looking for is basically – a price ratio (blue curve) that appears to oscillate around a mean (purple line). And then 1-, 2-, standard deviation lines just to get a feel for how far away from the mean the oscillations might go.
can some one please please code this indicator, I am sure there might be so many other people who are doing pair trading and are trying to find the same kind of indicator but it is not there, so it will help thousands of other zerodha users also
REFERENCES:
http://luminouslogic.com/a-pairs-trading-example.htm
https://www.equityfriend.com/traders-tool/pair-trade-opportunity-and-analysis.html
Regards,
Mukesh
Hi Mukesh, I guess you posted the same query on tradingqna…I’ve posted a reply there itself – https://tradingqna.com/t/indicator-that-shows-price-difference-price-difference-ratio-between-two-pairs-stocs-for-zerodha-pi-please-help/9620/4
Hello sir, first a heartfelt thanks for all the hard work you people have put in, to educate us. I want to know from where can i learn about momentum trading in detail sir. Would be very grateful if you could give us a chapter on momentum trading. Thank you.
Thanks for the kind words, Deepala.
You can apply the same TA principles to trade momentum. In fact, all the patterns I’ve discussed help you identify momentum and you could use the same to set up trades.
Due to varsity, i am able to know about TA in stock market….
i have que.– what was your thought behind indicator? means, there are plenty but you choose some of here. so we believe these are the best !?
Stick to the basics. I personally don’t like to depend much on indicators.
If i am using ema of 25 and 50 lookback period then should the value of rsi lookback period be also between 25 &50 or is it independent of ema period?
No, they both are pretty mutually exclusive.
Sir, I have some doubts,
1. RSI is just a approximation of future occurance(uptrend or downtrend) based on lookback period, am i right?
2. What lookback period will intraday trader will use?
3. Suppose, If a intraday trader uses lookback period of 14 hours as you have mentioned, will it be helpfull because there will be small changes in price??
4. Do we have to use MA,RSI,MA of volumes and S&R together for best possible result, am i right?
1) Entire TA is an approximation based on historical occurrences
2) I’d look at last 3 days data but focus more on current day’s price action
3) Yes, it should
4) Keep it simple, use one indicator (one which you understand best) along with CS pattern and S&R.
Good luck.
Thank you?
Sir, why to use indicator if we can indentify trend through candelsticks, is indicators only for confirmation?
Yes, thats how I look at it, Ayush. I use indicators as a side confirmation.
two questions :
1.) can we take different level for different sahres, for eg for infy we can use range 0-30 and 70-100 whereas for cipla we can use 0-20 and 80-100.
i ask this because if i apply 0-20 and 80-100 on infy then very hardly i can see the RSI getting less than 20 or greater than 80 historically, instead when i use 0-30 and 70-100 there are many instances where the RSI displays oversold by crossing 30 and overbought by crossing 70 historically.
2.)what is the the RSI is continuously between 31-69 (for range 0-30 and 70-100)? does that mean the RSI is not useful then ?
thanks in advance
1) Yes, of course. In fact, its best when done this way.
2) Its usually considered the ‘no action’ zone.
hello,
I need to know about super trend indicator? and on what basis period and multiplier value has to be selected for intraday trading and for long term?
We have discussed super trend here – https://zerodha.com/varsity/chapter/supplementary-notes-1/
DEAR SIR,
How one should look at movement of nifty index while evaluating a stock. Say, can we add trend of nifty index to the grand checklist??
Especially during intraday trading??
The over all direction of the market should ideally be in the same direction of the trade. This enhances the probability of success.
Dear sir,
say I have evaluated a stock and most of the points are tallying with checklist and it suggest to go short, but when the market opens next mornig the market trend is upward, then
1. Should I continue with my evaluation , drop the call or change the direction i.e. long instead of short (especially when it is an intraday call), please suggest…..
2. Sir, Can I mail you as I have some doubts( regarding trading only) which I do not want to publish in public, as it may disturb other participants,??
Regards
1) As long as the SL has not breached you execute the trade
2) Request you to post it here only.
I want to use comparative Relative Strength Indicator in PI . It shows this but the definition of Comparative RSI is to compare one security with the other security or base security , which is not showing .
Let me check this Sameer.
I get the following ticks from zerodha through kite connect:
The columns are: Timestamp, LTP, volume
But when I calculate the RSI using the standard formula, I see that the values differ from what shows up in the kite website -> studies ->RSI graph. Can someone please elaborate on how the RSI is calculated using the intraday ticks?
2017-07-28 09:20:14.366 194.9 1030000
2017-07-28 09:20:17.297 194.85 1040000
2017-07-28 09:20:19.607 194.85 1040000
2017-07-28 09:20:20.183 194.85 1040000
2017-07-28 09:20:24.372 195 1055000
2017-07-28 09:20:25.540 195 1055000
2017-07-28 09:20:26.190 195 1070000
2017-07-28 09:20:28.626 195 1085000
2017-07-28 09:20:31.159 195.05 1135000
2017-07-28 09:20:34.225 195.05 1135000
2017-07-28 09:20:36.436 195.05 1135000
2017-07-28 09:20:37.434 195.15 1140000
2017-07-28 09:20:39.281 195.15 1140000
2017-07-28 09:20:40.264 195.15 1140000
2017-07-28 09:20:43.119 195.15 1155000
2017-07-28 09:20:46.216 195.15 1155000
2017-07-28 09:20:49.240 195.15 1160000
2017-07-28 09:20:52.452 195.15 1160000
2017-07-28 09:20:56.403 195.15 1160000
2017-07-28 09:20:58.356 195.2 1180000
2017-07-28 09:21:01.405 195.2 1190000
2017-07-28 09:21:04.158 195.2 1190000
2017-07-28 09:21:07.375 195.15 1205000
2017-07-28 09:21:09.500 195.05 1215000
2017-07-28 09:21:10.403 195.15 1220000
2017-07-28 09:21:12.522 195.2 1225000
2017-07-28 09:21:13.192 195.15 1230000
2017-07-28 09:21:16.239 195.15 1250000
2017-07-28 09:21:19.284 195.1 1255000
2017-07-28 09:21:22.347 195.1 1260000
2017-07-28 09:21:25.195 195.15 1270000
2017-07-28 09:21:27.121 195.15 1270000
2017-07-28 09:21:28.602 195.15 1270000
2017-07-28 09:21:30.266 195 1300000
2017-07-28 09:21:31.440 195 1300000
2017-07-28 09:21:34.287 195.15 1305000
2017-07-28 09:21:37.250 195.2 1310000
2017-07-28 09:21:40.241 195.2 1310000
2017-07-28 09:21:45.603 195.25 1325000
2017-07-28 09:21:50.173 195.3 1330000
2017-07-28 09:21:51.308 195.3 1330000
2017-07-28 09:21:52.452 195.45 1355000
2017-07-28 09:21:54.210 195.45 1355000
2017-07-28 09:21:55.283 195.45 1355000
2017-07-28 09:21:59.306 195.45 1355000
2017-07-28 09:22:00.196 195.45 1355000
2017-07-28 09:22:02.377 195.45 1355000
2017-07-28 09:22:04.493 195.45 1355000
2017-07-28 09:22:05.399 195.55 1375000
2017-07-28 09:22:07.519 195.55 1380000
2017-07-28 09:22:09.213 195.65 1390000
2017-07-28 09:22:10.286 195.65 1390000
2017-07-28 09:22:14.129 195.7 1400000
2017-07-28 09:22:15.205 195.7 1400000
2017-07-28 09:22:17.257 195.7 1400000
2017-07-28 09:22:19.168 195.85 1410000
2017-07-28 09:22:23.382 195.3 1515000
2017-07-28 09:22:25.163 195.3 1515000
2017-07-28 09:22:28.631 195.3 1515000
2017-07-28 09:22:32.256 195.3 1515000
2017-07-28 09:22:35.312 195.05 1525000
2017-07-28 09:22:36.793 195.05 1525000
2017-07-28 09:22:38.631 195.05 1525000
2017-07-28 09:22:41.276 195.45 1600000
2017-07-28 09:22:42.333 195.45 1600000
2017-07-28 09:22:43.152 195.45 1600000
2017-07-28 09:22:44.393 195.45 1600000
2017-07-28 09:22:45.434 195.4 1605000
2017-07-28 09:22:50.243 195.4 1605000
2017-07-28 09:22:52.176 195.4 1605000
2017-07-28 09:22:55.442 195.55 1610000
2017-07-28 09:23:02.249 195.55 1610000
2017-07-28 09:23:04.297 195.55 1610000
2017-07-28 09:23:05.243 195.55 1620000
2017-07-28 09:23:06.397 195.55 1620000
2017-07-28 09:23:07.273 195.55 1620000
2017-07-28 09:23:09.349 195.6 1625000
2017-07-28 09:23:13.179 195.55 1650000
2017-07-28 09:23:14.411 195.55 1650000
2017-07-28 09:23:26.231 195.65 1680000
2017-07-28 09:23:31.406 195.7 1690000
2017-07-28 09:23:32.523 195.7 1690000
2017-07-28 09:23:35.256 195.7 1690000
2017-07-28 09:23:38.878 195.7 1690000
I’d suggest you validate the formula over EOD data before venturing into intraday.
To be more precise:
These are the closing prices for DLF August Future starting from 09:19:00 AM to 09:34 AM.
Since RSi is based on closing price of the period, For the 14 period (1 min chart) RSI should be 82.98
09:19:00 194.8
195.2
195.45
195.55
195.75
195.5
195.5
195.35
195.4
195.5
195.65
195.7
196.1
196.3
09:34:00 196.35
But on the 1 min chart it shows the RSI as 58.69
Like I suggested, first check if the formula works on EOD data. Also, when you are dealing with the minute chart, you are dealing with a lot of noise.
Hi Karthik,
The formula works well on EOD data. I am writing some code which depends on intraday RSI on a 1 min period.
If you can elaborate on how the value is in coming out to be around 58 @09:34-:09:35 AM for DLFAUG17FUT it will be very helpful. The closing price for every minute is as mentioned by me.
What formula is kite app using? why is it not using the formula mentioned above?
Fotgot to mention the date. it is 28th July morning.
Cool, posted a reply to your earlier query.
Kite uses Chartiq as the underlying charting engine. I’m really not sure about the formula they use. Can you did into Chartiq support doc and look for this, please? Thanks.
Dear sir. Can you clarify my whether RSI value can become exactly 100 if there is any point of loss with in the 14 days.
I think as per the formula RSI could never become exactly 100 unless RS value become infinite and RS value will become infinite only if the average loss is zero and it is possible only when there is no point of loss in look back period ie.14 days. It may be 99.9999 but it could not become 100. Please clarify whether I’m right or not.
Thanks for your valuable time spending on my comment.
I don’t remember seeing it at 100 either 🙂
“fewer the days you use to calculate the RSI, the more volatile the indicator would be”.
What does this mean sir?
Also, since nowadays nifty is pretty rangebound would you suggest using RSI indicator on it? Would 14 days be apt or should I increase the time?
Looking forward for your valuable inputs. ☺️
Whenever you reduce the time frame in technical analysis, the noise component increases, and hence more volatile.
I find simple moving averages more effective in present day circumstance.
Sir, market is not trending nowadays so how can you justify using SMA? You said it works best when market is trending
No, what I ment was that a simple SMA should help in identifying a trending situation. For sideways markets, I also like Bollinger Bands.
Hi. It’s been a year at Zerodha for me and in my humble opinion, it’s all one can ask for in a trading platform and so much more. I recently started experimenting with intraday trading and got mixed results. I have a couple questions regarding the same.
1. In your opinion, what are the best technical indicators for intraday trading?
2. What time frame (i’ve been working with 5/10 min charts) is the most suitable for such trades?
Thanks!
Glad to hear that, Udit!
1) Bollinger Bands and EMA, are some of my favorites
2) I’d prefer 9 x 21
How do we use EMA, do you have an article on that yet?
Yup, check the chapter on moving average.
Thanks for the prompt reply. I can’t seem to find EMA indicator in Kite. Is it present there by some other name?
You will find that under studies.
Udit – You can’t find it because it is not named EMA. The name in kite under Studies is “Moving Average”, once you select that, you can choose the Option as “Exponential”, then it becomes EMA! 🙂
The kite platform have only 1,3,5,10,15 minute options. Kindly explain what you mean by “I’d prefer 9 x 21”
If you are looking at minute charts then it means – 9 minute versus 21. If its EOD charts, then its 9 days versus 21 days.
Sir , I have confusion that the events of overbuying and overselling had occurred in past hours or periods .How can we take desicion based on event occurred some days ago.as technical analysis shows the past trend.
TA is best when you take action based on what has transpired in the market on an immediate basis barring some theories of Dow and Support/Resistance.
I have set 20/80 indicator , what does it mean if it between 40 to 60
60 to 80 what does this indicatate???
Inching towards the overbought territory.
karthik ji can u plz answer to my questions
i have read it somewhere in newspaper that
1. priceband=685 to 700 per equity share of face value of rs. 10 each
if price is 685 to 700 then what is face value? whats the difference?
and what does these means:–
2. discount to eligible employees : rs 68 per equity share on offer price
3. floor price is 68 times the face value and the cap price is 70 times the
face value
4. bids can be made for a minimum of 21 equity share and in multiples
of 21 equity share thereafter.
1) Face value is the notional value of the share, whereas the share price is the actual value on a per share basis as assigned by the market
2) Yes, this is the discount for employees
3) Assuming FV as 10, floor is 680 and upper band is 700
4) You have to apply for 21 shares or in mutiples – not numbers like 22, 25, 15 etc..
kk but what does floor price and face value mean and can u plz elaborate no. 4
The floor price is the lowest value of the share price, bidders cannot bid lower than that. Face value is just the notional value.
thankyou brother
Cheers!
Sir, Where will i get information about VAH,VAL,POC,IB,WAP ? Is there available in zerodha varsity??
Can you please expand these abbreviations for me, please? Thanks 🙂
Point of Control , Value of area , value of high , value of low
Initial Balance , Weighted Average Percentage
OHLC data is available which is basically the value of high, low etc. Volume is also available. But not the IB.
Sir ,
Is there notes on VAH ,VAL,POC etc??
Not on Varsity. Will try and cover this sometime soon.
OK Thank u
Cheers!
Hi sir
When you say the word “Trend” , be it upward or downward , does its definition changes on the type of trading.
Like If I am a day trader then “trend ” can be defines by a lookback period of 7-10 days and for the short term trader it my be several weeks or months for the same stock.
Please tell me if I am getting it right
The trend just refers to the direction in which the stock is gaining momentum, based on which you can set up your trades. YOu are right on the look-back period – trend refers to the look back period you are taking into consideration.
Hi Sir,
I am looking for StochasticRsi Oscillator and Vortex Indicator in pi, where can i find it ?
Regards
Santosh Panda
Guess both are not available Santosh. Let me check with the team to see if we can do something about it.
Hi Sir,
Please let me know when these two indicators will be available in Zerodha Pi
Regards
Santosh Panda
Sure, will do.
Hi Karthik,
I recently joined Zerodha and its the least when i say that you are doing outstanding work with it. Keep up the great work.
I have one question. Which indicators when combined work best for intraday trading? I really find stochastics fast % line very useful in predicting. However, what will your suggestion be?
Thanks.
Ritu – Welcome to the Zerodha Family 🙂
One shoe does not fit all.
No candlestick pattern or indicator works on the same 2 stocks. For example, bullish engulfing along with RSI may work on SBI but may not on HDFC. The trick is to backtest and be aware of which pattern/indicator (has a better probability) works on which stock.
karthik your view about advantages and disadvantages of ichimoku indicator whether it is a reliable indicator
I’ve not traded enough using Ichimoku, Esan. So I guess, I can’t really comment on it.
Hello Mr. Karthik 🙂 Sir can you please tell me which technical indicators/strategy is good to use for intraday trading according to you? and the parameter settings for them according to you.. Also for intraday trades especially, is Profit:StopLoss ratio of 2:1, 3:1 good one?
Awaiting your kind reply! Thanks.
That would be really tough to answer because no two indicators work alike and no indicator works the same way on two stocks. You will have to backtest each indicator on different stocks and figure out which one works on what.
Thanks Mr. Karthik. I have done a certification course in which i learnt about Technical Analysis, Indicators like MA, MACD, RSI, Bollinger Bands & Dow Theory. Candlestick chart patterns: Bullish/Bearish Engulfing, Piercing/DarkCloud, Bullish/Bearish Harami, Morning/Evening Star.. According to you, is there anything else which i should learn about/add to my list of indicators and chart patterns which is definitely worth it.. Thanks and regards.
If you are comfortable with these patterns, then I’d suggest you practice these in real markets. Once you get confident, try other patterns. Perhaps, you can backtest them to get greater insights. Thanks.
Okay sure thanks 🙂 I have been suggested to use SMA(80), MACD(12,26,9) RSI(14) with oversold level 30 and overbought level 70 and BB(20,2) for the daily chart trades.. Is this fine ?
Its fine, as long as you backtest it 🙂
I am new in stock trading. I am interest in short term trading one to two week.
My question is what kind of technical indicator I need to set.
1. 5 20 sma crossover
2. RSI (14) above 80
your views pls.
Yes, you can use any of these indicators. However, I find candlestick charts a bit more powerful in terms of its predictive power.
Hi Karthik, Excellent materials on technicals! I have a querry 1. Should RSI value analysis fixed(20-30 for buy & 80-100 for sell) for all stocks. Or can we choose different RSI for different stocks?
Not really, you can choose to customize your RSI levels.
I am trying to calculate the RSI of Suzlon for an interval of 14 days. These are the date and close e prices –
Thu Nov 02 09:15:00 IST 2017 — 16.4
Fri Nov 03 09:15:00 IST 2017 — 16.5
Mon Nov 06 09:15:00 IST 2017 — 16.1
Tue Nov 07 09:15:00 IST 2017 — 15.55
Wed Nov 08 09:15:00 IST 2017 — 15.5
Thu Nov 09 09:15:00 IST 2017 — 15.5
Fri Nov 10 09:15:00 IST 2017 — 15.55
Mon Nov 13 09:15:00 IST 2017 — 14.65
Tue Nov 14 09:15:00 IST 2017 — 14.5
Wed Nov 15 09:15:00 IST 2017 — 13.65
Thu Nov 16 09:15:00 IST 2017 — 13.45
Fri Nov 17 09:15:00 IST 2017 — 13.7
Mon Nov 20 09:15:00 IST 2017 — 13.6
Tue Nov 21 09:15:00 IST 2017 — 13.85
Wed Nov 22 09:40:34 IST 2017 — 13.75
My RS is coming out to be 0.197 and RSI is 16.45
But in Kite the value is showing something around 31.6?? Can you please explain how come you are getting that value?
Are you applying this to closing value?
Yes these are the closing values. You can cross check one or two dates if you want. Also, please let me know what is the answer that you are getting.
Sure. Will let you know if I do this.
I got it know. Although in the article you have mentioned to divide the (total_profit/14) and divide the (total_loss/14) to find the average loss and gain, but what you actually doing is dividing the (total_profit/no_of_positive_days) for finding the average gain and dividing the (total_loss/no_of_negative_days) for finding the average loss. I was doing the prior one once so their was a mismatch of the RSI value, from your value. Please confirm.
I guess you found your answer 🙂
Hi Sir,
If the RSI is in a overbought or oversold region for a prolonged period (say more than 20 days) and so if we are entering the trade ( long/short) respectively and once we have entered ,if the momentum losses and RSI and price are moving in opposite direction, what to be done? How to identify these scenarios and get rid of it?
YOu cannot get rid of it, you can trade along with it 🙂
Its best if you use it as a contrarian indicator when the RSI values are stuck in the overbought/sold value for a prolonged period of time.
Hi Sir,
What if we have entered the trade based on RSI touching overbought or oversold, in a hope that it would retrace back ,but if the trend prolong to continue in the same direction??In this case what could be the SL?
You will have to cut the position.
Hello Karthik,
Does the Zerodha trading platform has a feature wherein I can continuously get the values of the EMA’s that are plotted on my graph ?. For example as the graph builds along during a trading session and the EMA’s get plotted for a particular scrip/stock/security, there should be an API that I can use to extract the EMA values for this particular scrip/stock/security. I can then use these values within a customised program to arrive at the decisions I need to make an entry or exit.
Please advice.
Regards,
Ali.
No, we don’t have this feature. However, if you are familiar with coding, then maybe you should check out the Kite Connect APIs – https://kite.trade/docs/connect/v1/. I’m sure you can build this quite easily.
Hello Karthik,
Thank you for the prompt response. I have one more query on the Stock Futures (Derivatives) market. Do you know why after market hours are not allowed for the derivatives (Stock Futures) segment ?. What is the logic behind restricting this when one can place a after market hours order on the equity segment ?.
Regards,
Ali Asghar.
I’ll get back to you with an answer for this, Ali. Thanks.
Hey Karthik,
Did you get a chance to think over the query of Derivatives not being allowed for pre and post market hour orders ?
Regards,
Ali Asghar.
Hey, sorry I guess I missed your query earlier – anyway, even in after market hours trading price discovery won’t happen for eq, one has to trade only market orders at closing prices of 3.30.
Hello Karthik,
Going back to the query I posted on 7th december and you responded with the possibility of using Kite connect API’s. I really want to give this a try. Would you be able to provide technical assistance in case I hit some roadblocks during the development ?.
Regards,
Ali Asghar.
For API tech support, I;d suggest you look at this – https://kite.trade/forum/
Thank you Karthik. This helps.
Cheers!
Hi Karthik,
As a beginner I loved articles here on Varsity, Thanks for sharing your knowledge with such great examples.
What I am failing to understand is how these indicators can help in long term investments, I understand FA is good for long term but how do we chose an entry point where prices are low which in turn helps in more profit. If we make an entry at uptrend market and eventually lose money due to down trend.
Could you please help with some pointers which can help in understanding entry point and exit point.
Thanks.
Vishal, TA and FA are two different schools of thoughts. You use TA for short-term trades and FA for long-term investments. Mixing the two can be a little tricky. I’d suggest you dont do this, at least when you are starting off. Long-term investment should be made based on fundamental factors.
Thanks for the reply.
So does it mean just look at the fundamentals of the company and if they are good buy the stocks whatever the market price and let fundamentals handle it on the long run?
Thanks.
Absolutely, that is how I invest for the long term and it has worked for me over these years.
Hi sir…when we say “prolonged period” what range we ahould consider …is it for 1 month or more?
It really depends, if you are looking at a 6-month-old chart, something like 1-2 months can be considered prolonged.
Thank u sir….just for confirma. tion…if i look at adani power chart (6 month)….the RSI has crossed 85….and in the past it has shown down trend when RSI crosses above 80( see 2 yr chart) ….should i wait for other indicator( like candle pattern ) , to initiate the short position in this scrip.
Like I’ve mentioned earlier, the decision to buy or sell has to come from Candlestick, indicators only act as a secondary confirmation to the trade.
Thank u sir….just for confirmation…if i look at adani power chart (6 month)….the RSI has crossed 85….and in the past it has shown down trend when RSI crosses above 80( see 2 yr chart) ….should i wait for other indicator( like candle pattern ) , to initiate the short position in this scrip.
Where I can find relative strength comparative tool on pi or Kite?
Check under studies.
It’s not there. Is there some other name for this tool?
Anish, this indicator is not available in Kite/Pi right now.
Will ask the Product Development team to look into it
My doubt not related to this topic, although please answer
Suppose i initiated a trade kept stoploss and take profit … Will trade get executed even if i am not in online due to powerloss, internet problem etc.. (as these are most common )? i am hearing a lot of negative about zerodha in this case..
kindly reply me
Its quite natural, people who dont put in the efforts to learn and understand how products work seek pleasure in making small talk and spreading silly rumors.
Anyway, yes, this is possible by employing a bracket order. Check this to learn more – https://www.youtube.com/watch?v=2TrYyOHA7P4&index=8&list=PLkxTRam6E2V-okv6gwQlt6dLTsn0v6CD1
Thank you
Cheers!
Firstly happy republic day to all
Karthik sir I m new in your trading platform. I m reading your articles and they are fruitful for me as beginner.
I would like to know which strategy is best for option trading as I have lost so much money in option.
Thnx
Happy Republic day to you too, Ram!
Check this – https://zerodha.com/varsity/module/trading-systems/
Hi Karthik,
What I understand if RSI stuck in overbought region for prolonged period and if I am believing to go long from here so it would be easy for me if I received any supporting signal to go long at this juncture. Having said this what all parameters one can look for to support this overbought region and hence go long? Few things I can consider if supports are being respected, Avg volume is justifiable and getting strong candlesticks patterns with S&R and volume.
Kindly throw your opinion here.
Yes, all these are valid support points justifying your long position.
Sir in rsi indicator, which time frame is best?
Chart candle time 5 min, 10min,or 15min which is accurate for intraday?
The longer the time frame, the better it is. Given this, I’d opt for the 15 or 10 mins candle.
Just awsome Article Nithin Sir, Nimage koti Namana 🙂
Hi! Sir, Can we have Chande Vidya Indicator in Zerodha Charts?
I’m not sure about this. Request you to look under ‘studies’ in Kite.
No it’s not there in charts
Also if we can have 75 min charts on our charting software…
Hello Karthik,
I am trying to use the programmable alerts on the PI trading platform using TradeScript language. One basic question that arises when I go through the TradeScript manual is , for every function that TradeScript provides ,f or example
LAST – which fetches the LAST TRADED price
OPEN – which fetches the OPEN price of a scrip.
the manual says it will be the OPEN price of the the current CANDLE , LAST PRICE will be the most recent price of the current CANDLE, but it does not say whether these are DAILY CANDLES, HOURLY CANDLES or MINUTE CANDLES.
If I would want to compare the Closing price of the previous day to the OPEN price of the current day as soon as the market opens , how would I do that ?
Are all these functions based on the CHART that one is using ?
Ali, I’d suggest you reach out to my colleague Srini for this – [email protected]. Thanks.
Thank you Karthik. I will connect with Srini.
Good luck!
What values are considered for RSI ? is it closing price, average price ? Since the values are not matching between kite software and manual calculation. Also there is difference with other software like screener pro
Closing prices as default, but you can give it any input – Open, high, low, or avg prices. You just need to ensure that the input is same across all software, as long as that is in place, the RSI values will match.
It’s not matching with my manual calculation considering closing price and also with screener pro. Could you please share me the formula you use for RSI
The formula is explained in the chapter itself.
Consider RSI of Jubilant Foodworks for latest 14 days which comes to 77.6 as per the formula, whereas it’s showing 68.03 in kite now. You can cross check
Will do. Btw, you are calculating this on which average – simple avg, exponential avg, weight avg?
Calculating based on simple average.
Hmm, I really can’t understand this. RSI is a fairly straightforward formula.
You can just review once on this part
Thanks
Will try and do this sometime soon. Thanks.
Is there any way to plot first 15 min high-low point automatically with horizontal lines for current and past dates in the Kite ?
Ah, no Tarun. This is not possible.
Nithin,
is there any plan in near future to add “squeeze momentum indicator” as its now only available with trading view but one of the best indicator so for.
Kindly update.
We will check this and let you know Mani.
Hi Karthik,
I m using Kite since last 1 year, i do activly trading in FnO. To get an early entry/exits signal , i required Average RSI indicator. How can I add it in kite?
RSI is available but I don’t think Avg RSI is not available. Maybe you can add the moving average over RSI.
Sir
kindly tell me how i can add ztrend indicator to my chart.
Open the chart and select the indicator you need under “studies”. This will plot the indicator on the price chart.
What is standard indicators for RSI Chart?
14 days look back is the standard setting for RSI.
Thanks for reply.
I want to know what should be the value for over brought & over sold?
70 is considered overbought and 30 as oversold.
Thanks
What is standard values to be put for RSI Chart?
Sir, Any good books you think would be a good read on different technical indicators?
I cant think of a book which is dedicated only to indicators. You may want to check Steve Nison’s book on Candlestick Patterns. The 2nd half of the book discusses few indicators.
Hi,
I am attaching image of banknifty as on 25th jun. Is that a bearish divergence?
How do i send attachment?
You can upload on G drive and share the link, that is the easiest way.
please see below link for bn chart. Is that a bearish divergence
https://drive.google.com/file/d/1NYH9F35o0-X2qDDVBLy2OnpLjMDigb-4/view?usp=sharing
Should we see peaks or troughs?
Yes, you need to see the peaks and troughs keeping the price in perspective.
Not on EOD basis, remember there is no prior trend here.
Sir,I am impressed in going through your TA analysis in depth. But unfortunately, even after repeated study of your write ups,I failed to decide following.please help.
please refer the following stocks on BSE , waterbase, fresh fruits,and aimco pesticide .And please tell me as to whether these stocks are in accumulation phase or distribution phase..or it falls in different category otherwise,Please explain whatever is your logic.
Thanks
regards
Arvind Modi
Arvind, I can do that…but I’d like to understand what exactly is the problem you face. Maybe I can help you with this
Sir,my confusion ,rather ,not able to understand the chart ‘s characteristic..As per your ,accumulation n distribution attributes,after rise with high volumes till it peak,I take this as mark up 1 phase.ok.Subsequently,stock started falling with reduction in volume unabatedly till almost higher low status at swing bottom.The volume is not enough to buy even with bullish candle pattern developes.My question is this formation does not specify any where in your brillint full article.So is this accumulation again? as distribution phase is almost over awaiting suitable candle pattern with volume ,Time n price consolidation .?what should be traders approach in such scenario????
Arvind, volumes should confirm your action. In case the volumes don’t support, then usually there is scope for a contrarian view. I would suggest you look at this from this perspective.
sir,With all respect, you have yet not specified as to whether these scrips are in which phase?accumulation or distribution end? Nothingvsaid so far in your article regarding contrarian approach.Please highlight on this.Are you in favour of contrarion approach?In case If I donot want to be contrarian,when can I take position in such type of stocks?
Overall,I am very happy with your article.and helped me a lot to clarify my wrong concepts so far.I heartily thank you very much for that.
Arvind, I’ve clearly explained here that identifying accumulation and distribution is a bit tricky. Check this article – https://zerodha.com/varsity/chapter/dow-theory-part-1/, section 17.2.
Of course, contrarian approach is great, but for this, you need to have a great amount of conviction. You will develop this with experience.
sir,With all respect, you have yet not specified as to whether these scrips are in which phase?accumulation or distribution end? Nothingvsaid so far in your article regarding contrarian approach.Please highlight on this.Are you in favour of contrarion approach?In case If I donot want to be contrarian,when can I take position in such type of stocks?
Overall,I am very happy with your article.and helped me a lot to clarify my wrong concepts so far.I heartily thank you very much for that.
p.s.in case if I go as contrarion ,what factors apart from volumes,I should look in to for a justified selection of the stocks
Volumes matter, apart from that identifying accumulation and distribution trends matter, which like I explained can be developed over experience.
Karthik sir,I am waiting for your invaluable reply agaist my above post regarding confusion in deciding the faith of scrips waterbase,Fresh fruits n Aimco pastycides.Hope your write up helps in deciding this confusion
Thanks
Arvind
sir rsi is not same which i calculated in excel sheet of any company compare to your rsi.
Are you sure about the formula used?
Sir In kite could you add swing indicator which shows HH,LL,HL,LH. on charts.
Onkar, this indicator is currently not available with us. However, you can use Fractal chaos bands which calculates higher-highs and lower-lows
Ok sir, Thank you very much for your reply.
Good luck, Onkar.
If I have set the period for my chart as 1 minute then does the period in the studies like moving average mean 1 minute or would it be 1 day?
It would imply 1 minute.
Thanks for your response. On a 1 minute chart what are the ideal values for RSI and moving averages which I should use for intraday trading?
Ideally, in my opinion, you should not look at 1-minute charts because I think its noise heavy. But if you feel compelled to use, I’d suggest you look at the default values.
How to perform “Relative Strength Analysis” with some benchmark like nifty 50 on kite?
The relative strength of momentum? If yes, you can simply look at the indicators for this.
No, Relative strength analysis. Ratio of a stock 1 and benchmark (like nifty) [stock1/nifty] , and comparing it with the ratio of stock 2 and benchmark. [stock2/nifty] and Identifying the outperformance/underperformace with benchmark.
Hey Karthik ! Could you please take a look at this chart and tell me what all it checks ? (According to the checklist until now)
https://drive.google.com/open?id=1Oe9xlW1uP5LE_WDwnbvgzmeDnvavusCn
I’d be hesitant to trade this stock with so many gaps and circuits. Technical Analysis is of very little help here 🙂
What if the RSI moves in the range of 20 and 80 ? lets say 55 ? What does it indicate ?
Hey Karthik ! Is RSI of any use if it is between 20 and 80 ? What does this range tell ?
Not really, its most useful outside that range. Between 20-80 is just waiting time 🙂
Mr Karthik R
I very much like your postings
let you be the torch bearer to may people like us
Dr.R.Ponraj (M.Tech. NIT surathkal, Ph.D. IIT Madras)
Coimbatore 13.10.18
Sir, its an honor to hear such kind words from well-read man such as yourself. Thank you!
Can you please help in ” How to check the values of the indicators placed on a chart at a particular pointer” in Kite
???
You can always look at the cross air for data point.
Dear Karthik Sir,
If a dumb newbie has started understanding all the TA contents nicely then how much time and money will it take to make 2k frequently usually on daily basis??
Thank you.
This is one of the toughest questions to answer, Gaurav. Highly dependent on your capital and strategy.
Still Sir from your experience can you say??
I once read somewhere that it takes 20K hours of rigorous learning and trading to reach some sort of consistency in trading.
I’m a beginner and trade only in cash market still not started with f&o and I trade only nifty 50 selected stocks and some next 50 and midcap stocks I basically prefer swing trades and rsi I buy when rsi enters 30levels and even if it falls then also I buy and keep on averaging and I hold the positions for multiple days and when I enter into profit zones I book my profits this strategy has given me some good profits and has a good accuracy upto 80% wat do u say about this strategy is it good to average a lossing trade as in some TV channels they say don’t average Ur losing trades waiting for Ur precious opinion on this.
The problem with averaging on a losing stock is that you are buying more of a losing stock. So your net exposure increases and if the stock continues to fall, you will end up losing a lot more money.
I’m not a big fan of RSI, but then if its working for you then you should continue to use it 🙂
Thanks.Which are the TA check list you follow to execute a trade.
I have explained this towards the end of the module. Check this – https://zerodha.com/varsity/chapter/dow-theory-part-2/
I have my own stock screen in Google sheets, I wish to add RSI also in a colum. Do you have a code for Google sheets which pull out RSI values of a script. Thanks in advance.
You can probably check here – https://support.google.com/docs/answer/3093281?hl=en , Nove.
Hi,
Can you tell me what is the difference between RSI and stochastic? Which one is better applicable for swing trading?
Have explained the difference in the chapter. I’d suggest RSI. Stochastic does not work well for swing positions.
Can you suggest best trading software in the market which auto signals buy/sell intraday/Swing/Positional and user friendly.
The best according to me is Kite. If you know to programme, you can always check out – https://kite.trade/ and create your own logic for positions.
Sir, to practice scalping on an intraday basis which indicators/combination of indicators are best to use? I am using 15 minutes and 5 minutes candles. Please provide some insight. I am entirely new to this but scalping on intraday is most interesting for me. I know scalping needs quick action that i can take care, planning to write code for executing the order.
Padma, if you are keen on scalping, then I’d suggest you look at order flow data along with price volume breakouts. However, since you are new and you are interested in this, I’d suggest you start with 1-2 trade setups for the day using 10/15 mins candle. Once you get used to this, maybe you can think of scalping.
Good luck!
Thank you Karthik, i heard of price volume break outs but never heard a term order flow data . Please elaborate. Also pls share any reference material that can be of help for the best indicator selection for scalping on indian share market. Yes i also planned to try daily 1 to 2 indicators or combinations of indicators in my program..thank you…
Order flow data is nothing but the way the people buy and sell, which reflects in the market depth (top 5 bids and asks). The higher the flow, the higher the liquidity of the stock, hence easier it to buy and sell larger quantities. I’m saying larger quantities because scalpers transact large quantities for a relatively smaller movement in the stock.
When should RSI and MACD used,
Range bound or trending?
Well, these indicators help you figure if the stock/index is range bound or trending.
Friends, I am planning to buy a course on RSI from a renowned RSI practitioner. Its price is $4500 ( roughly 315000+). I am looking for partners to buy the course so that cost can be shared. If interested do text me on 9892233731… sandip
Sandip, apologies for the unsolicited advice. But seriously, why do you want to blow up Rs.315,000 on a course about RSI? There is plenty of free knowledge available on the internet, and I can assure you that what’s available for free is more than sufficient.
Hope you take a well-informed decision. Good luck.
Sir how to analyse market from bigger time frame to lower time frame for primary trend in intraday …and sir do it really workout….sir suggest with small example ….
Satish, I’d suggest you look at the EOD charts to get a larger perspective and maybe load 15 mins intraday data to get a shorter term (secondary) perspective. How this works really depends on the way you the system. If you scalp, then the probability of success is lower, if you increase the time frame, you do get a better perspective. So eventually it all boils down your risk and reward temperament.
Hi karthik,
Which is the nearest substitute for DEMARKER INDICATOR. As I didn’t find this indicator in kite & trading view.
I need to do some research on this, Mehul. But I do remember someone mentioning that ADX, +DM, -DM are the closest approximation. You may want to double check that.
Hi,
Now that kite zerodha offers trading view charts for analysis, is it possible for us to add custom indicators?
If I login to trading view directly I can see many custom indicators created by others under the public library which can be used.
But if access trading view charts from kite login, I can’t find any custom indicators. can we overcome this? or allow the user to create a custom indicator, please?
Regards,
Sri
We don’t have this yet, let me check this with the team.
Hi,
How will you combine S&R and RSI calculations? For example, if a stock is going upward for a considerable amount of time, meaning RSI would be above 70 at least. And bullish candlesticks are in majority, so it is advisable to go long then? Then how would you consider Resistance here? Because the stock would not have seen any sudden decline in a very long time period? Hope I have put the concepts in a correct manner here. I am new to the trading concepts so 🙂
Dhaval, if a stock is trending up or down, then you will have to consider a trendline.
hi karthik,
it is a very good resource from zerodha to get started with trading for begginers
i have below queries
1. i would like to trade using Bullish engulfing pattern, as per my understanding necessary conditions to be satisfied for it to be profitalbe would be
2 red candlesticks before formation of the blue candle with large body which can engulf the previous red candle.,and RSI should be <30 and volume should be greater than 10 day average volume ,
is there anything that i need to check before trading other than these conditions?
please let me know so that i can learn.
As long as the candle on P2 engulfs the candle on P1, the pattern can be considered as bullish engulfing. The RSI criterion is not really required.
Hello Sir,
What happens if stock continuously gaining or losing in 14 consecutive days. Average of loss or gain will became zero.
How to calculate RSI in this scenario.
Hmm, the technique to calculate RSI remains the same. It’s just that the results will display extreme values.
Sir,
If I calculate 2 period RSI.If there continuously gain or loss two consecutive days .RSI should be 100 or 0 only right as per formula.
But in real scenario this not same
Eg Take SBI from 13.01.2020-16.01.2020 stock if falling for continuously falling for 4 day.
RSI should be zero on third day as per formula .All charts showing RSI around 17 in Zerodha charts as well as in other charts too.
Here how RSI is calculated
RSI measures the momentum, the rate of change matters here and not just the change (i.e. up day/dawn day).
I want to mark the opening range of 15 min chart, the high and low. I could not find any indicator to do so. please guide. Second is that thereafter I want to change my candles to 5 min chart with the high and low mark of first 15 min candle to continue. Please do help.
Ah, I’m not sure how this can be done.
What should be our interpretation when the RSI is between 30 to 70. And what should be a trader ready for ? Long or short or just watch ?
It does not imply anything meaningful. RSI is useful only at the extreme ends.
How can I download pdf file of the notes?
You have the option to download the PDF at the end of the module page.
Hi Kartik,
I would like to see a chart wherein I can see the RSI of Stock vs Nifty or Stock Vs Stock. Please advise how can I check that on zerodha kite. Also how can I see a chart of Nifty 50 as the options I can see is only Niftybees and niftyees.
Thanks
Supriya
You can set up a multi-chart view, please do refer to the last chapter of this module.
sir, in some of the charts RSI is range of 30 but the super trend is showing buy .. then how to read the situation.. kindly explain
Hmm, never a good idea to follow two different indicators at the same time. This may lead to conflicting opinions. Please stick to 1 system and follow that.
Hi Kartik,
Great Content, thank you for sharing your knowledge with us.
In a market which has shot up heavily or beaten down heavily in few sessions (these covid days), would these indicators work ? mving average for 20, 30 days will be skewed ? or should we change days accordingly ?
I’m of the opinion that when the markets move for fundamental reasons, TA does not hold up.
Hi Karthik,
Could you please add a chapter about price action based analysis.
The entire module is about that if you realise 🙂
Hello Karthik,
Had gone through other stuff but the way you put this ahead was very easy to understand, Kudos!!
However, need your help in understanding the time frame that we need to choose on the chart for 9 day EMA with 21 day EMA or 25 day EMA with 50 day EMA for swing trading to get the desired results.
Thanks in advance!!
Regards,
Suresh.
Suresh, swing trade implies you intend to hold the position for a few trading sessions. Which means you need to based your decision on an EOD data. The general rule of thumb is higher the data frequency, better the quality of the signal. However, you need to strike a balance…from my experience, a 21 x 50 probably helps.
Thanks for the info Karthik.
However, im confused on what time frame that I need to look at this on the chart, Is it gonna be 1 day or 1 hour chart?
Look for day chart, Suresh.
Sir, This question is because I am just beginner on Zerodha Kite. When I am choosing 1 day period on BOTTOM, RSI is different for today’s date than on selecting 5 days; Similarly, It changes when I select different time period at the BOTTOM. Which RSI value is correct to decide to buy the stock.
When you select different timelines, you get different RSI values Mahinder. So you need to ensure you work with a timeline you are comfortable with.
how to draw average volume line on volume chart?
Select the field as prices from the MA settings.
what if the rsi is neither moving above the range nor moving below the range. it is in center of your range
Then there is no trade 🙂
Hi Karthik,
Firstly I would like to thank you for building such amazing content for the newbies. I did studied your Fundamental Analysis & now also about to complete Technical Analysis & I’m really enjoying it. The content is quite impressive, simple & logical to understand.
Can you help me with the middle range i.e. what if the RSI range between 30-70? What does it depict?
I’m glad to note that, Kapindar. The middle range for RSI means a lack of trend/momentum in the stock/index.
Hi Karthik,
Thank you for the wonderful content on Zerodha Varsity. As a novice investor, I found it extremely useful and interesting. I have three questions:
1. Is it possible to calculate the percentage of time a stock is in Oversold, Overbought and in between the two zones? I guess this could be done by calculating the area under the curve in the RSI indicator in the respective regions. Is this feature available in KITE? I think this will be useful in judging the relative strengths of various stocks.
2. Is it possible to plot multiple indicators in the same window? For example, I would like to track both RSI and MFI using the same y-axis. At present KITE gives me another sub-plot which is not efficient since both indicators have the same y-axis range.
3. Is it possible to export data and run some custom scripting operations? I ask because the feature I asked in 1st question is pretty simple if I have access to RSI series data.
Thanks once again!
1) No, this feature is not available in Kite, not sure about other platforms either. I’m not sure about the use as well 🙂
2) Ues, you can. However, these will show up on different panes. In my opinion, tracking multiple indicators may very useful
3) Yup, you can use Kite connect APIs for this – https://kite.trade/docs/connect/v3/