Knowing the limitations of TA indicator are important
It is also recommended to use more than one indicators to verify if the price reversal signal is not false alarm and justify with market reality.
Limitations of the RSI
1. The RSI compares bullish and bearish price momentum and displays the results in an oscillator placed beneath a price chart. Like most technical indicators, its signals are most reliable when they conform to the long-term trend.
2. True reversal signals are rare and can be difficult to separate from false alarms.
3. Since the indicator displays momentum, it can stay overbought or oversold for a long time when an asset has significant momentum in either direction. Therefore, the RSI is most useful in an oscillating market. RSI is not suitable in a trending market.
1. The RSI compares bullish and bearish price momentum and displays the results in an oscillator placed beneath a price chart. Like most technical indicators, its signals are most reliable when they conform to the long-term trend.
2. True reversal signals are rare and can be difficult to separate from false alarms.
3. Since the indicator displays momentum, it can stay overbought or oversold for a long time when an asset has significant momentum in either direction. Therefore, the RSI is most useful in an oscillating market. RSI is not suitable in a trending market.
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I reflected trading experiences by writing journals. My comments are for educational purposes not financial advice.
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