Been using RSI and stochastic indicators but they keep giving mixed signals.
Price keeps pushing higher even when RSI shows overbought conditions. Same thing happens on the downside with oversold readings.
How do you handle these conflicting momentum signals?
Focus on using RSI and stochastic as confirmation tools instead of standalone signals.
I wait for real price weakness, like breaking support or failing to make new highs, before acting on overbought conditions.
Combining RSI with simple moving averages helps clarify things. If the price is above the 50 MA and RSI is oversold, it often suggests a good buying opportunity in an uptrend.
I got burned by this constantly when I started. Kept thinking overbought RSI meant the price would flip immediately.
Game changer was zooming out. Your RSI might scream overbought on the 1H but still have tons of room on the 4H chart.
Try tweaking the periods too. Everyone uses 14 but I switched to 21 for swing trades - cuts through way more noise.
Momentum stays extreme longer than you’d ever expect. Now I wait for actual price structure breaks before trusting oscillator signals. Stopped me from fighting trends that just keep climbing.
Multiple timeframes help, but I always check trend strength first. I’ve learned not to short overbought markets when the uptrend’s still strong.
Most traders get overbought/oversold signals completely wrong - they’re not buy/sell signals, they’re warning flags. Context matters way more than the actual reading. When markets are trending hard, these indicators just show the momentum’s getting stronger, not weaker. EUR/USD hits RSI 80 in a strong uptrend? That’s usually when it really takes off. Don’t flip your direction based on these readings - adjust your position size instead. Take some profits when things get extreme, but don’t reverse until the actual price structure breaks.
Overbought doesn’t mean sell, oversold doesn’t mean buy. That’s the biggest mistake people make with these indicators. They show momentum extremes, not reversal signals. Strong trends can stay overbought for weeks. Don’t use these as entry signals. Use them for context. Watch for divergence - price hits new highs but RSI doesn’t follow. That’s your reversal warning. Trade with extreme momentum, not against it.
Don’t rely on signals - just follow price action.