 folks in this video we're going to be talking about the relative strength index also known as the relative strength indicator but i'm probably going to refer to it for the most part as rsi by far the rsi is at the top of the list in terms of utilization by most traders who perform technical analysis on whatever they may be trading the problem is is that when i read these books and many of them are old now when i read these books the way it was offered that you should use technical analysis back then when the books were written is outdated and i see many videos on youtube and many of which have over 300 000 views and they're still citing the way to use the rsi is the same today as it was when the books were written back in the 1970s 1980s and nothing could be further from the truth so in this video what we're going to cover is what is the rsi then we're going to do some rsi myth busting now before we go into what is the relative strength indicator or the rsi i'd like to share with you a quick story about me i've been trading stocks options and commodities for over 25 years now and after the dot com bust in march of 2000 i was looking for a new strategy to help me outperform the market but in a way that would reduce my risk and provide me a lot of upside potential and that is when i fell in love with the rsi i use it every single day and on every single chart whether it be daily charts weekly charts monthly charts intraday charts it doesn't matter and what i was able to do was to modify the rsi and i'm going to show you that later on in this video and the modification allowed me to be far more disciplined in my approach to accumulating a stock that met certain criteria but the first and primary criteria was that rsi had to be at a certain level and i'll go into this in greater detail later on in the video because it's my fifth and final strategy called the contrarian trading strategy so please stick around and we'll go over some charts now before we move on i would ask you please leave me a comment are you using rsi and if so how are you doing with it and if you'd like me to do more videos if you get value out of this one what would you like me to do a video on so let's move forward let's get to what is the relative strength indicator now many of you have probably seen this calculation your eyes glazed over and i don't blame you i'll be honest with you in the 25 years that i've been using the relative strength indicator i've never once worried about the formula behind it so let's get rid of that and let's focus on actionable information that could help guide you and i think it's important that we pay credit to j wells wilder jr who was a mathematician and he's the one that developed the relative strength index and that was back in 1978 when it was published in new concepts in technical trading systems and in commodities magazine now 1978 is not all that long ago for many of us i was a child but many of you may not have even been born back then and what j wells wilder was able to do was he was able to measure or provide the secret sauce of how to measure when a stock is moving up the average gain should be larger than the average loss when the stock is going down the average gain is smaller than the average loss it's pretty simple but he was able to develop the rsi and allow us to visualize generally speaking the rate of change of a securities price now the rsi is a leading momentum indicator now there are other leading momentum indicators such as the stochastics but many of you are probably familiar with lagging indicators such as the moving averages or the mac d as well as the adx indicator the value that i get out of the rsi is that there's a saying that i always like to use to members and to viewers is that the market sends you signals and this is what i'm going to show you in this commentary and many times the signal that is provided to us by the markets is illustrated by the relative strength indicator which again is a forward-looking momentum indicator now one of the common questions that i'm asked with regards to the rsi is what can rsi track the momentum of folks it's if you could chart it you can use rsi whether it be stocks or commodities forex or cryptocurrencies i don't care if it's cupcakes if you could get it on the chart you're able to use rsi so it really is a must have in your toolbox or an arrow in your quiver when you're doing technical analysis now what i want to do folks i want to segue over into myth busting and there are three key myths that i want to dismiss to help you become a more powerful trader by being better advised on how to use the rsi in the 21st century the first myth up is 70 equals overbought 30 equals oversold folks this is very outdated information that i've seen written in technical analysis for dummies getting started in technical analysis by jack schwagger which is a very good book but unfortunately it's a little bit out of date now i'll take this blurb out of getting started in stock analysis by michael c tom set and for the most part this is what all of these books define as being overbought and oversold and unfortunately it's being repeated to this day by many on youtube where many people get their information from but unfortunately this information is outdated and i'm going to show you in a moment on the charts what i mean and this passage is from getting started in technical analysis the rsi is a fairly straightforward oscillator and easy to track very true to this day it is based on an index value between zero and 100 which a normal mid-rate range would be above 30 and below 70 if the oscillator reaches or moves above 70 on the top side the stock is overbought if it reaches or moves below 30 the stock is oversold neither of these conditions should be expected to last for very long folks this is where we need to amend the rules on how to use rsi so that we're using rsi more effectively into the 21st century now the first straw we're going to use to illustrate why using 30 as oversold is dangers will be using the chart of best ink ticker symbol b est and you could see here that on september 14th of 2020 the rsi as noted in bloom went below the 30 mark and if you would have went into this trade expecting that the share price would have you may have lost quite a bit of money if you were stopped out why is that because while rsi went down below 30 here on september the 14th it truly didn't bottom out until september the 21st and if you would have bought at the lows on the 14th at $3.35 and sold at the highs when rsi ultimately bottomed out on the 21st you would have still had a net loss and those prices i just gave you our best case scenarios now don't get me wrong there was a point in time where 30 being oversold and 70 being over but were accurate when i first started using rsi that was the case however with the advent of computerized trading algorithms high frequency trading that is no longer the case and we need to modify our behavior in how we use the rsi another example this time we'll go to rsi overbought we'll bring up bmi which is badger meter this is a daily chart and you could see that back here on october the third rsi went above 70 that was right here however the share price would have kept going higher now what if you use the simple rule of thumb of overbought over 70 and you sold your position or you went short you would have lost out on a lot of upside potential because the ultimate high after hitting a high on the eighth which was a high of 69.99 was up here at 82 dollars and 90 cents you would have left a lot of money on the table or if you were short you would have been sitting with a very large loss now these are only two examples but i would strongly encourage you that moving forward that you look at the charts that you're looking to trade and see whether or not in the past on those charts whether or not the examples i've just shown you are more common and i guarantee if you remember what i'm showing you right now you're going to say wow i can't believe how outdated the oversold overbought rule of thumb that my grandfather taught me is out of date so the myth of 30 being oversold and a buy signal and 70 meaning a sell signal and overbought that myth is busted now you may be asking well bob how do you use the rsi in your trading well i'll show you now what i do is this length is periods whether it be days weeks months it's it's it's 14 periods consecutively now at current pretty much all charting softwares default to upper band 70 and lower band 30 which is how it was intended initially and that's fine but what i like to do and this is what gives me the edge is i take this number and i change it to 80 and i change the lower number to 20 these are your settings for the 21st century apply now take a look at this very same chart badger meter some simple bmi same chart as before take a look at this chart and you could see that if you're using my settings that it became overbought the day that it began to top out now this in and of itself does not mean that you're going to see the shares roll over it just implies that you should be watching it very close if you're long set a trailing stop loss order perhaps take some money off the table because this is unsustainable now don't get me wrong rsi i've seen go up to 95 and in rare cases even higher than that but it's at this point here where you need to be saying to yourself my upside is limited and my risk of losing money where to enter the trade has grown therefore i should avoid if you own a stock you should be looking to scale out so myth number one here i think that we've busted now moving on to myth number two and myth number two is changing the formula will give me an edge over other traders and this was brought to my attention by somebody that made a video on youtube and it has over 250 000 views and it's downright scary now what he did in the video was that he modified the length he kept upper at 70 and lower at 30 so we're back to the original settings the default settings but what he did was he modified the length to this i'm going to add another rsi indicator and we'll use this line in purple to illustrate what he did he changed the length to 250 he kept the upper at 70 lower at 30 apply now let's put this to practical use we're going to bring up a chart of am z n which i shorted just prior to the stock market crash during covid now back on february the 11th amazon.com hit an all-time high of 21 85 per share rsi continued to rise validating the price action now what i did back then is i took my crayon out and i watched for a lower high because we knew there was a shock coming to the supply chain and what i did was i used my 14 day rsi with upper 80 lower 20 and i was looking for a lower high on price and a lower high on the rsi and that lower high arrived here on february the 19th this is how i use rsi remember rsi is a momentum indicator and it was clearly showing on this chart that we were losing momentum we were putting in lower highs even though we had put in a new all-time high on february the 19th what did rsi do using my settings 14 day 80 20 it put in the lower high it failed to validate the market sent you a signal that amazon was losing momentum and then once it broke down below rsi 74 spot 51 you knew that you had your lower high and now a lower low but price didn't break down to a new lower low until several days later on february the 21st this is the value of using a 14 day length on your time frame now if you're using a time frame of again 250 periods in this case a daily chart so 250 days without of the box settings of upper band 70 is overbought lower band 30 let's take a look at how this would have helped you while this version of my rsi sent you a signal on the 19th of february that there was trouble with amazon the 250 period view didn't show that there was trouble with amazon until it began to decline a couple of days later on or about the 21st and it did so very calmly and did not give you a sense of urgency that there was something very very wrong with amazon unlike the 14 day time frame so i would strongly encourage you please use the 14 day time frame the value of the rsi is that technical analysts out there use this indicator and you're going to have traders of like mind using that time frame meaning on a 14 day or 14 week or 14 month basis nobody's using 250 periods not enough to make a difference anyway and we were able to short amazon in advance of the rapid sell-off that we saw in the subsequent months so changing the formula will give me an edge over other traders that myth is busted myth number three when rsi is moving lower i need to sell my stock or look to short the stock let's talk about that we're going to use badger meter again symbol bmi and let's take a look at what happened after september the 18th 2020 when it rallied rsi hit a new high but then all of a sudden on the 21st it pulled back so did rsi it then rallied put in a higher low and then broke down yet again to put in a new lower low the key is is that you need to keep in mind what the stock is doing on a longer term time frame weekly time frame it was in an uptrend and the trend remained healthy so you had the probabilities at your back that what we were doing on this pullback was that we were entering a consolidation range and that was evidence with this divergence on price versus rsi this is why you need to use price and rsi i want to talk about this more in a moment in conjunction with each other rsi should never be treated as a standalone reason to buy or sell a stock because take a look at what would have happened if you would have relied solely on rsi so we peeked out here lower high here then what we did is we broke down to a new lower low on the 28th wow if you were just looking at the rsi you're saying i need to short this stock or you need to get out but what was price telling you sometimes you get false negatives this is accurate the 18th through the 21st price pulled back rsi pulled back and then when you fast forward to the 23rd of september the rsi broke down to a new lower low certainly certainly i needed to short this stock certainly i needed to sell this stock but no why because price was not validating what rsi was telling you it did not put in a new lower low and in fact the next day it bounced off of support and rsi recovered to press on higher and then again right here on the 28th you saw rsi pull back but what did it do what did price do it went into a consolidation and then ultimately it broke out so just make sure that if you're going to sell or short a stock based upon lower highs and lower lows on the rsi that you're getting validation on price and i would only be opening up a short position there is a caveat to that and i'll go to it in the final trading strategy on this video so stick around but i would only open a short position when rsi is putting in lower highs lower lows and it's down below 50 why it's because when it's down below 50 rallies tend to fade meaning if you get a rally higher the day following when rsi closes down below 50 and is in decline that rally has a strong probability of fading more on that later now let's talk about spotting divergences using rsi now we've covered strategy number one which is overbought and oversold and in that we discussed the caution about reacting to a declining rsi because it may just be entering a consolidation phase but in this strategy strategy number two i want to talk about spotting divergences because all too often people approach rsi from the perspective of overbought oversold and nothing can be further from the truth now for this example i'm going to talk about xar the s and p500 aerospace and defense spider now you could see that the share price had bottomed out here on september the 24th 2020 and then rsi validated the breakout by moving up in conjunction with the price good stuff and as i pointed out earlier the share price went into a consolidation and you saw a pullback on rsi which is fine what you want to make sure that you're seeing are higher lows it's momentum indicator so the trend is still intact now using rsi to give you an edge over other traders by spotting divergences would have helped you out right here on october the first when the share price hit the upper band of resistance and it pulled back no breakout on price however rsi did break out this is an indicator leading price performance and then the following day you had a buy signal with this outside reversal bar or a bullish engulfing of the prior day's move it's on this breakout that you could have bought the shares and they would have continued higher so in this case here you saw a bullish divergence on the rsi okay so now let's talk about how we spot a bearish divergence using rsi again in conjunction with share price now i was a part of this trade where i had a book profits on the gdxj which is a gold mining etf symbol gdxj now the gdxj put in a high on rsi july the 22nd it consolidated sideways then the share price broke out and while rsi did move up higher it failed to confirm the higher high versus the 22nd now that's no reason to sell however it's reason to keep a close eye on whatever you're trading the share price then dropped back down into what appeared to be a consolidation range rsi confirmed where things get tricky is right here we're going to remove this line where we broke out on august the fourth continuation move higher to new multi-year highs on the gdxj the only problem is is that when you take a look at the rsi to give you a pulse check on how momentum is all you need to do is take a crayon out and do this it was failing to validate we were putting in lower highs despite the fact that price was moving out to new higher highs and not only that what was worse was that we broke down to a new lower low here on the 29th that was over a week before ultimately the price of the gdxj broke down below support levels and went into a brief shallow correction so this is an example of a bearish divergence on the gdxj would i have gone short based upon this probably not however i would have avoided opening up a new position or adding to my existing position and what i did do on this observation was that we began booking some profits this is how you leverage identifying rsi to spot bullish and bearish divergences now strategy number three is the candlestick strategy meaning we're using rsi in conjunction with the candlesticks and if you'd like to see me do more videos on candlestick charting or rsi the stochastics or any other indicator or topic that you might enjoy please leave a comment below and i'll definitely get back to you especially if you have a question with regard to what i'm talking about right now now the candlestick strategy we're going to use the dba is a very powerful way to identify when a stock that has especially been in a long term bull or bear market is tired and a reversal and a change in trend is eminent so let's talk about how we do this now in this analysis we're going to use a little bit of what i already taught you as well we're going to incorporate spotting divergences into candlestick charting it all ties together and this is this is at the root of how i trade now the dba you can go back on youtube i've been talking about the dba for months now and it's been in the long term bear market this is a monthly chart so a lot of data here it's been in the multi-year bear market and we put in an ultimate low on the dba here the month of june of 2020 but the candlesticks we're telling you for the past prior months going back to march april may that you were seeing bottoming action these wicks shadows bottoming tails column cupcakes i don't care what you call them cupcakes again i know it's a thing i have so we saw bottoming action at the 18 dollar and 17 cent mark well that's interesting that's interesting to me you know what that tells me to do are we seeing anything interesting on our indicators because the stock had stopped going down now while we hadn't broken out yet you had begun to see rsi begin to drift up and what we're looking for here because i'm still watching it to buy what we're looking for here is an ultimate breakout so these candlesticks here mark indecision in the dba and when you see indecision as noted by this doji star formation or as i mentioned earlier these bottoming tails that's an indicator that the trend might reverse and after observing the price action on the candlesticks we wanted to take note of what is rsi doing and rsi was drifting up despite the fact that we hadn't yet broken out above resistance see how rsi drifted up here and then ultimately we broke out in august confirmed by rsi and while we're still seeing reluctance on the part of the dba to break out to new higher highs rsi is breaking out this is an indicator leading price performance now there are no guarantees me personally i would wait for the breakout on price but this is a very bullish indicator and this should be on your watch list is one to watch for that breakout and what i like to do this is trend spider i like to set alerts on trend spider this is my primary software for technical analysis in fact there's a 35 discount code below if you watch us on youtube the video description area 35 off or if you watch us on the website it's within the blog post immediately below and it's also included with our silver and gold level memberships but you must use the link below and the discount code c o n 35 to get that discount now using trend spider to set up our alert i want to know when the dba breaks out again above this resistance level a note to myself rsi bullish divergence long entry point and we're going to keep this active for a couple of weeks and all i care about is when we break through and close above monthly resistance and my alert is set and at the contrarian trader we take a rules based approach meaning i don't care what the price of dba does between now and breakout point unless of course it reaches and pulls back through the lower band of support so what i'll do here is set up another alert at the lower band of support we'll keep a little bit of sensitivity on now here's our alert i want to know when the dba touches or bounces off of the support level at $13 97 cents give or take a dime the key is though as noted by my note to self is that rsi must confirm and hold the breakout point right here in white it's okay to pull back test and hold on a pull back to support but ideally we do not break down below this support level if it does i would avoid the trade create alert so again this is our rules based approach using automated technical analysis as provided by trend spider and until one of these alerts are fired off we set it and forget it that's how you take the impulse buying or selling out of your trading and you become a very very powerful trader now the fourth strategy i want to go over is the bolinger band strategy this is a more advanced strategy and i wouldn't suggest it for those who are beginners i would strongly encourage you if you're a beginner rewatch strategy number one which is the overbought oversold module strategy number two which is the spotting divergences module and strategy number three which is the candlestick module now if you're an experienced trader and you're looking to develop new strategies for trading using both the rsi and the bolinger bands well this is for you now this is ideally suited for short-term swing trades or day trading and what you're doing with this strategy is that you're combining the power of the bolinger bands with the rsi now keep in mind that you're out of the box bolinger bands are two standard deviations do not use the two standard deviation what i use are the three standard deviation up and three standard deviation down and when you combine a stock that is trading above its three standard deviation bolinger band along with the stock that is trading above on rsi above my settings of not 70 upper but 80 upper you're dealing with a stock that is at unsustainable price points and that a pullback is eminent does that mean the stock can't go higher of course not yes it can go high it's a very powerful stock but you want to also incorporate in this your candlestick charts to identify topping action we're not there yet we're close and the symbol that we're going to use is cbio catalyst bio and you can see here that we have rsi greater than 80 it can go higher that however here is that we are trading and closed significantly above the third standard deviation bolinger band folks that are watching us in the future i can predict to you that this is not going to end well go back fact check me to make sure i'm right i have no idea i'll scroll this over there's no data looking forward that's how confident i am that while yes we may move a bit higher here that ultimately we are going to correct is it going to crash no it's not going to crash but you are going to get an opportunity to scalp a swing trade to the short side this is why i say that this is a more advanced strategy for those very experienced with trading and if you'd like me to do videos on the bolinger bands or on the bolinger band strategy please leave a comment below let me know what you'd like feedback on and i'll be more than happy to provide it i work for you you guide me and believe me i enjoy the heck out of it so thank you in advance now to give you an example of what i mean by this is not going to end well look at the last time that cbio had been at nosebleed levels as it is right now back in december of 2019 it pierced and closed above its third standard deviation bolinger band hitting a high of seven dollars and ninety five cents rsi on that date hit a high of roughly 80 not quite as overbought as we are at the time of this recording however it's it's it's good enough to illustrate what happens and you could see that after hitting a high on the 18th of december at seven dollars and ninety five cents it finally bottomed out here on january the eighth with a low of six dollars and thirty eight cents now think about if you were looking to buy the stock here and you're very bullish on the shares think about the power that you have at your disposal of being able to identify an extreme overbought level on bolinger bands and an rsi if you had that at your disposal you would have known listen this is not going to end well while i may not want to short the stock i'm good definitely going to hold off until the froth comes off and i'll buy it at a better risk reward entry point and when it hit a low what was rsi doing it was bottoming out and then validated the breakout higher that's the bolinger band strategy the fifth and final strategy i mentioned earlier and it's really what inspired me to create the contrarian trader back in 2005 and we have trained thousands of members on how to learn how to use technical analysis learn how to use discipline to identify opportunities in the marketplace with reduced risk and maximized reward and the strategy i put together was the contrarian trading style and what that combined was primarily the rsi at times the bolinger bands but in all cases candlesticks and volume and the mac d now the mac d is a lagging indicator however it validates what i'm seeing on the leading indicator being the bolinger band and primarily the rsi and as a final bonus i'm going to leave you off with a very popular stock and it's a stock that anyone over the age of 10 has definitely heard of but it is in an rsi bubble and i'm going to leave you off with that so stick around to the end now the first example of an extreme overbought stock which is what the contrarian trading style is all about finding extreme overbought and extreme oversold stocks to trade because the probability of once you have rsi greater than 90 the probability of it being sustainable for the longer term is unlikely you're going to get a reaction to the downside at some point in time i can do far more in-depth detail about this trading style if you're interested please leave a comment below but i don't want to get too in-depth with it right here right now because this is a video regarding the rsi primarily but this is an advanced strategy i would strongly encourage you to not trade this style until you've watched future tutorials from me because there are a lot of nuances on how to trade extreme overbought extreme oversold stocks using the contrarian trading strategy now example number one 10x genomics now oddly enough i was long of this stock not too long ago and i booked profits on or about here where we pierced the third standard deviation bologna ban so we left some money on the table as the shares continued higher but the market became shaky and when i see a stock begin to show me a profit and the market is a bit shaky i invoke my old traders adage first out best out and that's what we did here but in this case we left a little bit of money on the table but we are looking to short 10x genomics based upon rsi candlesticks and let's bring up the mac d and volume now my settings here on rsi to revisit are at 14 day rolling period upper band 80 lower band 20 not the upper band 70 not the lower band 30 as suggested to be used by the books written many many years ago remember we're dealing with rsi now 21st century we need to up our game that's why we're using these new upper bands and i hope that in in updated volumes of getting started in technical analysis which is a very very good book overall i use it to this day i hope that they update in the next volume overbought 280 and oversold 220 now here with rsi you still have rsi validating with a move higher that the shares are very strong the problem is is that what we did on the last trading day which was a friday is that we did break out but we faded along with the rest of the market and while this is becoming an interesting short we're not there quite yet but we're very close now to really drive home how out of date the 70 30 rule is for overbought oversold i'm going to adjust this i'm going to change 80 because i'm open mind to the fact that you know what 80 may be getting a little bit older now and we need to revisit it what about if we change this up to 90 take a look at where rsi is right now we are at 89 spot 89 on the last close and not only that we broke out the last trading day above resistance with rsi well above 70 well above 80 close to 90 this is why again i hate to keep pounding this home but the old way 70 30 rule out the window that myth is now busted i don't want to see anyone lose money now with the catarian trading style what we look for here is not only our primary primary indicator trading above the 80 mark what we're looking for are signs by the market that we're beginning to see price action weakened as you saw this past trading day we had broken out on that day but faded to close well off the highs of the day but that in and of itself is not a short signal we are close we're also looking at volume volume was very light on this particular trading day it was an institutional distribution that may resume the next trading day and we may see higher volume in a break of the support level that would have me much closer to shorting the stock if that were to happen and one of the one of the other indicators which is the lagging indicator which is the mac d what you're seeing here are i don't use the lines i use the histogram the mac d histogram what you're seeing here is momentum which is lagging waning it's declining these are the indicators that we must see declining up volume rsi well over 80 and price action beginning to fade and ideally on an entry day basis we'll use a 30 minute chart on an entry day basis to identify whether or not we're beginning to see signals by the market that we're beginning to put in lower highs and you can see here that we clearly are lower high and what's rsi doing breaking down to lower highs you can see how we close down below it and now we have lower lows so the intraday or the internals of 10x genomics indicate that if you are long you should be booking profits because the rsi on a daily time frame on an intraday time frame is sending you a signal to get out because you're probably going to see shorts lean into the shares and you're going to see some institutional profit selling in the very near term now i promised you that i would leave you off with an extreme over bought stock that everyone knows and it is a bubble and that stock is drum roll please microsoft that's right microsoft is in a bubble this is a daily chart and i need to use stock charts dot com which is a very good software as well but it's falling behind trend spider which again 35 discount code below because trend spider has so many more features now than stock charts dot com anyway i can get time frames on stock charts dot com that is soon coming to trend spider which i'm going to go through in a moment so you may be saying i don't see a bubble here bob what are you talking about the chart looks pretty good yeah it's it's it pulled back a little bit this past trading day on a friday but otherwise we're close to a breakout on microsoft and i won't argue with you however what we do here at the contrarian trader is we use multi time frame analysis meaning if i'm going to buy a stock like microsoft as a potential breakout trade i don't care about the daily chart than many do i care about the higher level charts meaning the daily chart is a view of the battlefield from a 5000 foot view whereas a weekly chart this is your view from a 10 000 foot view of the battlefield and you could see strong uptrend but it's this chart that begins to tell us a story not the daily chart keep an eye on the rsi rsi peaked out on microsoft the week of february the 10th it sold off due to covid rallied back and ultimately broke out to new all time highs there's a problem though as you fast forward to present day and you look back ever since february rsi has been putting in lower highs and now lower lows despite the fact we've been putting in all-time highs that is a bearish divergence we went over bearish divergences earlier but this is not why we have a bubble i'm not done yet we have more let's move back a bit let's go all the way to a quarterly chart now we're talking about the 50 000 foot view of the battlefield and this is where we enter bubble territory rsi and microsoft on a quarterly basis is at 92 spot 86 think about it microsoft a company worth over one trillion dollars has an rsi of 92.86 does this mean i'm going to short microsoft on the next trading day not yet i'm going to wait for the break the charts the price action rsi stochastic they'll tell me when it's time but what i'm doing is i'm using the quarterly chart and rsi as a qualifier it gets better let's further validate using what i taught you earlier the bolinger band strategy on a yearly time frame now we're talking about 100 000 foot view of the battlefield on a yearly time frame we have rsi at 93 spot 76 all-time highs and probably one of the most overbought stocks on the universe and when you take a look at the bolinger bands the bolinger bands i mentioned earlier that out of the box you have a two standard deviation bolinger band that's in green i use a three standard deviation bolinger band that's in red we have traded for the past four years above the third standard deviation bolinger band folks we're not supposed to be here microsoft is a bubble so that i hope that if somebody's watching this a year two years from now you're looking back saying my god the guy was right if you're if you're watching this two years from now this is october of 2020 please leave a comment saying whether or not i was right so to summarize we've covered what the relative strength index or indicator is we've dispelled some myths those myths are 70 is overbought and 30 is oversold we've also dispelled that changing the length of time from 14 to a different time frame does not give you an edge over other traders if you shorten it it becomes too noisy if you draw it out too long as i displayed in a 250 bar time frame it's way too slow for you to react so it does not give you an edge over other traders stick with the 14-day time frame we've also dispelled that when you see the rsi begin to decline that it's a cell signal that's not accurate it could be entering a consolidation range and that you should watch the candlesticks to see whether or not the shares are bottoming out and poise for a new breakout hire because the rsi is in fact a forward looking momentum indicator it generally trades along with the price and with any oscillator as price pulls back so should the oscillator as price breaks out so should the oscillator strategies that we've discussed overbought and oversold i've shown you how to use 80 is overbought you'll need to manually change your settings to 80 and change the lower band to 20 on your charting software if you're using trend spider it's very simple simply click on properties and you can change the settings in here again 35 discount code below in the video description area or on the blog page use that link and the discount code spotting divergences is a very powerful way of identifying whether or not a stock which has been in a long-term downtrend or in a long-term uptrend may in fact begin to see signs as noted by the rsi of beginning to break down or break out prior to being reflected on the share price strategy number three is the candlestick strategy and that's where we combine the power of candlestick charting along with the rsi and you should use that on every single trade that you make without exception the fourth and more advanced strategy that's the bolinger band strategy that's for more short-term swing trades and as i mentioned earlier if you want me to do more videos on indicators trading please leave a comment below let me know what you'd like for me to do and the fifth and final the contrarian trading strategy is the one that i developed going on 15 years now and it's one where we take advantage of short-term extreme overbought and or oversold levels and in the case of microsoft it's not even a short-term overbought condition it's more of a longer-term bubble where i think there's a lot more probable downside than there is upside on microsoft going out a few months and in closing folks i really appreciate you watching all the way through this video i know it's been long but i hope you got value out of it and if you did if you could help support the channel if i could ask you to smash that like button share it with a friend leave a comment below i'll definitely get back to you and please join us every sunday and thursday night as we go live six p.m eastern standard time generally i'll take chart requests from the audience after i go through the requests that have been submitted by members if you're a member of the contrarian trader normally we only go in about an hour but if you're a member i'll stay on until 10 o'clock at night to go through your symbols so we'd love for you to become a member by joining our 14-day free trial offer where you get transpired for free and until the next video everybody have a profitable trading day and week be well