Trading Strategies Guide

RSI (Relative Strength Index)

RSI is a momentum oscillator that measures the speed and magnitude of recent price changes to evaluate overbought or oversold conditions.

Key Points:

  • Range: 0 to 100
  • Overbought: Above 70
  • Oversold: Below 30
  • Default Period: 14 days

Trading Strategy:

  1. Buy when RSI drops below 30 and starts rising
  2. Sell when RSI rises above 70 and starts falling
  3. Look for divergences between price and RSI for stronger signals

VWAP (Volume Weighted Average Price)

VWAP combines price and volume data to show the average price at which a stock has traded throughout the day.

Applications:

  • Institutional trading benchmark
  • Support/resistance level
  • Trend confirmation
  • Entry/exit points

Trading Strategy:

  1. Buy when price is below VWAP and showing upward momentum
  2. Sell when price is above VWAP and showing downward momentum
  3. Use VWAP as a dynamic support/resistance level

Moving Averages

Moving averages smooth out price data to create a single flowing line, making it easier to identify trends.

Common Types:

  • Simple Moving Average (SMA)
  • Exponential Moving Average (EMA)
  • Popular Periods: 20, 50, 100, 200 days

Trading Strategies:

  1. Golden Cross: When shorter-term MA crosses above longer-term MA (bullish)
  2. Death Cross: When shorter-term MA crosses below longer-term MA (bearish)
  3. Multiple MA Strategy: Use different periods (20, 50, 200) to confirm trends
  4. Support/Resistance: MAs often act as dynamic support/resistance levels