Practical application: how and when to use it? - Buy or Sell Estimation
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Last updated
Below are the steps and considerations for its practical application:
Before diving into live trading, take some time to familiarize yourself with the indicator's parameters. These include the RSI length, QQE factor, and values related to Bollinger Bands. Each parameter can be adjusted to suit different trading styles and assets.
RSI Length: This value determines the number of periods used to calculate the RSI. A lower value will make it more sensitive to price changes, while a higher value will make it less sensitive.
QQE Factor: This factor adjusts the sensitivity of the indicator. Changing this value can make the indicator more reactive or more stable, depending on what you want to achieve.
Let's analyze the modifiable settings in the TradingView platform and their explanations so you can understand how they work:
RSI_Period: This parameter determines the length of the RSI (Relative Strength Index). It is a momentum indicator that measures the speed and change of price movements. The default value is 6.
SF: It is the smoothing factor for RSI. It helps smooth out RSI fluctuations and provides a smoother line. The default value is 5.
QQE: This parameter represents the fast factor of QQE (Quantitative Qualitative Estimation). It is an indicator that combines RSI and moving average to identify trends and direction changes. The default value is 3.
Threshold: This is the threshold used to determine whether a histogram bar is considered positive or negative. If the RSI value minus 50 is greater than the threshold, the bar is considered positive; if it's less than the negative, it's considered negative. The default value is 3.
Src: This parameter defines the data source for RSI calculation. The default value is the closing price.
Wilders_Period: This is the period used in Wilder's Smoothing calculation. It is used to smooth out RSI values. The default value is calculated as RSI_Period * 2 - 1.
Length: This parameter determines the length of the Bollinger Band. The Bollinger Band is an indicator that shows a price range around a moving average and is used to identify overbought or oversold conditions. The default value is 50.
Mult: It is the multiplier used to calculate the standard deviation in the Bollinger Band. The higher the value, the wider the bands. The default value is 0.35.
RSI_Period2: It is similar to the previous RSI_Period parameter but is used for the second RSI in the indicator.
SF2: It is similar to the previous SF parameter but is used for the second RSI in the indicator.
QQE2: It is similar to the previous QQE parameter but is used for the second RSI in the indicator.
Threshold2: It is similar to the previous Threshold parameter but is used for the second RSI in the indicator.
Although the indicator can be applied to any timeframe, it is crucial to understand how it behaves on different scales:
Long Timeframes: On daily, weekly, or monthly charts, the indicator can identify long-term trends and be less sensitive to noise or minor fluctuations.
Short Timeframes: On 1-minute, 5-minute, or 15-minute charts, the indicator will react more quickly to price changes, which can be ideal for day trading or scalping.
It is vital to understand the market environment in which you are trading:
Trending Markets: In a clear bullish or bearish trend, overbought or oversold signals may not be as effective. In a strong bullish trend, the market can remain overbought for an extended period.
Sideways Markets: In range or consolidation conditions, overbought or oversold signals can be particularly useful for identifying reversal points within the range.
Never rely solely on one indicator. Use the Buy or Sell Estimation A.I in conjunction with other technical analysis tools and techniques to confirm signals:
Support and Resistance: If you receive a buy signal near a support level or a sell signal near a resistance level, this can strengthen the validity of the signal.
Other Indicators: Tools like MACD, ADX, or moving averages can complement and confirm the signals provided by the Buy or Sell Estimation A.I.
Regardless of the effectiveness of any indicator, it is always crucial to have a risk management strategy. Always set a stop loss and determine in advance how much you are willing to risk on each trade.
