Fellow wavers , we always found the same question in labeling , which wave is 3 or if this is the end of the cycle or this is 5. Many questions always come, either we are waiting for a trade or we are in a trade. As a waver , I always find it hard until I found the RSI ( relative Strength index. ).
The Relative Strength Index (RSI) is designed to indicate a market’s current strength or weakness depending on where prices close during a given period. It is based on the premise that higher closes indicate strong markets and lower closes indicate weak markets. The RSI is displayed as three lines, the RSI and two moving averages of the RSI. The RSI is calculated by finding the percentage of positive closes (the current close is higher than the previous close) to negative closes (the current close is lower than the previous close).
For us, using ELLIOTT WAVE PRINCIPLE as tool to trade, this is great always from a higher to a low and with a five waves visible , the lower or higher read is wave 3 of 3, where the market has the higher momentum , where everyone identify the move and jump on it, after that the market will makes lows or higher but the RSI will created a divergence that mean we are in a wave 5 ,mean a turn will happen and the trend will change.
It is very important to know in which degree you looks at the RSI the higher the degree , the stronger the reverse . The RSI always will be right , it will show the wave 3 momentum extreme and wave 5 divergence in any 5 waves cycle , I recommended because I used everyday. and sometimes it will show the count to me , always start from the minute to the higher degree possible. Thanks.