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How and When to adjust the Oscillators such as RSI or Stochastics with market momentum

Those who use Oscillators for trading may be with Candlesticks or any other technical (I use it with Elliott waves and Fibonacci levels for higher confidence) may like to know that Oscillator settings must be changed with the change in market trends. For example when markets are going for a sideways correction the Oscillator settings must be different versus when they are trending

Apart from Positive or Negative Divergence Oscillator settings could play a vital role in telling many other relevant facts to note which we may miss out other wise. Here are few of them.

  1. The area in the rectangle, every Oversold and Overbought zone correspond to reversal, that is because market was following that rhythm. Everything seemed coherent. Majority of traders use oscillators in this way.
  2. When the out of rectangle situation occurs, they either give all the gains in one single move trying to catch every top or bottom. In the circle every time bearish candles occurred a trader will try to short and get stopped out. While, this situation tells us that there is a change in the rhythm or momentum in market and now the oscillator settings are again to be changed. or better move to higher time frame to get better clarity or if the rhythm is coherent, trade in that time frame.

NIFTY - Alternate 5 - May-27 1408 PM (1 min)


Now the check the oscillator settings in the second chart, I have readjusted with this new rhythm. It should do well now. Also read my earlier post on How To Revise Stop when already in Profit. Both the techniques of Oscillator adjustment and revising the profits support each other, as you will find in that article that adjust your Stop once there is a bullish or bearish reversal. Now Bullish or Bearish Reversal could be identified only when the oscillators are adjusted properly so that the action of Stop adjustment is taken on the right time, no sooner no later.

NIFTY - Alternate 5 - May-27 1414 PM (1 min)

All of this is for the education purpose only.

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