Best Beginner Stock Trading Indicators | RSI & MACD Combined

what's going on ladies and gentlemen, welcome back to another video. This video will be great because we will walk you through combining the MACD indicator with the Relative Strength Index indicator, so many of you know the MACD or the movement. average convergence divergence indicator which is very commonly used as well as the relative strength index indicator which is abbreviated as RSI so many of you are familiar with this and many of you loved the last video I made on the MACD indicator , so now we are going to look at Combining both the MACD and the RS i, together to show you how many traders take these two

indicators

, combine them to create their own type of strategy, as you can call it, or their own

trading

style, so I'm going to walk.

You guys have set up the MACD and the RSI by combining them and it's going to show you what you're really looking for by combining both studies, so let's get into it and we'll start sharing the screen here, just give me a second. alright here we are guys so this is a

stock

chart of TTD this is just a recent

stock

that had great earnings reports you can see ahead of a phenomenal day so we're going to go up here so if you're not familiar with adding these Studies, you'll see how to do it, but we're not going to do a full tutorial and really how you do it, I'm not going to touch on too much, we're going to jump right into it, so this video won't.

It won't take up too much of your time, so you'll go up to the studies filter here. Once you are here, you will click or type MACD. This will show the first sector. First, you know there's one here. MACD MACD I'm going to add selected once you add selected click apply ok and the MACD is good as it's the default setting for this study it's what you want but it's how you want to use it so you don't really want to change the study, so once you type MACD, hit enter and apply it, that's exactly how you want to leave it.

Then go back to the studies filter in the search bar, you will type our s I which will show the first one. option here RSI, click on it, you add the selected application and that's fine, and now that will be on your chart, the default settings for the RSI study are exactly as they should be, so don't mess with that, it sounds good, Let's move on, to give you some background. or a little bit of context about these two

indicators

, so this is your first time watching one of my videos or you've never seen in the previous videos that I made on my channel regarding these indicators, you might want to check it out.

First, if you have any questions that aren't clarified by the time I finish this video, first here's the one above, it'll cover this briefly. The MACD indicator. This is classified as a momentum indicator. It sounded strange. Let's redo it. Classified as a momentum indicator, I have to say it quicker, so here we have a momentum indicator and ideally the MACD is an indicator that will help you project different changes in momentum. Well, it is momentum and it tries to help you understand when momentum is shifting to the bullish side. down so there is a trend up or down so if we zoom in on this chart we can see that when the stock price goes up the MACD and momentum increase and then we can see when the blue line crosses here towards the gray.

This is supposed to mean a reversal and momentum to the downside where you can see that although the price action was going up, the momentum was slowing down, so we are having a slowdown here in the momentum. Well, this is what the MACD does well: it crosses over blue. gray crosses which is a momentum change upwards, blue crosses downwards which is a momentum change downwards and vice versa can be seen throughout the day. He does it on numerous occasions, where we have a cross here and now it goes up ideally. The way many people will use the MACD indicator is simply this: when the blue line crosses up and over the gray line it is supposed to mean it is bullish and many people will start taking their entries based on this signal here when it is supposed to see this bullish, so imagine here you have this MACD cross that you enter here, you would have made a nice profit on the trade, now these indicators are not foolproof and they don't work 100% of the time all the time. and you may get some false signals.

I recommend watching my previous video I made on Mac. I need to help you understand some of those false signals and a different approach to this indicator that could help you be more successful using it. So again, the first one here is the MACD indicator, which is a momentum indicator that helps you track the change in momentum trend from bullish to bearish. Now we're going to move on to the bottom one, which is the RSI, so when I go to the bottom one this is another momentum indicator so they're both momentum indicators the bottom one Relative Strength Index this one is pretty simple you have two lines on the chart you see this yellow line here at the top and this yellow line here and at the bottom white gray beige whatever color you want to call it, so you see these two lines and then you see this little choppy price action in the middle, it's well, the top line and the bottom line are supposed to, you know, indicate overbought which is up here, so if the price is above this top line, this would be considered overbought, where the stock has been extremely overbought. and then here you see that it falls below the line, so it has the seventy line at the top and the thirty down line at the bottom, so 70/30 when it is below it means that the price has been oversold when it is above it means it has been overbought so people use the relative strength index this way when the relative strength index is on your chart and a stock will most likely skyrocket.

You will find that the Relative Strength Index or RSI indicator will show that the stock has been overbought. When a stock has been overbought, it will likely soon begin to pull back and will advise you otherwise when you have the relative strength. index and indicator on your chart and a stock is selling extremely short and is below the 30 level right there, when it is below the 30 level it is considered extremely oversold so you can anticipate that there will probably be a buy. go back to that stock that will then increase the price so here we are when the relative strength index is above this line it means the price has been overbought or the stock is overbought when it is below this line it is supposed to mean that is oversold and will probably now bounce again relative strength index on the MACD indicator themselves, they are not perfect indicators and you can get some false readings so this is something you will want to play with a little bit as time goes on. but the most important thing in this video is that we show you how people use the MACD indicator and the RSI together to help them better understand when they should take a trade and I see a great example right on the stock chart. guys you see maybe maybe not we'll get into this right here this is a perfect example look at the stock sell off ok cells all the way down here you can even see there's a huge sell off not that you know which necessarily have to pay close attention to the volume, I'm just pointing out that there is a lot of selling volume on this drop, it makes sense, big drop, big volume, look at the RSI, the RSI shows oversold, ok, the MACD starts to show a cross just there. so if we go straight up and take our entry right in this area by timing the MACD crossover with an oversold condition on the RSI, this is basically telling you, hey, this is extremely oversold, the MACD is showing that the trend is changing from bottom up and We are crossing and then you look at the price on the chart and you will see that basically from that moment on the stock price had started to increase in a bullish manner, so you take an oversold condition on the momentum, for so the momentum is oversold to the downside. where you can expect the price to start rising and then you have the MACD, so let's close, you have the MACD showing a bullish crossover while the stock is oversold, the stock is down on that day and then you take your entry so people have reason.

A lot of people who just use the MACD will typically say, "Okay, this is going down and we're starting to get a bullish crossover. I'm going to go long and then if you combine this with the RSI, you'll get a little bit." of additional data to maybe make you feel a little more confident about placing your trade, so what we now know is that we are getting a bullish crossover and we are having an oversold condition and the oversold means that it is likely to be bought again. Not in every situation you're going to have to be able to determine that for yourself, of course, when you trade all this stuff I'm showing you is 20/20 hindsight, but regardless of whether it's 20/20 hindsight, you can clearly see that this kind of system works and happens well, it's not like hindsight is 20/20, you will never understand it, no, you just have to practice it, spend some time in the market and visualize this in real time, and you will start to get it and you will start to see it, for Of course, it's easy to go back to hindsight, regardless of whether you do it in hindsight, this kind of thing happens every day in the market and you can use this to your advantage, so this is a particular case. actions, let's take a look at a couple of different examples, we'll go to Netflix just because I don't know, I just choose Netflix.

I like Netflix, so let's see what we have here to see if there's any correlation. So here's a good example. Look at this example of an oversold condition on the RSI. What we know about the RSI. Conner says and every other youtuber says that if the RSI is below the 30 mark, which it is there, then this is considered an oversold condition. and the stock should bounce back nicely, let's take a look at what happened. We had the oversold condition and it was right at the volume weighted average price on the display app, if you're not familiar that's actually usually a point where the stock will bounce.

It has a touch there like the first time in the day, so you can see that we had a bounce oversold condition going straight up, it did indeed bounce and we even had a bullish crossover, now this move only lasted a little bit, so which again, this is a great example, right, I'm

trading

stocks. I'm trading Netflix and I'm looking at the MACD and I'm looking at the RSI. I am looking for an oversold condition abroad to get a good price on the stock. I know relative to the day and then I look at the MACD and I'm going okay, we're getting a bullish crossover and I said, I take the entry, well you've got your RSI oversold, you've got your bullish crossover, you get in and take. the trade and then you know it stays and does this, it starts trending down and then all you're seeing here on the MACD is just these bullish and bearish dips back and forth, but it actually stays the same, like this that this could have given you an entry and this could have given you an entry that you know how to put together and sure enough, you get a good buy here around the V web price, you get a little bounce, you could have made money on that, but guess what.

It didn't become the old Holy Grail race, so just because you're getting a signal to buy here doesn't mean you're going to have this astronomically large winning trade, it could in turn result in something small, so if you're using the MACD on the RSI and you take this trade and it doesn't become the Holy Grail winning trade. Why didn't it become that Holy Grail winning deal? I will tell you this because the RSI and the MACD do not dictate. Future returns only give you an entry or possibly an exit, but do not take the date of how much growth will occur or how much decline will occur after an entry or exit.

That's okay, it's just there to help you understand that a possible entry and exit doesn't dictate it. future growth future growth or view of a stock going up will be based on your skill set how much you know how well you can identify the trend what type of stock you are trading you have positive news that day you have negative news news of the day so You really need to understand what it is that you are trading and the potential that that stock will give you on any given day, in any given year or month or whatever time period you are trading in, so you need to be able to identify the potential that will give you the action and then combine your RSI and you can mix your McAfee so that when you are in that action of the day you can know when you want to get out and you can know when you want to enter so again just to be clear the RSI MACD will not dictate how much the stock will go up or down, just assume it's there to give you that kind of confidence on the entry and exit, okay?

So the way most people will use these two indicators is to project when a stock has become oversold and then when they want to enter based on when the MACD crosses and vice versa, we could say, hey, we have long Netflix here. and up up up upmore stuff and it's okay, well, when do we sell well? You could look back on the stock chart in this direction. You could come back here and probably find some kind of resistance that's on the right if we went up. back in time most likely this level 366 is a resistance from yesterday the previous day four days ago five days ago three weeks ago one year ago two years ago nine years ago twenty years ago understand that it could be anywhere and in any time these things hit resistance, okay, so this Netflix stock didn't sell off just by the MACD or just by the RSI, the RSI says: Hey guys, this move has been overbought and then the MACD here just says Hey guys, it looks like this movement is slowing down. in momentum and we could change to the downside, okay, the MACD is not going up.

Hey guys, this is resistance and it's supposed to sell. Understand that maca D is usually a slightly lagging indicator because the only way the MACD or that indicator can really move is after price action. has moved because the MACD reads momentum and momentum can only happen after it has happened, that is the only way the indicator can catch it. The price action must move first and then you can tell the MACD. Hey, this is what is happening and the MACD will act accordingly. therefore the MACD is a slightly lagging indicator and is the same as the RSI because the RSI cannot tell that the stock is overbought until the stock is actually overbought so that move must occur for the RSI to pick it up well , so in a situation like this you the stock could be long here and you could have plotted that 366 or this entire 366 area could be resistance based on yesterday, two days ago, three days ago, five, two, zero, two years ago, and then when you are in the trade and it is going up and it is approaching your resistance, you are planning that this is resistance and it is approaching and then you come and look at your MACD and you go, okay, it looks like the lines blues start moving towards the gray line, okay, In fact, it is in an overbought condition is what the RSI tells us, so if you are getting an overbought condition, an appearance of a momentum shift to the downside and I had already projected that 366 is resistance, it's probably a good indication that it might want to exit because you had already assigned 366 as resistance, you know that's where the stock could slow down and then you look at your MACD and your Mac starts showing up well , it looks like it might start going down and then your RSI goes up.

Hey, there's a little bit of overbought, it's like three signals saying, Hey, you might want to sell well and now that doesn't mean it won't go higher on the day, but at that current moment you were getting a sell signal and it's possible. I want to pay attention to that and that's exactly how you and people should use these two indicators together. Still, keep in mind that it is not a fixed solution and there is still a lot in this game that you will probably learn as time goes on. but this is how people will use the MACD indicator on our side together, they will use it together with both of them, that's fine, and when there are overbought sighs and you get bearish signals from the MACD, you might want to take it. an exit when you are getting an oversold condition along with a bullish crossover on the MACD, that is probably the time when you will want to make an entry and of course there is a bit more, as many of you know, trading is a endless world of learning, mistakes, processes, back and forth, trial and error so I hope this video helps some of you who know you will be using this in the future and as always please give thumbs up and like and share. in the video and subscribe if you haven't already, we will upload quality content day after day about trading, so if you like the channel again, please subscribe and I will see you in the next video. everyone take care