setup Northington RSIV

Be a Lean, Mean Investing Machine

Momentum indicators, such as the Relative Strength Index and the stochastic oscillator, are commonly used to identify price points that are considered oversold or overbought. In range-bound markets, these classic tools can work well. However, once price begins a solid directional trend, these indicators’ ability to identify relevant oversold and overbought levels is greatly handicapped by the nature of their arithmetic.

Best Practices

Here are some recommended best practices for the Northington RSIV:

• The Northington RSIV is for use in a confirmed price trend. Use other methods to determine the beginning and end of a trend.

• Consider entering a long position in an uptrend when the Northington RSIV (30, 40) crosses below 30.

• Consider entering a short position in a downtrend when the Northington RSIV (30, 40) crosses above 70.

• When a countertrend signal is generated, consider taking in the position for 25 percent to 33 percent of the look-back duration of the indicator. Be sure that the broader market is also similarly overbought or oversold. This is to be used as part of an overall risk-reduction practice.

• Gaps can nullify an extreme reading. Allow price to move away from the gap by the number of the look-back periods. Gaps can cause issues with many technical analysis indicators.