Vishal Malkan’s Advanced RSI Trading Strategy That You Must Study
Without a doubt, Vishal Malkan is among the most credible names in the Indian stock trading community.
With more than 25 years as a trader and 12 years of a trainer, you can trust his credentials. A novice trader like us can learn a lot from his wisdom.
His calm and composed demeanour and impeccable logics are what new and even professional traders can emulate.
In this blog, we’ll try to decode his strategy that can help you get an edge in the market which is also the purpose of this blog.
We focus more on learning the process and strategy than giving a tip.
In this blog, we will discuss his 5 Star RSI strategy that you must pay attention to. This is RSI Range Shift Strategy. The concept is very different from what you know about the RSI strategy.
Most traders use 40-80 levels for oversold and overbought levels. However, this is not correct and you can make big loss by blindly following this.
He says that most of the time big move in stock price comes after 70 only which is an overbought level in popular RSI parlance.
This is a mistaken notion as there are many stocks that have doubled or tripled after crossing overbought levels as often big move only starts after 70.
In an uptrend, stocks are oversold at 40 RSI and in a downtrend, they are overbought at 60.
What does this mean for you as a trader?
- Whenever, a stock is bullish, 40 is oversold.
- Whenever, a stock is bearish, 60 is overbought.
Once you understand this, the way you see the chart will change forever.
In the above image, at A, the stock clearly says I am now bullish and I will be oversold at or below 40.
Now, the issue is how will you consider whether the stock is in a downtrend or uptrend?
I suggest that if the stock goes below 50 days EMA, you can consider it in a downtrend.
Now be careful when the stock price goes above 50 Days EMA and see the RSI. It also goes above 40.
That’s a clear sign that it’s a BUY now.
The answer is NO.
On the monthly chart, the price is still below 50 days EMA.
The multi-timeframe analysis is very important before you do such trades.
To be bullish, it has to be bullish on monthly, weekly, daily charts.
I’ll buy at the round circle as shown in the picture. Now, let’s see it on the daily chart.
It’s a buy at 145-150 range.
- Price >50 Days EMA at the monthly chart
- Price >50 Days EMA at the weekly chart
- Price > 50 Days EMA at the daily chart
- RSI >40
Though Vishal Malkan uses only RSI, I have added EMA and multi-timeframe analysis to optimize it.
However, you can exclude monthly if you wish, but the probability will be lower.
Let’s take another example of #Nifty Pharma.
I’m only considering the monthly chart here. I’ll prefer buying at RSI point 2 and not at 1.
2 is a screaming buy. Because it says that I’m bullish and will continue to remain bullish as I have taken support at 2.
It’s bullish on the weekly chart as well and that shows the start of a long-term bullish trend in the entire sector.
In the next 5-6 years, most of the pharma stocks became 20-30x.
So, the RSI range shift of 40-60 with EMA can help you find the megatrend in a sector.
I’m not discussing the Exit here as it’s a long-term stock holding. I’ll discuss it later. By that time, you can visit his YouTube channel: Malkan’sView.
It’s a very good place to learn about technical analysis. You can also follow him on Twitter: @Malkansview
He runs many training programs which you can be joined if you are serious about learning about technical analysis. The best part about him is he is both a very good trader and a trainer.