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Today I was experimenting with some RSI normalization as an alternative to daily resets. See pic: AUDNZD M5 at Nov 3rd, 2015. After a sharp move, the exchange rate is flat for a certain while, between those blue dashed lines.
The first indicator version (reset at 1:00 a.m.) reflects both the movement as well as that flat period perfectly – see parallel trend lines.
The second version, without reset and normalized by a 40 period RSI, shows strong slopes of both trend lines in opposite direction, indicating a possible and misleading entry.
I already expressed my doubts about RSI as a proper method to normalize our index based CS lines earlier in this thread. Maybe it would improve the results if no slopes are traded that are moving towards the nought line.
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A good trader is a realist who wants to grab a chunk from the body of a trend, leaving top- and bottom-fishing to people on an ego trip. (Dr. Alexander Elder)