Finding the entry point using RSI and wave logic

Core idea

RSI isn't used to catch overbought/oversold — it's used to read the buying-force-vs-selling-force relationship of each timeframe. From that you know which timeframe has a pattern to trade, which timeframe has run out of force, and — most importantly — you know whether the structure of the adjacent lower timeframe is backing the higher timeframe's wave, so you can place an extremely tight stop and still catch the higher timeframe's target.

Details

1. Reading a timeframe's state through RSI

For each timeframe, look at 3 things: RSI's position, the spread between the two moving averages (fast/slow), and the slope.

• RSI + 2 MAs spread out and sloped → that timeframe has a clear trend, it has force.
• RSI milling around 40–60, the 2 MAs stuck together → that timeframe is sideways, no evidence, skip it.
• RSI holding above 60 → buying force dominates on that timeframe. RSI holding below 40 → selling force dominates.
• Note: RSI rising does not mean price is rising. If RSI climbs very high while price is still sideways in a channel → that's not increasing buying force, it's just weakening selling force.

2. What is a "pattern"

A pattern = an RSI cycle that curls down (or curls up) with spread between the two moving averages, then bursts open in the opposite direction. The pattern is precisely the evidence of accumulation of buying/selling force. No spread, just choppy little crosses up and down → no pattern, just noise.

3. The "smoothness of the moving average" theory (the fuel tank)

The movement of price has to produce smoothness in the moving average.

An average value can't jump in one move. When the RSI and 2 MAs of a timeframe are spreading very wide in one direction, they can't turn around and cross back the other way right away — it has to take time, moving gently, to narrow the gap first. A highly practical application:

• Estimate how much time is left in the wave (for example: looking at how wide H1's RSI has spread to know it'll be a few more hours before it can reverse) → know whether you can safely hold the trade overnight or have to sit and watch it.
• Just watching one timeframe under this theory alone already lets you build ~40–50% of the scenario.
• The reverse: a timeframe that's spreading wide while you expect it to reverse right away = a baseless expectation.

Addition: the fuel tank. A timeframe's RSI that has gone very far in one direction → "the tank is nearly empty," that wave is very likely the last wave of that trend.

4. Recognizing STRONG vs. WEAK momentum

• Weak: RSI just pokes down into the ~20 zone (or up to ~80) and snaps straight back, forming a sharp low/high. That means 100 people sell down and immediately 1,000 people buy up — the selling side couldn't hold its position.
• Strong: RSI holds in the 20 zone (or 80) for a stretch of time, moving gently, meeting no resisting force. That is the natural weakening of the winning side — momentum with credibility.
• Momentum is also weak when: during the correction, the lower timeframe pulls the higher timeframe's RSI back with it → phase disagreement → the momentum fails.

5. The backbone: wave structure and validity

From Dow theory — inside a big wave there's a small wave, inside the small wave there's a smaller one still:

• Uptrend structure = the next high is higher than the previous high AND the next low is higher than the previous low. Downtrend structure is the reverse.
• An uptrend structure stays valid for as long as the nearest support zone is still holding. Breaking the nearest support = the uptrend structure loses validity — but that's not yet the same as a downtrend structure having formed. A downtrend structure is only confirmed once there's a pullback wave and then a continuation wave that breaks the new low it just created.
• Distinguish between an uptrend wave (that timeframe is moving up) and an uptrend structure (higher highs/higher lows on the smaller timeframe inside it).

A key law:

For an uptrend wave on the higher timeframe to form and stay valid, it must be backed by an uptrend structure on the adjacent lower timeframe. The lower timeframe's structure breaks → the higher timeframe can't keep climbing. (And the reverse for a downtrend wave.)

Reason: a wave always runs from the lower timeframe, pushing gradually up to the higher timeframe. If the lower timeframe has no force, where would the higher timeframe get its force from?

6. The biggest application: SL by the adjacent lower timeframe → multiply your RR many times over

The usual way: enter on whatever timeframe, then set the SL by that same timeframe's low/high → SL very far away → RR only 1:2, 1:3.

This method's way: enter on the higher timeframe's pattern, but set the SL by the structure of the adjacent lower timeframe. Because if the lower timeframe's structure breaks, the higher timeframe definitely can't climb further — there's no reason to wait for price to go all the way back to the higher timeframe's low before cutting. The price zone in between is a wasted stop.

Illustrative example (numbers from the session, only to get a feel for the ratio):

• Enter at 25k7, feasible TP 26k2 (~600 points).
• SL by the H1 low = 25k4 → 300 points → RR 1:2.
• SL by the M5 support = 25k55 → 150 points → RR 1:4.
• Another example: enter at 26k1; SL by H1 = 25k8 (300 points) vs. SL by M5 = 26k (100 points).
• A real trade: entered at 21k1, SL at 20k9 (200 points), closed at ~23k9 → about 17–20% of the account.

With this method, an RR of 1:5 to 1:10 is normal, some trades reach 1:13, 1:23.

A mandatory constraint — ADJACENT timeframes only, no skipping:

• Riding an H4 wave → SL by H1. You are not allowed to set the SL by M5/M15 (M15's structure only backs the first H1 wave, it can't back the whole H4 wave).
• Riding a 3D wave → you are not allowed to set the SL by H1.
• The one exception: a sideways zone, when two timeframes (e.g. H1 and H4) are running the same shared wave — only then are you allowed to use an even-lower timeframe's structure.

The cost you pay: it's harder work — you have to watch the lower timeframe, and sometimes you get stopped out and have to re-enter. But the math still wins: lose 1 part on the swept trade, eat 6 parts on the next one → net still +5, compared to a flat 1:2 which only ever nets you 2.

7. Three specific, commonly seen entry patterns

1. Retesting the lower timeframe's support inside a higher-timeframe uptrend wave — the lower timeframe corrects back, tests support 1–2 times without breaking it, then bounces → enter, SL below that support zone.
2. Retesting the lower timeframe's resistance inside a higher-timeframe downtrend wave — the lower timeframe pulls back up, tests resistance, can't break it → go short, SL above the resistance. (A real trade example: SL only 200 points.)
3. The lower timeframe builds an uptrend structure (higher highs/higher lows) pulling the higher timeframe up — enter along with it, SL below that structure's low, and move the SL up to each new low → if it gets swept, it's almost always breakeven or a small profit.

8. The SL must land on a zone that HAS VALUE

Placing the SL on the wrong timeframe is a common mistake (for example, a student thought they were taking the M5 low but it was actually the M1 low → SL too shallow → got swept). Check: does the high/low you're using for the SL correspond to the RSI pattern of that exact timeframe? (see Barrier zones by timeframe (resistance · support · feasible TP)) A "valuable" SL zone is rarely wick-swept; an SL zone placed carelessly in the middle of nowhere gets swept as a matter of course. The number of points (20, 50, 100) matters less than whether that zone has value.

Putting it into practice

The sequence of steps on the chart:

1. Turn on every timeframe one by one → quickly note each timeframe's state (up / down / sideways 40–60).
2. Choose the target timeframe = the timeframe with the clearest pattern, and the one whose wave the market is currently running.
3. Check the fuel tank + smoothness of the target timeframe → how much further, how much longer it can still go.
4. Check the momentum of the lower timeframes: still there / gone / weak / failed.
5. Identify the adjacent lower timeframe to the target timeframe → find its structure and barrier zone → that's where you place the SL.
6. Wait for a signal of aligned force (the lower timeframe's RSI holding above 60 or below 40 + volume) → enter.
7. Size your position by the SL distance so that risk = 1% of the account.

What the teacher stresses / common traps

• Don't base decisions on divergence. Divergence is just a phenomenon that often shows up near the end of a wave; what you base your decision on is wave logic + multi-timeframe logic.
• "This thing is so simple I once doubted myself over why nobody uses it" — the technique of setting the SL by the adjacent lower timeframe is this method's single biggest money-maker, but the trade-off is you have to put in the effort to watch the lower timeframe.
• Trap: skipping a timeframe when placing the SL (setting the SL by M5 to ride an H4 wave) → the SL gets swept over and over for no good reason.
• Trap: only looking at price/candles to identify a barrier. Looking at candles is "identifying by eye"; you have to look at RSI to know which timeframe that barrier belongs to.
• RSI crossing up/down while the two moving averages haven't crossed yet doesn't yet count as a valid pattern.
• This body of knowledge works for both futures and medium/long-term investing — the only difference is the timeframe and the target, not the underlying nature.

Related lessons

• Entry point — the pillar note, the overall process and checklist
• Barrier zones by timeframe (resistance · support · feasible TP) — using RSI to determine which timeframe a barrier belongs to (a mandatory step before setting SL/TP)
• Rising momentum / falling momentum (QTT – QTG) — the definition and stages of momentum
• Wave logic — Dow theory, wave structure, trend validity
• Multi-timeframe (multi-timeframe logic) — the relationship between adjacent timeframes, in-phase/out-of-phase
• Moving the stop-loss point — moving the SL by the lower timeframe's structure
• Counter-trend entry point — a variant of this technique for counter-trend trading