RSI trend & the two moving averages

Core idea

Apply EMA 9 and WMA 45 onto the RSI line itself (not onto price) to turn RSI from a jagged line into a tool for reading trend with clear markers. An uptrend in RSI = an uptrend in buying pressure; a downtrend in RSI = an uptrend in selling pressure. The slope and the spread of this trio of lines are exactly the acceleration of the side that's winning.

Details

Setup

• EMA period 9 = the fast moving average.
• WMA period 45 = the slow moving average.
• Apply both onto RSI (in TradingView: the three-dot menu on the RSI pane → "Add indicator on RSI").
• Absolutely do not use a moving average on the price chart.

What a moving average really is (in the teacher's way of understanding it)

Not a math formula, but the value line / psychological zone the crowd accepts at that point in time. Take gold as an example: when gold is at 30 million, people see 33–35 million as "reasonable to buy." Once gold has climbed to 60 million, that same 33–35 zone becomes a dangerous zone rather than a zone of potential, and people now see 50 million as "reasonable." That psychological marker that drifts along with price is exactly the moving average.

Three factors that define a trend (all 3 must be present)

An uptrend:

1. The fast moving average crosses up and sits above the slow moving average.
2. Both lines are sloped upward.
3. The two lines are spreading apart from each other. → The steeper and the wider the spread, the stronger the trend.

A downtrend: the reverse (fast crosses below slow, sloping down, spreading downward).

The starting point of a trend = where the two lines cross. The ending point = where they cross back the other way.

Why the spread measures strength: if price rises gradually (30→31→32…), psychology has time to adjust, and the moving average tracks close behind. If price jumps (30→50 in a week), psychology can't keep up, and the price line flies far away from the moving average → a big spread = strong volatility.

The logarithmic curve and the peak point

Within each trending leg of RSI, the distance between RSI and the two moving averages traces out a curve: gradually expanding → touching a peak point → gradually contracting → crossing back over.

• The expanding stretch = the phase where the winning side keeps building, at its strongest.
• The peak point = the moment psychology can't get any greedier (or any more fearful).
• The contracting stretch = one of two things: the winning side is weakening, or the other side is starting to get involved.

The train metaphor: a train racing along at high speed that wants to turn around has to gradually cut its acceleration → come to a full stop → gradually build acceleration in the opposite direction. There's no such thing as barreling ahead full speed and then slamming straight into fear.

The most important consequence: a falling leg of RSI is at the same time exactly the pattern that prepares an uptrend in price — and vice versa. That's why the time to go looking for a buy point is after the falling pattern has contracted and finished, not while RSI is still wide open and heading down. Buying while RSI is still opening downward = jumping in while the train is still at full speed.

The "pull" property toward the moving averages

When RSI (or the price line) moves too far away from the two moving averages, it tends to get pulled back — that is, it seeks its way back to the value zone. There are two kinds of returning:

• Profit-taking selling comes in → price arcs back down to meet the moving average.
• No selling comes in → price goes sideways in place while the two moving averages gradually catch up to it.

Recognizing these two patterns tells you whether the sideways stretch ahead is a rest before continuing, or preparation for a reversal.

When RSI has no trend

Signs: the two moving averages are nearly flat, no slope, no spread, RSI crosses up and down through them repeatedly — and this usually comes together with RSI sitting squarely in 40–60. → It means buying pressure and selling pressure are balanced → price is sideways → don't trade on that timeframe. This is exactly the place where people used to die from seeing "cross up = buy, cross down = sell."

Special case: RSI clearly falling while price goes sideways

The two moving averages are spreading apart, sloping down — but price isn't falling, it's going sideways, holding support firmly. Explanation: this is buying pressure resting, not selling pressure increasing. Verifying evidence: RSI cannot break below 40 (if selling pressure were truly coming in it would have to go below 40) and support still holds. Market metaphor: 80 buyers / 20 sellers, then 60 of the buyers step out to go play → left with 20 buyers / 20 sellers → price stands still. To break support, you need more sellers coming in, not the buyers taking a rest.

A misunderstanding to correct: CONTRACTION means the two moving averages moving toward EACH OTHER

A student misunderstood that "RSI contracts its distance to the two moving averages." Wrong. The contraction is the two moving averages moving closer to each other (RSI itself is still running, separate from whether it has crossed them or not). When a lower timeframe acts as a catalyst pulling price, it causes the RSI moving averages on the higher timeframe to gradually contract their distance — that's a sign the higher timeframe is about to enter its decision-making phase (getting ready to cross back over and flip the trend). So if you want to know when H4 (currently out of phase with 1D) will reverse, just watch for when H4's two moving averages get pulled into contracting.

A mirror of "buying pressure resting": in a FALLING wave, the correction leg is just "selling pressure resting"

Symmetrical to the "RSI falls while price goes sideways = buying pressure resting" case above: in a downtrend, selling pressure is the dominant side, so pullback/correction legs are just a temporary rest for selling pressure, not a real rise. After resting, selling pressure comes back and price keeps falling. The sign the downward momentum is still in effect: the correction leg cannot break the upper mark of the momentum (holding at roughly 50 or below). Don't mistake that resting leg for a reversal signal and try to catch the bottom early — see rsi rising/falling momentum, risk wave.

The wave's three key points

Within each wave, there are 3 moments when the two moving averages contract toward each other — called point 1, point 2, point 3. These are the 3 moments when price is most likely to move sharply. Pull up any timeframe and you'll see this same rule. Use it to time entries: when the timeframe you're tracking is approaching, say, point 2, that's when you need to sit at the screen and wait — either for a breakout, or for one more leg down to open up.

Estimating the DATE a move will happen. Because a moving average needs smoothness (price has to move enough for the MA to crawl toward it), you can project the current contraction speed of RSI against the two moving averages on the higher timeframe to guess the approximate date point 2 will land on (e.g. "somewhere around the 6th–7th–8th"). Not accurate down to the hour or minute, but enough to know the window of time you need to sit at the screen — instead of staring at the screen nonstop the whole time. While waiting, the lower timeframes only give you scattered small trades; the real move sits at the higher timeframe's contraction point.

Crossing a moving average is NOT a buy/sell signal

This is the most common misunderstanding, and also the deadliest one:

• The end purpose of every tool is only to read how buying pressure / selling pressure is developing — not "cross up = buy, cross down = sell." Trading like a parrot off the cross signal gets you killed.
• RSI crossing above 60 on one timeframe (say, 15m) is not an entry signal in itself. You first have to know which timeframe the wave actually belongs to. If 15m is loitering around 40–60 = no information there, and the wave at that moment belongs to H1, then drop 15m entirely.
• The very same downward cross can carry two opposite meanings, depending on the relationship to the force and wave before it — not on whether RSI happens to be at 60 or 40.

The apple-market metaphor — "buying pressure weakening" ≠ "selling pressure increasing":

• At first, 20 buyers / 2 selling stalls → price shoots up (rising momentum).
• 5 more sellers show up (now 7 sellers / 20 buyers) → price corrects but still holds support, because the buy side still dominates. This is buying pressure weakening, not yet real selling pressure.
• A different case: only 5 buyers / 2 sellers (the buying force was already weak, RSI only around 70 rather than up to 80), then 5 more sellers show up → supply now dominates, price breaks support. This is genuinely selling pressure increasing.
• The same action of "more sellers show up" produces two different outcomes. What distinguishes them is the underlying force before that + whether price holds support or not, not the RSI number itself.

On the argument "an indicator lags price, so technical analysis is useless": it's true that every system (Wyckoff, Ichimoku, Elliott, RSI…) is calculated from price, so all of them lag price. But we don't use RSI to get ahead of price; we use it to read the entire process of the force relationship, then enter at support/reset zones on the price chart itself. The person making that argument is usually someone who only ever looks at the cross-up/cross-down signal.

Don't "get creative" with the settings early on

• The question "if I lower RSI's period below 14, will the signal come faster?" is what the teacher calls a dangerous question: a faster signal also means more signals and more noise.
• The fast MA / slow MA pair (EMA9 + WMA45) is not a magic number. Only by sticking with one pair for long enough do you get to see its true probability. It's fine to switch to a different pair — as long as you stick to one pair. Using this pair sometimes and a different one other times means sabotaging your own probability.
• Don't mix in Ichimoku or another indicator before you've finished with this system (see knowledge takes time to forge skill).

Putting it into practice

1. Turn on RSI + EMA9 + WMA45 on the timeframe you're examining. Answer: is RSI on this timeframe rising or falling (are all 3 factors present), and is it in an expanding stretch or a contracting stretch.
2. If it's expanding in a given direction → that trend is still alive, don't trade against it.
3. If it's contracting → prepare the scenario for the opposite direction, start looking for an entry point.
4. If there's no trend → skip that timeframe, move to another one.
5. Cross-check RSI against price: RSI falling while price holds support = buying pressure resting; RSI falling while price breaks support = selling pressure genuinely coming in.
6. Time point 1/2/3 to choose when to sit at the screen.

What the teacher stresses / common traps

• Don't draw a pattern just to make it pretty. Circling an arc doesn't make it a pattern. You must be able to explain why that stretch expanded (one side continuously building) and why it contracted (that side ran out of force / the other side got involved). A pretty arc-shaped pattern isn't pretty because of how it's drawn — it's pretty because it accurately reflects the psychological cycle.
• Don't pay attention to the small, fidgety crosses up and down. You have to reduce RSI to one overall curve before evaluating it.
• A downtrend in RSI ≠ a downtrend in price. This is where the most confusion happens.
• Entering when RSI has already moved too far from the two moving averages = very high risk, even if the direction may still be correct — because you've already missed the good position. "You miss out on the good position, not every stretch."
• Reading RSI + 2 MAs together also tells you: which timeframe a wave belongs to, whether the coming wave is a correction or a reversal, whether the trend still has enough strength to hold — but it has to be combined with multi-timeframe.

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