What Are Indicators?

Indicators are tools that convert market data into signals.
We use them as supporting arguments for our hypotheses — not as standalone buy/sell triggers.

Louis’ favorite indicators:

1. Ultimate RSI (by LuxAlgo)
   
   
2. SMA (Simple Moving Average)
   
   
3. OBV (On-Balance Volume)
   
   
4. Fibonacci Retracement
   
   

Ultimate RSI (LuxAlgo)

This is an improved version of the standard RSI.
It reduces noise, gives cleaner signals, and makes trend direction easier to read.

How Louis uses the Ultimate RSI

• The 50 line (Midway) is a momentum filter:
  
  
• RSI above 50 → bullish momentum/trend
  
  
• RSI below 50 → bearish momentum/trend
  Helps avoid trading against the trend.
  
  
• RSI over 80 = strong bullish momentum
  
  
• RSI under 20 = strong bearish momentum
  (These are not automatic buy/sell zones.)
  
  

All signals are based on candle closes, never wicks.

Buy / Sell Signals

• Buy: RSI line crosses above the orange signal line on candle close
  
  
• Sell: RSI line crosses below the orange signal line on candle close
  
  

More conservative traders also wait for the RSI to reclaim the 50 line.

On weekly charts, I often only requires the cross above/below the orange line as a buy/sell signal.

Divergences (Reversal Signals)

Divergence is one of the strongest uses of RSI and helps spot potential tops and bottoms.

Bullish Divergence

• Price: makes a lower low
  
  
• RSI: makes a higher low
  → Momentum is strengthening even while price looks weak.
  → Often signals a bottom forming.
  
  

Bearish Divergence

• Price: makes a Higher high
  
  
• RSI: makes a lower high
  → Momentum weakening even though price makes a new high.
  → Often signals a top.
  
  

Reliability:

• Weekly: extremely reliable
  
  
• Daily: reliable if combined with OBV, SMA, pattern, or lost support
  
  
• 4h and below: weaker, lots of noise
  
  
• Can form 2–3 waves before the reversal actually happens
  
  

Hidden Divergence (Trend Continuation)

Used during strong trends and can confirm that the trend we are in will continue.

• Hidden Bullish:
  
  
• Price: makes a higher low
  
  
• RSI:makes a lower low
  → Uptrend continuation
  
  
• Hidden Bearish:
  
  
• Price: makes a lower high
  
  
• RSI: makes a higher high
  → Downtrend continuation
  
  

Same reliability rules as normal divergence.

Practical RSI Rules

These are simple rules you can read directly to your students:

Trend-Based Trading

• Very safe:
  
  
• Only buy when RSI is above 50
  
  
• Only sell when RSI is below 50
  
  
• Slightly riskier (Louis’ preferred on weekly):
  
  
• Trade based on the orange-line cross alone if paired with other confluences.
  
  

Price vs RSI – Which to trust?

RSI can sometimes lead price, but hidden divergences can make it tricky.
Louis uses:

• OBV for direction
  
  
• RSI for momentum
  
  

Can RSI dip below 50 but still be bullish?

Yes — this happened in the last bull market.
RSI is not perfect, but it’s very useful for confirming trend shifts and derisking zones.

Pairing RSI with Other Tools

If pattern = bullish, but RSI momentum = bearish → confidence decreases.
If both align → confidence increases.

SMA (Simple Moving Average)

What an SMA Does and is:

SMA = average closing price over a chosen number of candles.
It smooths out noise and helps identify the trend.

What SMA Helps With

• Trend direction
  
  
• Trend strength
  
  
• Trend changes
  
  
• Dynamic support & resistance
  
  

Louis uses:

• SMA-20
  
  
• SMA-50
  
  
• SMA-100
  
  
• SMA-200
  
  

Trend Signals

• Price above SMA → uptrend
  
  
• Price below SMA → downtrend
  
  

Weekly close above/below an SMA = strong signal for reversal/trend shift.
Two consecutive closes = strong confirmation. Very strong signal for reversal/trend shift.

SMA as Support/Resistance

• Uptrend → SMA often acts as support
  
  
• Downtrend → SMA often acts as resistance
  
  
• A break below/above a respected SMA = trend weakening
  
  

BTC used the weekly SMA-50 as bull-market support this cycle. (General opinion)

Why SMA Works

Millions watch the same SMA levels → psychological → self-fulfilling. People think it works and buyers step in at that level. 

Which SMA to Use?

• SMA-50 weekly → medium-term investors (months → years)
  
  
• SMA-100 weekly → long-term investors (years)
  
  
• Larger SMA = stronger, slower, more reliable
  
  

When is an SMA invalid?

A close below/above it — especially on the weekly — signals breakdown of the trend.
Two closes = strong confirmation.

OBV (On-Balance Volume)

What OBV Measures

OBV adds volume on up-closes and subtracts on down-closes.
It tracks volume direction, not price direction.

What OBV Helps Identify

• Real underlying strength
  
  
• Early reversals
  
  
• Breakout validity
  
  
• Accumulation / distribution
  
  
• Trend continuation or weakening
  
  

Crypto is heavily volume-driven, so OBV is extremely powerful.

Why OBV Can Move While Price Stays Flat

Because price only moves from market orders,
but OBV reflects the hidden battle between buy vs sell pressure inside a range.

Examples:

• OBV goes up, but price flat → accumulation
  
  
• OBV goes down, but price flat → distribution
  
  

OBV often moves before price.

OBV Trend Reading

• Higher highs + higher lows → bullish
  
  
• Lower highs + lower lows → bearish
  
  
• Flat → low interest (weak breakouts) 

Same as on normal price moves.

OBV Divergences

Extremely powerful in crypto. 

• Bullish divergence:
  
  
• Price LL, OBV HL → bottom forming likely
  
  
• Bearish divergence:
  
  
• Price HH, OBV LH → top forming likely
  
  

Hidden divergences also apply just like with RSI and have the same rules.

Spot Breakouts & Fakeouts Using OBV

• Real breakout: OBV also goes up with the price signaling that buyers are strong.
  
  
• Fakeout: OBV flat or dropping during price breakout. Less confident that price will continue up, more likely to fail.
  
  

Works especially well on BTC. 

Timeframes

• Weekly = extremely reliable
  
  
• Daily = strong
  
  
• 4h = usable but noisy
  
  

Fibonacci Retracement

This is not found in the indicator tab but in the left toolbar.

Louis uses custom settings:

• Removes background
  
  
• Adds 0.75 level (You can remove one very high FIB level and change the number there.
  
  

Why have I added this? I saw it on twitter, tested a lot and found it works a lot, giving a higher win rate

IMPORTANT: Pair with S/R

Every level matter, BUT FIB levels matter most when they align with:

• earlier support/resistance
  
  
• SMA
  
  
• trendlines
  
  
• OBV signals

So if a FIB levels lines up with resistance/support or other confluences then it is more likely to be a key level.

How to Use Fibonacci

• For support: take a line from the bottom → top
  
  
• For resistance: take a line from the bottom top → bottom
  
  
• If price breaks a FIB level, the next one becomes the new target
  
  

Which Timeframe should i use?

• For very big macro/Bull targets you could take it from the last cycle peak to the bottom to find targets. (And opposite for support)
  
  
• For shorter term targets you can use the local top → local bottom
  Shorter timeframe = levels play out faster.
  
  

Other Tips

• Louis makes FIB zones a little wider, so a small area around is the key level.
  
  
• Yes, use the wicks. (Some exchanges have extremely high wicks with 1000% moves, these are too big and pure manipulation, I would not use them. But every other wick should be used)