RSI Forex Trading Strategy
Using The RSI indicator by itself as a forex trading strategy is not a good idea.
RSI indicator is best combined with other forex indicators and tools to create a trading strategy to give it a much more reliable performance.
When RSI is above 70, the market is considered overbought.
When RSI is below 30, the market is considered oversold.
If you don’t know what these terminologies mean, then let’s get into understanding RSI a bit more, shall we?
RSI OVERSOLD AND OVERBOUGHT EXPLANATION
When a market is in an uptrend for a period of time, it won’t continue going in up. At some stage in time, the uptrend will change to a downtrend. The market gets “heavy” in other words.
This heaviness is what “overbought” condition means in RSI terminology. So if you see RSI above 70 and then it starts to go down below 70 level then it may mean the the market may be changing to a downtrend.
The opposite is also true, when RSI is in an oversold condition, it means that the market has been in a downtrend for some time and now it may be due to change to an uptrend when RSI line starts to cross the level 30 and points up.
So there you have it…RSI indicator is used for determining the market oversold and overbought conditions.
WHAT IS THE RSI FOREX INDICATOR?
RSI stands for Relative Strength Index and is a momentum oscillator. Here’s what RSI does:
- Measures the speed and change of price movements.
- It oscillates between zero and 100.
HOW TO TRADE THE RSI
- RSI must cross the 30 level line to the downside.
- Then wait for it to move back up above the 30 level.
- Buy when RSI is above the 30 line and is pointing up. Make sure the candlestick is closed first before you buy to ensure that the RSI is definitely above the 30 level.
- Set you stop loss 10-20 pips above the high of the candlestick that made the RSI line pointing up when that candlestick closed.
- Set your take profit target 3 times what you risked or you can use previous swing high point as your take profit target.
- RSI must cross the the 70 level line to the upside first.
- Then you have to wait and watch for it to fall back down below the 70 level.
- As soon as the RSI is below the 70 line and the RSI is pointing downward you sell. Make sure that the candlestick closes first before you initiate a sell order.
- Set you stop loss anywhere from 10-20 pips below the low of the candlestick that caused the RSI line to move below the 70 line and point downward during that candlestick’s close.
- Ok, for take profit, set it to 3 times what you risked initially or look for a previous swing low point and use that level as your take profit target level.
DISADVANTAGES OF THE RSI FOREX TRADING STRATEGY
- Tends to give false signals
- Monitoring is required.
- You need to combine RSI with others to make if work effectively.
ADVANTAGES OF THE RSI FOREX TRADING STRATEGY
- RSI is a very good forex indicator used in combination with other forex trading strategies as a means of confirmation to trade (or not trade).
- Try to combine this RSI Trading Strategy with Price Action Trading, it may be a much better system than just using the RSI by itself.
Do you have a RSI Forex Trading Strategy or Any other forex trading strategy That You’d Like to share? Please use the “submit button” on the right hand side and and submit your forex trading strategies to me so that I can post them on this forex trading strategies website.
The Descending Triangle Pattern Swing Trading System is another one of the Triangle Pattern Formations: The Symmetrical Triangle Chart Pattern Trading System & The Ascending Triangle Chart Pattern Trading System The Descending Triangle Chart Pattern Formation Trading System Is the exact opposite of the Ascending Triangle formation and it is considered a bearish pattern. Here is a comparison between the descending and ascending triangle chart patterns: HOW TO SPOT THE DESCENDING TRIANGLE CHART PATTERN It is quite simple, really: here’s how: First, the market has to be in a downtrend and at some stage, the price will consolidate when it hits a support line and then it will move up but only to find resistance on the downward resistance trendline. The Price will continue be to squeezed into a tight spot until it a breakout happens-usually to the downside. HOW TO TRADE THE DESCENDING TRIANGLE CHART PATTERN As long as you know how to spot the descending triangle pattern chart formation, trading the pattern should be very easy. Here are the rules of the descending triangle pattern swing trading system: Wait for a breakout candlestick to break and close below the support line. Once that happens, place your sell stop order 3-5 pips under the low of the breakout candlestick. For stop loss placement, you have a couple of options: first option is to place you stop loss right above the downward resistance line (this is the best stop loss placement option because you wont get stopped out prematurely). The next option is to place you stop loss anywhere from 5-30 pips above the high of that breakout candlestick. Your take profit target: you can calculate the height of the pattern and use it to calculate your take profit target price level or you can place it at 3 times what your risked. Did you enjoy this? It would mean the world to me if you shared it:
Current Forex trading system represents a well thought and very simple combination of indicators. Knowing what signal to look for with each indicator, provides a strong tip for good entries and exits. Time frame: Any.Currency: Any.Indicators: 5 EMA, 10 EMA, Stochastic (14, 3, 3), RSI (14, 70, 30) EA: SimpleBalanced_1_0.mq4 (Attached) Entry rules: Buy when 5 EMA crosses above 10 EMA and Stochastic lines are heading north (up) and Stochastic is not in overbought position (above 80.00 level) and RSI is above 50. Entry rules: Sell when 5 EMA crosses below 10 EMA and Stochastic lines are heading south (down) and Stochastic is not in oversold position (below 20.00 level), and RSI is below 50.Exit rules: when 5 EMA and 10 EMA cross in the opposite direction or if RSI crosses the 50 mark again. Advantages: allows filtering entries and thus is more accurate.Disadvantages: 5 and 10 EMAs can give very early exit signals.
Symphonie Matrix Strategy is easy strategy for beginners where Trend, Emotion, Sentiment and Extreme work together to form musical winning strategy. When you put that on screen you get a very powerful system for beginners and intermediate. This strategy goes well with support & resistance lines to time and predict exit out of market. First in order to be able to play with the strategy you need to get the Symphonie Matrix Indicator for MT4 and install it on your MT4 / MetaTrader 4 Platform. - TimeFrame: 5 minutes (preferred) works on all other TFs - Symbol: any currency / best on EURUSD - Risk: MAX 2% of account equity per order - Indicators: Symphonie Matrix Indicator for MT4 Symphonie Matrix Strategy Overview: This Symphonie Matrix strategy is best used on 5 min timeframe but was successfully tested on all timeframes. First thing after you install the indicator is to fine tune the settings for the timeframe you want to use it on. Indicator supports multi-timeframe options and you can drag and drop multiple indicators on the same chart to get MTF indicator (you only need to set the ForceTimeFrame option). There are other options in Symphonie Matrix Strategy for Trend, Emotion, Sentiment and Extreme. Fine tuning that based on your trading and based on each timeframe is unique. For me the default options which are already set work great. Symphonie Matrix Strategy Entry Rules: We will be entering the PENDING BUY / SELL order when all four colors turn same color. Blue for BUY and RED for SELL as shown in the picture above. When Symphonie Matrix Indicator turns for example all RED on candle close we will place pending SELL order 5 pips below the candle wick which is in straight line with all four colors. Then we will wait for Price Action to come get the order. If any of the Symphonie Matrix Indicators changes color and Pending order is NOT hit we delete the order and we wait for the next same color rack. It is recommended that you delete the order even if it did not hit the Pending Order in the next 3-5 candles even if Symphonie matrix color is still the same and wait for the next change of major colors. SL should be placed 20 or 30 pips away from the Pending order or previous swing high. Please note that if your Pending order is hit you should place BE (Brake Even) to +1 or +2 pips as soon as Price Action gets 10 pips in profit! This will protect your investment if PA reverses and takes you out in negative. Symphonie Matrix Strategy Exit Rules: - There are couple of options to exit the trade. The most recommended one is to use Support & Resistance lines and exit the trade on them. - Second option is to set TP (Take Profit) with win/loss ratio of 1:1 with SL (Stop Loss). So if you set SL to 20 pips your TP should be set to 20 pips. - Third option is to trust Symphonie Matrix system and wait for Trend bar to change color and close the order.