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Forex trading strategy #4 (RSI High-Low)

Although no trading system can solely rely on RSI indicator, using it in combination with other tools and proper technical analysis can bring a new edge to your Forex trading.

Setup:
Currency pair: Any.
Time frame: Any.
Indicator: RSI (14) with levels at 70 and 30.


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Hi Nils,

RSI: When you put RSI indicator on the chart it asks you about the RSI period you want to use. Default value for RSI indicator is 14-period RSI. If we talk about RSI (7), it means that when we add RSI indicator to the chart, we should change its value in the settings to "7".

Stochastic: Stochastic overbought/oversold areas by default are defined by 80 and 20 levels (and we look for crosses in this areas). However, it is also not rare to use 70 and 30 levels as oversold/bought areas for Stochastic.

RSI: "RSI (14, 70, 30)". I've just corrected it above to "RSI (14) with levels at 70 and 30". Thank you. I should've done that earlier. It is just my own way of writing strategy rules, which I use all the time, so I brought it here unconsciously. Sorry for misleading you.

RSI indicator always has just 1 parameter - the period.

"EMA 200, close" means that you use 200-period EMA applied to Close. This expression is commongly used among Metatrader 4 users, who has the option to apply Moving averages to Close, Open, High or Low.
On other platforms, if you have no options to change additional EMA parameters, all moving averages are applied to Close, which is default, standard settings.

Fractals: There is an illustration on fractals on page 5
Briefly, Fractals show price tops and bottoms, they help you to see those tops and bottoms on the chart. Since tops and bottoms (in other words, swings high and low) serve as support/resistance levels, traders use them for entries, placing stops, taking profits, calculating risks. Try to read some more info online about price Support and Resistance, and you will understand the value of Fractals better.

Regarding "price up/down EMA", could you quote the whole sentence, please?

Regards,
Edward

Hi ! I have tried this method using the twisted method suggested my the 1st commentor..
and it works! the only drawback: you have to really monitor the screen and don't float your cash too long! take any profit that u can earn asap! I tried this and earn 4 pips within few seconds..

Hi Edward,
Which timeframe would be best to work with or would you suggest using the time frames.
Thanks. For example on a M30 chart the reading on the RSI is different from the H4 chart.
How should i interpet this same currency different time frame.
Thanks

Simply put: the higher time frame the stronger the signal.
If you see a signal on 4 hour time frame it means the long term momentum is inviting you to take actions, however, if you the same moment go to 30 min time frame you may notice that you have a good opportunity there as well or, for example, you have no favorable momentum yet, instead RSI tells you to wait a bit if you want to trade off 30 min charts.
Either way, you determine the time frame you like to trade with: long term or short term. Obviously when both time frames agree on a signal and direction a strong move across the charts will be seen.

Regards,
Edward

Hi Edward
Thank you very much for this grate Site. Iam very new in The Forex market,
I have been trading With the Demo acounts about 2 months now.
This is a huge help for me to understand the tools in the Forex trader.
and the rest is just praktic. Iam a solid FAN of this Site.
Best regards
SASAN

Thank you Sasan, and welcome!

Regards,
Edward

If you are going to use RSI then look for divergence, confirmed by another indicator (stochastics, macd, williams etc).

DO NOT just simply trade based on RSI otherwise you will end up with more losers then winners.

Hi All,

Sorry about the following 'blonde' question but what does TP stand for?

much appreciated

K