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H4 Build Your Strategy On RSI

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109 views4 pages

H4 Build Your Strategy On RSI

Uploaded by

svfor324
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Build your strategy on RSI

13:30 14.09.2018
Before we consider RSI trading strategies, it’s worth beginning with the small
definition of the RSI.
RSI (Relative Strength Index) is one of the oscillator indicators that is widely
used by traders to determine reversal points. The main idea that you should
keep in mind implementing different trading strategies is “if RSI rises above 70
bound, it means that the pair is overbought. If RSI falls below the 30 line – the
pair is oversold.”
Let’s consider 2 simple trading strategies that you can use in your daily
trading.
Strategy #1
Criteria:
 Currency pair – any
 Timeframe – H4
 RSI – Period 8, apply to “Close”, levels: 30, 40, 50, 60, 70
Buy.
Steps:
1. When RSI crosses the 50 level bottom up, place Buy Stop pending order 15
pips above the candlestick where the cross happened. Don’t forget about Stop
Loss! Place it at the local minimum. And remember that if the index crossed
the 50 level back, you should close the position.
2. As soon as the index crosses the 60 level, place the second order. The Stop
Loss should be placed at the local minimum as well.
3. When is it time to close the position? As soon as the RSI breaks the 70 level
upside down.
Sell.
Steps:
1. When RSI crosses the 60 level downside, place a Sell Stop pending order 15
pips below the candlestick where the cross happened. The Stop Loss will be at
the local high.
2. When the index breaks below the 50 level, place another pending order below
the candlestick of the cross. Don’t forget about the Stop Loss.
3. If you come back to the introduction of this article, you will see that 30 line is
one of the key levels. So when the index crosses the 30 level bottom up, it’s
time to take profit as it’s a signal of the reversal up.
th
Strategy #2 (the 50 candlestick)
Criteria:
 Currency pair – any
 Timeframe – any
 RSI - Period 8, levels: 20, 80
Steps:
th
1. Find a pair the 50 candlestick of that is lower than previous 49 ones.
2. Apply the RSI indicator. Check where the indicator crosses the 20 level upside
th
down. Check whether the below 20 RSI corresponds to the 50 Only after both
conditions are met, you can move to the next step.
3. Now it’s time to wait for another candlestick that will be lower than the
th
50 However, it’s important to have a look at the index. The index is supposed
to provide a higher signal than the first one (it’s a divergence between the
indicator and the price). If these conditions are met as well, we can look for the
entry point.
4. The next step is to determine the entry. You should wait for the candlestick that
th
will close above the 50 After that, you can open the position.
5. The next step is very important in any trade. Place the Stop Loss. Have a look
at the chart and find a reasonable support level according to the previous price
moves. Your Stop Loss should be a little bit lower than the support because
the price may reach the support and rebound. But if it doesn’t rebound, risks of
the further fall would increase.
6. The last step is to find a take profit level. It’s a golden rule of traders to use 1:3
risk-reward ratio. So if you determined the Stop Loss level, you should count
the distance between the entry price and the Stop Loss and place 3 such
distances above the entry price. It will be your target.

Tips: all traders know that signals of only one indicator don’t give 100%
assurance. It’s always better to combine several indicators. And if you see
that another indicator signals the reversal, it’s better to take that signal into
consideration and maybe even close the position before the RSI gives a
signal.
Making a conclusion, we can say that RSI is one of the most reliable
indicators. You even may combine it with other indicators to create your own
strategy!
education forex education

DARYA BOBROVA

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