The rsi strategy
I combined the two versions from the TradingView Built-In library into one chart, keeping the default setting for the CCI signal lines and fitting the RSI's default signal lines to them, so that they line up. I therefore adjusted the RSI to match the Simply using a single RSI and placing a signal after it crosses the 50 level after being overbought or oversold in the same direction.
I started developing this strategy as a way to plug in and test values before defining them in the bots on 3Commas, Coinrule, and Quadency. None of those bots performed the same way my script did and I kept working on it until the strategy finally yielded the same simulated results when paired with the Tradingview bot on Quadency. I looked at all the different RSI TradingView EN.
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RSI + SMA + MACD = a Strategy for Any Market
Open Sources Only. The Relative Strength Index RSI is a well versed momentum based oscillator which is used to measure the speed velocity as well as the change magnitude of directional price movements. RSI Bar Chart. Bollinger Band with RSI. Delta-RSI Strategy with filters. Cvwap-Pvwap 2.
Determining the Trend using RSI
A positive bullish divergence occurs when the price is drifting lower, but the RSI is edging higher. This is a signal that the price may be heading towards a bottom and an upward reversal is about to happen. On the other hand, a negative bearish divergence occurs when the price is drifting higher, but the RSI is going lower. This is a signal that price may be heading towards a top and a downward reversal is about to happen. Whereas the RSI focuses on price extremes high and low , the computation of RVI seeks to relate closing prices to open prices.
This means that the RVI has both positive and negative numbers, with the centreline being 0.
The RVI gives information on the strength of price movement, with positive values indicating increasing momentum, whereas negative values denote decreasing momentum. The RSI is the best indicator to complement or qualify the signals delivered by the RVI, especially in trending markets. For instance, if the market is in an uptrend and the RVI delivers a bearish divergence signal prices go higher whereas RVI goes lower. In this case, a retracement or a trend reversal will be confirmed if the RSI reading is above 70, which implies overbought trading conditions. The MACD moving average convergence divergence indicator is very popular because of its simplicity and ease of application, as well as its graphical appeal.
MACD is a trend following and momentum indicator, used to determine when the price trend is accelerating or decelerating. Because the MACD uses moving averages in its computation, it is largely a lagging indicator and can be used to qualify trading signals generated by the RSI indicator, a leading indicator.
How to Use RSI (Relative Strength Index) in Forex -
For instance, if the RSI displays a reading of above 70, which implies overbought conditions in the market, a sell position can be initiated when the MACD series shifts from positive to negative crossing below the 0 centreline. Bollinger Bands is a volatility indicator whose bands squeeze when there is low volatility but diverge when there is high volatility. Periods of consolidation are usually followed by massive breakouts, which makes any Bollinger Bands squeeze a vital time to watch the markets.
A breakout signal will be delivered when there is an RSI overbought or oversold failure swing. For instance, a bearish signal happens when the RSI line rises above 70 and then falls below 70 again. You could open a sell position when the prices touch the lower Bollinger band. The absence of trend indicators in this trading strategy is compensated by simultaneous analysis of two timeframes. The only difference will be that instead of levels 30 and 70 we will set it at Stop Loss and Take Profit are fixed and set at distances 20 and 50 points from the opening price respectively.
All three signals should be received during three candles, otherwise, they will lose their value. Exiting an open trade should be done when RSI enters the opposite zone.
Sometimes, an opposite position can be opened simultaneously with closing previous position, granting other signals to follow the aforementioned pattern. As an oscillator type indicator it does this by moving up and down within a range of 0 to , with 0 representing the most oversold conditions, and representing the most overbought conditions. Typically any reading above 70 is considered overbought and ripe for a reversal, while readings below 30 are considered oversold and also ripe for a reversal.
Some traders use the 80 and 20 levels as their signal points. The RSI indicator is considered a leading indicator, which means that its signals typically come prior to a price event on the chart. The positive side of this is that we are able to attain early signals for our trades, but the downside is that many of these signals can be false or premature.
Therefore, the RSI should always be used in a combination with another Forex trading tool or technique for confirmation. In this lesson, we will dissect the RSI indictor and give some best practices for trading with it. Welles Wilder. The indicator usually attaches to the bottom of your chart in a separated horizontal window.
I. Trading Strategy
The Relative Strength Index technical indicator consists of a single line, which fluctuates between area. The area is separated based on three primary zones:. The RSI line moves in and out of these three areas creating different signals on the chart. The default RSI setting is typically 14 period. RS stands for Relative Strength in the formula above. This calculation looks pretty straightforward, but we also need to calculate the value of the Relative Strength RS. This is how you calculate the RS variable:. After you determine the value of the RS, you can apply the result in the first formula.
This will give you the current RSI value. It works the same time if you change the periods the RSI takes into consideration. If you change the settings to a period RSI, then the second formula will look like this:. Then you add the result to the first formula for determining the RSI value.
Using RSI in Forex Trading
There are three basic signals provided by the Relative Strength Index technical indicator. Since it is a leading indicator, the signals can typically come prior to the actual price move happening on the chart, depending on what information you use to enter the trade. The first signal we will discuss is the overbought signal. When the RSI is oversold, it implies that the price is likely to increase.
RSI Divergence is the last signal we will discuss. As with some other indicators, such as MACD and Stochastics, the Relative Strength Index Indicator can diverge from the overall price action which can provide clues into potential reversals in the market. The RSI Indicator is built in many trading platforms including the most widely used forex trading platform — MetaTrader 4. RSI Analysis in Forex consists mainly of recognizing the signals described above. We will now illustrate each of the signals so you will get a better sense of how to analyze your chart using RSI.
The image above shows how a RSI Overbought signal may appear. The RSI line breaks into the area first. This creates the overbought signal.