Regarding the RSI trading strategy, we have previously released "Learned! Use the 5x5 RSI trading strategy to find stronger entry signals" and articles such as "RSI Indicator Trading Experiment: 86% of Signals Are Valid", "A Super Simple Strategy: RSI Indicator Forex Trading Strategy", etc.
As we all know, the RSI (Relative Strength Index) is one of the most popular oscillators at the moment, it was developed by the world-famous technical distribution leader J. Welles Wilder. In 1978, he published the book "New Concepts in Technical Trading Systems", which published a number of technical indicators including RSI and ATR.
Today, we are going to introduce the Reversal Candlestick Combined with RSI Indicator Trading Strategy, which is a price action trading strategy that involves the use of the RSI indicator.
There is nothing special about this, just a very simple trading system based entirely on the RSI indicator. The strategy uses the RSI to determine oversold and overbought situations.
Well, the candlesticks involved in the strategy must be reversal candlesticks.
In a nutshell, here's how the strategy works:
If the RSI is in oversold territory and starts to cross the 30 level, you need to look for bullish reversal candlestick patterns. That's a buy signal.
If the RSI is in overbought territory and starts to cross the 70 level, it is necessary to start watching for bearish reversal candlesticks. That's a short signal.
Yeah, it's still pretty simple.
Do long setup
1. The RSI indicator must cross the 30 level from the bottom up and run above that value.
2. Once this condition is observed, you need to wait for a bullish reversal candlestick to form on the chart, such as pin bar, insider bar, etc.
3. Place a pending buy stop order 2 pips above the bullish reversal candlestick high.
4. Set the stop loss at least 2 pips below the bullish candlestick low, but if you think the stop loss is too close to the entry price, you can move it down a bit, or use the nearest swing low.
5. Take the previous swing high as the take profit target level.
Empty the settings
1. The RSI indicator must cross the 70 level from the top down and run below this value.
2. Once this happens on the chart, you need to wait to see if a bearish reversal candlestick pattern is formed, such as Shooting Star, insider bar, etc.
3. Place a sell stop-loss pending order 2 pips below the bearish reversal candlestick low.
4. You can set the stop loss at least 2 pips below the bearish reversal candlestick low, but if you think the stop loss is too close to the entry level, you can move it a little, or use the nearest swing high.
5. Take the nearest swing low as the take profit target level.
Most traders use RSI, only judging to buy when the indicator reaches the 30 level or sell when it reaches the 70 level, in fact, just trading according to such a simple rule, the success rate may not be too high.
However, this does not mean that a simple trading strategy has no effect, and the simple method followed has lower odds. Of course, you can also combine indicators such as moving averages to judge short or long, and believe that the probability of success will be higher.