The strategy is rather simple and may help you gain profit on Forex. RSI strategy works best with EUR/USD on М5 timeframe. The signal to enter the market appears as soon as a trend line on RSI indicator (Relative Strength Index) is broken down.
Let’s add RSI with period of 21 to the M5 chart of EUR/USD. Entry points are:
- The next candle of the price chart after the breakdown of the trend line, formed on RSI chart.
- The next candle of the price chart after divergence pattern formation on RSI chart.
Stop Loss is placed 20 points away from the entry point. As soon as floating profit reaches 10 points, Stop Loss can be moved to the breakeven zone. Take Profit isn’t set in this strategy, Trailing Stop tool plays the role of Take Profit.
It is not recommended to enter the market before or immediately after fundamental releases, when major instruments are highly volatile. It is also strictly prohibited to delete stop-losses or to move them closer to the entry points/current price.
Img 1: After breakdown of the trend line on RSI chart long trades can be opened.
Img 2: Short position can be opened after the breakdown of the trend line.
Img 3: This image illustrates the divergence between RSI and price charts (the next maximum on the price chart is higher than the previous, but the next maximum on the RSI chart is lower than the previous one). As soon as divergence pattern forms, new position can be opened directed the same way as RSI chart (sell position at the image above).