The RSI Trade

The RSI

This set up is based on an article written in Technical Analysis of Stocks and Commodities. The article was written by Hadi Seyedinajad. Mr. Seyedinajad uses the RSI mostly for exits, but I found it to work well for trade entries. I use the RSI for counter trend and trend following trade entries as well. I have been trading this set up for the past four weeks with good results, even in these choppy markets. The rules are very simple and all you need is the RSI on a 5 minute chart. I only day trade the EUR/USD with this set up. I do chart and watch the Fibs and major Support and Resistance.

The set works very well when at price consolidation. It can give an early indication of the direction of the break out.

I use the RSI to make my trades entries. Draw a trend line on the RSI, from the most recent high (or low) and wait for the break to enter as a counter trend. I also use the RSI as a trend following entries. When the RSI bounces off the trend line, I can enter the trade. The key here is to see the long term chart to determine the best use of the RSI, trend or counter trend.
Of course as most of us know, the RSI divergence can be a great trade as well, so do watch for divergences.
In later post I will show the use of Fibs and the micro trend use as well.


Again the set up is very simple:

 

1. EUR/USD only
2. 5 minute chart
3. 21 period RSI
4. Enter/exit based on RSI Trend lines
5. 20 Pips for stop loss and trailing stop for profit target.
6. Move the stop to break even as soon as you have 10 pips and keep trailing. I have used the 25 trail stop.
7. Don’t trade this set up ( or any set up!!) during major news
8. Don’t widen or remove your stop.

Okay, here are some examples:
(This is my first post and I could not post the explanation next to the pictures. This is the only way I could this work. I hope it make sense)

 

1. This is an example of consolidation market. The RSI gives early indication of the breakout.

This one did not work very well, but if the proper stop/trail stop was used, you would have been out with some pips or break even.



Second chart: Choppy but the RSI would have kept you short longer

RSI divergence that worked well



second: The RSI could have kept you in the short trade longer in choppy markets

1. Two possible trades, both counter.

1. RSI would have got the most out of this trade.. Just stay in as long as the RSI does not break the line

1. A divergence that did not work, so don’t get too excited and keep your stop/trail stop in place

1. This one worked and told you when to get out

1. Another divergence, with a good exit.

1. Many opportunities to enter/renter this trade.
2. Divergence and exist

1. Many chances to enter and a good exit.

LOKE VREY NICE REMAIND ME THE WOODY CCI METOD

14 day with 20/40/60/80 levels work well. Bull runs 40/80 with support around the 40. Bear runs 20/60 with r @60

Need to bust through 60 band

I have a RSI ebook should anyone be interested in RSI study

http://api.ning.com/files/YirimPE49X...ermination.pdf

Regarding your first picture.
Wouldn't it be the same if you just trade a normal
trendline break on your chart?

Yes, I would look to get long on a break up but rsi does a pretty good job of showing divergence.

Thank you Bunton.
I like your post.

Yes, but many times I noticed that the RSI trendline break leads the price trendline break. Plus the RSI tends to have less false break outs.

Daily chart notice first retest of the 60 band short

Hi Kareem,

thanks for posting this strategy with RSI.

This remind me the strategy of Ghafari, fx analyst who uses a triple ma cross for entry and RSI for exit on higher timeframes (H4).

PDF attached.

r.

Thanks, nice artical. Yes many use the RSI trend line for exit only, but again I found it to give great entries as well.

How to trade this

I have tried this set up with the EURUSD 5M chart only.
Any feedback on other pairs would be great.

Hi Kareem,

Give this a read.

Thanks Dopey, interesting artical.