RSI Strategy

This is a trading strategy based only on RSI indicator. You only need MT4 and this indicator http://www.mql5.com/en/code/10972

I want to make it clear that this is a counter-trend strategy. I know that many of you do not trade against the trend, however with this strategy you are not really aiming for a trend move, but more of a scalp. My target depends on the signal timeframe, the key here is to choose a precise point and also exit early with few pips (depending on timeframe as well). So in a nutshell:

- This is a counter trend strategy
- This strategy is based on selling when market is overbought and buying when market is oversold
- The indicator we use is http://www.mql5.com/en/code/10972 (RSI MTF) plotted in 1min timeframe so you can see the RSI levels in one window without having to go to each timeframe from 1 minute to 1 week timeframe
- You must take a small profit and do not try to pick a top or bottom because markets can stay overbought / oversold for long period. Use stops/positioning If you wish to catch a bigger move and place TP on entry when it start moving in your favour for example.
- Works on all pairs/all timeframes

Before I show you some example trades, including trades that I've taken using this method let me say that :

I know that many will disagree with trading against the trend, but I found for my own trading style that I can pick temporary tops/bottoms with this method and get some pips (Well, the key here is to not be greedy and also be confident about your setup)

So how a trading signal is generated?

First put the indicator and open 1m chart, it'll show you the RSI levels on all timeframes for that pair. Please also add the levels 20/17, 80/83 to the indicator and make them clearly RED lines so you can see when a pair makes an extreme reading.

I enter long when:

RSI reaches 20 or less I enter long. A better signal is when 2 or more timeframes have the same low RSI reading. A more powerful signal would be a divergence on the chart that suggest our position from that entry.

I enter short when:

RSI reaches 80 or more I enter short. A better signal is when 2 or more timeframes have the same high RSI reading. A more powerful signal would be a divergence on the chart that suggest our position from that entry.

Ok, I believe that charts are worth a lot more than words, so I'll share setups including these I traded this week as well.

Remember, do not be greedy, one or two reversal candles can be good for you. Do not wait for entire reversal of trend because it needs more than that. Example: If you "feel" or technically studied that it's a top, open two lots the same size and make one TP +10 and the other at BE or like that, you can catch bigger moves or trail stop.

Setup:

Put exclusive mtf rsi on 1min chart and add levels 20/17/80/83 to it, remove levels 30/70/50. Make the level lines red and clear as they are RSI extremes.

Put a 200 WMA on chart (This is only for guidance, so we can see how far the price went away from the moving average) - Trust me it helps, I have seen in many , many situations how prices try to narrow the distance between this MA and not stay too far away, especially when the market is at extreme. We'll need a good eye to catch clear opportunities.

DO NOT

- Overtrade
- Trade the news
- Trade friday

DO

- Add to position if it moves against you, and stay confident that you can close your positions with a small profit or at least at breakeven.

And you'll do fine

These are recent USDCAD opportunities, in this strong uptrend.

In first setup, even though, it moved down then up to continue a strong upmove, you could get at least 10pips, like I said, your target should take timeframe in account. the first signal appeard only in 1-hr chart. It takes a bit of consolidation to free up the ob reading.

White line is 1hr rsi

In second setup, Both 1hr and 4hr were above 80, a stronger signal to sell into correction, the price corrected 30 pips without spread almost. True it went up again, however that's not our goal. We only need to get pips during the corrective move.

The third signal was so strong, because it shows that RSI (1hr/4hr) both are close to/above 80 , the price made a higher high, and rsi made a lower high which is stronger signal to sell and the price corrected about 50 pips.

I've traded all 3 but I get about 7-8 pips and exit, I do not use a trailing or stop, that's something up to you really.

While we are at it, I've taken this setup on EURMXN (Although only 4hr is at extreme, 1hr is close to extreme) Let's see how it plays out.

On 1min charts, these are opportunities to scalp the AUDUSD. Note the arrows and the red line (1m rsi at extremes) see how they were turning points even for quick/small pips.

The good thing is that you know you're not trading a repaint, for me it is giving me leading signals to catch turns or bounces/retracements. Ofcourse the 1min signal is a good scalp itself if its not used during news times.

One thing to consider, Try to play either volatile pairs, or small-spread pairs. This is completely up to you, a 4-hr signal is more important than 1-min so for 1-min you'll like a small spread pair to make enough profit to cover it quick.

can u tell a bit more about your Money Management?

If you're starting using this method, I suggest starting with micro lots $1 pips for example (Depending on your investment really) I trade with over 20k and I am a bit agressive especially on high probability setups (e.g. RSI crossed 85/13) and I only get enough pips, so I do not look to be greedy, but put a target that's reachable. If it goes against me, I add another position and when the price reaches my initial entry I close both positions. You have to put a few factors :

How far did the price move from its 200-ma ?

Is the pair in a very strong trend?

Is it only one signal from one timeframe?

Are we during news/volatility?

Many factors will give you the sense to choose your lot size,it's something you'll get with more live trades.

thanks for your answer i will test this strategy next monday



can u show your mtf rsi settings? because my lines never go in the 80/20 zone?

I am using the default 14-periods RSI, It will surely visit the 20/80 zone but it's not very common, I mean - on 1min chart you can get 3-5 opportunities per 24hours, it's not like you'll get a signal too often, just see different pairs and you may find an opportunity (See the EURMXN trade I posted live in the post above for example) pay attention to spread too. If there's no trade, and price is not confidently in this zone, just do not trade. Do not force it to go to that level, trades will occur on multiple timeframes during price swings and trend moves just you've to be there to catch the moves. I missed 2 opportunities today already.. you can't get 100% of the trades you know.

Btw, each timeframe represents a line, you do not have to see all lines go in the zone (that's so rare) .

Ok here's a trade opportunity on GBPNZD few hours ago, 1min chart. Note how the MA is too close when the signal was initially given, although you can be in green if you followed the strategy basically...

I hope this explains how the idea works better for you.

May I know how to add RSI difference TF into M1 chart and the dashboard as well?

Hi Sam2vt! Which dashboard?

Here's a recent scalp trade minutes ago on USDCAD. Same rules/setup

Playing out now

And at the same time, the AUDUSD was a good trading signal too.

Please note: all trading setups so far are 1min, that should make your optimistic profit target 1-3 pips depending on pair. As the price can turn after correcting. You can protect it with BE stop and close half of it If you want to get the most out of it. But do not be greedy and collect small profit and you'll be in green.

This is our EURMXN trade from yesterday, it was given on 1hr-4hr chart. Price made a nice drop and I closed it.

Shorting EURGBP.. looks like a high probability trade according to MTF

Missed this one but paid out well.

hi, thanks for sharing, i have been using something similar to that. my levels are 75 and 25. time frame 4h.

if possible attach your template, please.

thanks

Here is an AUD 1M chart. Notice how 15 and 30 M RSI is up close to 80 and 5 M RSI is divergent. 4 quick pips, in and out.

Ah good catch! They key is to master the small pips profit that add up like your example. Perfect!