RSI forex indicator can be utilized in many different manners. One of them, is using it as momentum indicator, signalizing rapid price movement. One of the advantages of this approach that it quite often marks the beginning of a new born trend.
Signal can be improved by adding similar but yet different oscillator – stochastic. Stochastic will confirm exit, improving risk reward ratio of this forex strategy.
Forex strategy employs tight stop loss with profit target that can get as much as 10 bigger than the risked sum.
Used forex indicators
RSI (relative strength index) 21. This is commonly used period of RSI that works very well as momentum trigger.
Stochastic (15,9,9). Stochastic does a good job supporting RSI in determining the exit point for our positions.
Apply both oscillators in 15 to 4 h chart of any major pair.
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Forex strategy rules:
RSI touching 30 line. Enter the trade long on candle close. Stop loss is placed above the high of our entry candle.
Take profit: Both Stochastic lines rising above 30 line. RSI rising above 30 line.
RSI touching 70 line. Enter the trade short on candle close. Stop loss is placed below the low of our entry candle.
Take profit: Both Stochastic lines falling below 70 line. RSI falling below 70 line.