Trading With the KISS

2018-01-14 02:28   来源:FxZoo

Trading with a KISS (Keep It Simple Stupid)

We have discussed in numerous articles the need to have a trading plan or strategy in order to be successful trading online.
There are a gazillion articles online extolling numerous ”winning trading strategies” and you can purchase robots that trade to a pre-defined strategy for you. But are all strategies that hard to grasp? Do you need a robot to trade for you?
I have found a relatively simple trading strategy that you can easily back test and adapt to suit your trading style and preferences. So what is this easy to use trading strategy………..?
Simply put: The relative strength index (RSI). This indicator is most commonly used to indicate temporary overbought or oversold conditions in a market. An intraday forex trading strategy can be devised to take advantage of indications from the RSI that a market is overextended and therefore a retracement is likely to occur.

The RSI is a widely used technical indicator, an oscillator that indicates when an instrument is overbought (when the RSI value is over 70) and, conversely, indicates oversold conditions (when the RSI readings are under 30). Many traders will often prefer to use the more extreme readings of 80 and 20.
So is there a downside to using RSI? On occasions of sudden, sharp price movements this can cause the RSI reading to spike repeatedly up or down, and, thus, it is likely to giving false signals. Also, it is not uncommon for an instruments price to continue to extend well beyond the point where the RSI first indicates the market as being overbought or oversold. That said, I invite you to try using the following RSI strategy on any instrument and “tweak” it to your own preferences:
When the RSI breaks above 70 prepare to sell that instrument when the RSI breaks back under 70.Conversely, when the RSI breaks below 30 prepare to buy that instrument when the RSI breaks back above 30.

Examples:

The below shows Germany 30 (DAX) in a 30 minute candlestick chart with an RSI indicator below the main chart.

  1. You would buy DAX when the RSI breaks above 30: in the below this equates to around the 9901 level
  2. You would sell DAX when the RSI breaks below 70: in the below this equates to around the 10070 level

In this example you would have realised a profit of 169 index points

Germany 30 (DAX)

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The next example shows GOLD in a 1 Hour candlestick chart with an RSI indicator below the main chart.

  1. You would buy Gold when the RSI breaks above 30: in the below this equates to around the 1215 level
  2. You would sell Gold when the RSI breaks below 70: in the below this equates to around the 1235 level

In this example you would have realised a profit of 20 USD

GOLD in a 1 Hour candlestick chart

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The next example shows BRENT in a 30 minute candlestick chart with an RSI indicator below the main chart.

  1. You would buy Brent when the RSI breaks above 30: in the below this equates to around the 39.45 level
  2. You would sell Brent when the RSI breaks below 70: in the below this equates to around the 40.60 level

In this example you would have realised a profit of 115 cents

BRENT in a 30 minute candlestick chart

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The final example shows USD/JPY in a 1 Hour candlestick chart with an RSI indicator below the main chart.

  1. You would sell USD/JPY when the RSI breaks below 70: in the below this equates to around the 113.45 level
  2. You would buy USD/JPY when the RSI breaks above 30: in the below this equates to around the 112.63 level
  3. You would buy USD/JPY when the RSI breaks above 30: in the below this equates to around the 112.05 level

In this example you would have realised a profit of 82 pips and are long waiting for the RSI to indicate when to sell.

USDJPY in a 1 Hour candlestick chart

Click on chart to enlarge

 

I suggest using your own preferred charting package and instruments to see if this simple RSI trading strategy would work for you?

Good luck and Happy Trading!!
#tradesafely #doublehit #fxzoo

 

 

 



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